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Economy & Business

St. Louis’ Renegotiation Of City Foundry Tax Incentives Could Pave Way For More Equitable Growth

The City Foundry mixed-use development in the Midtown neighborhood of St. Louis is at the center of a new strategy to leverage development in the thriving central corridor in order to help other parts of the city.
New+Found
The City Foundry mixed-use development in the Midtown neighborhood of St. Louis is at the center of a new strategy to leverage development in the thriving central corridor in order to help other parts of the city.

The City Foundry mixed-use development in the Midtown neighborhood of St. Louis is starting to come to life after years of planning and construction.

The area now hosts pop-up shopping events for women-owned small businesses, tenants like Great Rivers Greenway are moving into office space, and a food hall will open later this year.

But there’s something bigger going on that’s not visible from the outside. This development could be the first in St. Louis to include an equitable development fee — a new city strategy to leverage development benefits in thriving neighborhoods in order to help revitalize underserved parts of the city.

For this project, that means the developer behind City Foundry will contribute $1.8 million to the city’s Affordable Housing Trust Fund in order to secure about $18 million in Tax Increment Financing for its $160 million second phase.

Newly elected Alderwoman Tina “Sweet-T” Pihl, whose 17th Ward includes City Foundry, campaigned on her city planning background and vision for more equitable development. Once elected, she spearheaded an effort to renegotiate the tax incentive plan to get a better deal for the city.

“This is a huge step — historic, I believe — one of the things I wanted to do,” she said. “This is systemic change.”

About half of the equitable development fee is slated for distressed neighborhoods on the north side and the other half for Forest Park Southeast, the neighborhood where Pihl lives.

“It’s a very interesting incubator for me as a city planner to look around and say, ‘Wow, I am living what I read in books about displacement, gentrification,” she said.

Pihl said the financial contribution will help long-term residents stay in their homes as taxes go up due to new developments, such as along Manchester Avenue, the strip also known as The Grove.

She’s seen this strategy of using equitable development fees work in Boston, where she previously worked, as well as Seattle and Alexandria, Virginia. With an initial wave of approval, she said the City Foundry deal could serve as a model for future projects in St. Louis.

Pihl is among a wave of newly appointed city leaders hoping to drive big changes in the way the city does business with developers.

0611_CR_Tina Pihl_01.JPG
Corinne Ruff
Alderwoman Tina “Sweet-T” Pihl, who represents the 17th Ward, stands in front of the City Foundry mixed-used development in the Midtown neighborhood of St. Louis. She renegotiated a tax incentive deal with the developer to secure funds for affordable housing.

A new way of doing business

In recent years, the city has come under fire for the way it manages tax incentives.

Last year, Missouri State Auditor Nicole Galloway released an audit calling on officials to increase transparency around how it awards tax increment financing projects, known as TIFs.

In recent years, the St. Louis Development Corp., which oversees tax incentives, has hired more staff to analyze financial proposals from developers.

The organization has for decades focused on an overall strategy of building on the strength of the city’s central corridor. The hope was to attract new developers to the city and spur economic growth in surrounding neighborhoods.

But Sarah Coffin, an urban planning professor at St. Louis University, said other neighborhoods haven’t shared those benefits. She studied the use of local tax incentives in 2016 for the SLDC.

“I think that after the study revealed just how focused and concentrated investment was in the central corridor, it was very plain that there needed to be some expansion,” she said.

Plus, she said the city hasn’t done a good enough job of guarding against gentrification, which has led to the displacement of residents, small businesses and manufacturing firms.

Coffin, who knows Alderwoman Pihl through their mutual work in urban planning, said the renegotiated deal with City Foundry has a lot of potential to help spread out benefits. She said the deal also shows the city can now be more selective about how it uses tax incentives along the central corridor.

“I mean, there's a lot happening now, that if not that developer there will be another developer who will say, ‘You know what? I'm going to take that risk because the risk isn’t as great as it used to be,” she said.

"For a long time, the city has negotiated with developers with a bit of an inferiority complex."
Nahuel Fefer, director of policy and development for Mayor Tishaura Jones

But not everyone agrees the city has reached that point.

At a recent meeting of the city’s Tax Increment Financing Commission, longtime SLDC Director Otis Williams argued it’s still too soon to pull back on incentives.

“Because we don't have all the money to correct all the things that are wrong, we need those outside investors, and we need to create a climate where those outside investors will come,” he said.

But Williams is retiring later this month, and new Mayor Tishaura Jones is taking a different stance on tax incentives. She nominated incoming SLDC Director Neal Richardson, whose priority is economic growth for all areas of the city.

“My goal is to have shared and collective ownership in the future of our region,” he said. “And the only way to do that is to ensure that we're investing the dollars from the economic growth into areas that have not seen investment previously.”

Nahuel Fefer, director of policy and development, said the mayor's major goal during her term is to revitalize the city.

“We're really coming in and not resetting so much as returning to the fundamentals of SLDC’s financial analysis and requiring that projects really earn the incentives that we award,” he said.

Fefer said the city is now in a position to require developers to provide stronger community benefits in their project proposals if they want incentives.

“If a project contributes to these public goods, if it creates quality jobs, if it provides affordable housing, then there may be a role for calibrated incentives to play,” he said. “But for a long time, the city has negotiated with developers with a bit of an inferiority complex.”

Recent negotiations between city leaders and the City Foundry developer got off to a rocky start, but Alderwoman Pihl said she’s grateful the developer kept an open mind.

“It's something where we all saw and see it is a win-win-win,” she said, meaning for residents, the city and the developer.

Steve Smith is the CEO of the development company behind City Foundry, called New + Found, which recently rebranded from Lawrence Group. In a recent meeting with the TIF Commission, he said he’s excited to pilot the new strategy.

“We do agree and believe in the goal that we need to find a way for economic vibrancy in the central corridor to extend to areas where there's been under-investment,” he said.

A spokeswoman for Smith said he couldn’t comment for this story because the deal hasn’t been finalized. It received a preliminary green light from the TIF Commission earlier this month. Now, it heads to the Board of Aldermen for final approval.

Follow Corinne on Twitter: @corinnesusan

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