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McKee's Northside rehab vision goes to Missouri Supreme Court

This article first appeared in the St. Louis Beacon, Nov. 28, 2012 - The key question that could determine whether Paul McKee gets a $390 million tax break to redevelopment a large swath of north St. Louis – what is the difference between a project and plan – made its way to the Missouri Supreme Court Wednesday.

But it’s not clear whether 45 minutes of oral arguments brought the judges any closer to an answer.

McKee’s Northside Regeneration vision -- covering 1,500 acres in the north end of the city, costing more than $8 billion and set to last more 23 years – has been stalled since July 2010. That is when St. Louis Circuit Judge Robert Dierker ruled that the tax-increment financing ordinances approved by the city did not conform to state law.

Specifically, he said the McKee redevelopment suffered from what he called a “fatal flaw” – that it was a broad-based plan without the specific projects that the state TIF law requires.

"Without a defined project, the TIF redevelopment process allows cities to expand redevelopment area designations ad infinitum. If defendants' approach in this case is valid, the city might as well designate its entire corporate boundaries as a redevelopment area, and proceed to capture incremental tax revenue to dispense to favored redevelopers whenever the city feels like it. The statutes demand more."

More specificially, he said, "Northside's redevelopment plan sets forth estimated dates of completion of objectives, but without reference to any specific projects as that term must be understood. The plan is not the project. Concepts are not projects. Projects are concrete, not hypothetical or abstract: sanitary sewers will be constructed in City Block 1000, commencing on such-and-such a date, at an estimated cost of so many dollars."

Dierker’s ruling was upheld by the Missouri Court of Appeals, which said that because of the potentially broad impact of the case, it was sending it to the Supreme Court.

There, lawyers for McKee and for the city of St. Louis argued Wednesday that Dierker’s view was needlessly and wrongly narrow, that McKee’s vision is so broad that it might not be able to be as specific as the judge wanted but that the law did not require it to be.

“That judge was cynical and sketpcial about whether or not this project could actually succeed,” said Gerard Carmody, representing the city. “Many are. But the fact of the matter is that his cycnicism and his skepticism has no place in the analysis about whether or not the stautory requirements necessary to go forward with this have been met.”

Paul Puricelli, lawyer for McKee, added that specificity is inherent in the TIF process, and that the developer would not get any money from the tax break until he spends his own dollars building infrastructure that meets with the city’s approval.

“What is the danger here?” he asked. “This is not a handout subsidiy. This is a reimbursement subsidy. No one gets a single dime until you’ve done the work to the satisfaction of the city.”

But Lawyers for the four individual plaintiffs in the case, who challenged McKee’s right to use the tax breaks for rehabilitating areas near where they live, said that by declaring the area blighted, as the TIF statute requires, property values have been depressed.

“Who is harmed?” asked Bevis Schock, lawyer for plaintiffs Cheryl Nelson and Elke McIntosh. “My client is harmed.”

Schock said that Dierker’s ruling was drawn narrowly and correctly.

“He said, I don’t know how big the project has to be. I don’t know how many there have to be. But there has to be something specific, and I think in that sense, Judge Dierker got it exactly right.”

Other issues brought up in the trial in Dierker’s court included whether McKee has the necessary financing for the redevelopment plan, known as Northside Regeneration, and whether his projections of the kinds of home that would be sold there are realistic. Plaintiffs also questioned whether the entire area covered by the plan is blighted or whether some areas that are in good shape would be sacrificed.

Those issues didn’t come up specifically during Wednesday’s oral arguments, but they were covered in briefs submitted by both sides, as was the question so whether tax-increment financing is a good way to fund such efforts.

Said one brief filed on behalf of plaintiffs:

“Depending on whom one asks TIF’s either are a clever and honest way of creating incentives for developers to engage in economic activity which would not otherwise occur, or are shady schemes in which politicians and developers engage in crony capitalism to shift the risks of development to taxpayers, in which there are market distortions of the sort which recently brought America to her knees, in which homeowners and business people are expelled from their real property by eminent domain so that their property can be used by other private persons and not for public use, and in which government entities are starved of the new revenue that they would receive through organic economic growth.”

It added:

“In sum, the numbers presented by Northside are out of thin air, are not even close to based in reality, and as the final two examples show, are actually deceptive. Northside was either being run by inexperienced fools (doubtful), or was playing city officials for stooges (likely).”

Briefs filed on behalf of McKee and the city were considerably less colorful, concentrating instead on what they considered to be Dierker’s overly broad reach in declaring the city’s TIF ordinances outside the bounds of state law.

“The trial court’s definition,” one brief said, “ignores the purposefully broad language of the Act and fails to take into consideration the practical and economic realities of large-scale, phased development projects. Long term, area development projects — unlike their single building or single lot counterparts — depend upon the developers’ ability to react as economic and market forces and investor and user preferences change over time.”

During arguments, Puricelli put it this way:

“We don’t have streets. We don’t have sewers. We can’t go to Home Depot and say come on in guys. We don’t have streets and sewers and electric to support it. We have to have that first.”

Carmody added that the city did not approve the McKee tax breaks lightly, and the court should respect the city’s judgment that his vision will succeed.

“It may be a failure. But the question before this court is should it be a judge, should it be a court, that says don’t even try it to someone who says I’m going to dedicated the rest of my life to make a difference.”

The court took the case under advisement.

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