ST. LOUIS • The Missouri Supreme Court will consider developer Paul McKee’s massive NorthSide Regeneration plan this week, and people far beyond north St. Louis will be watching closely to see how it rules.
The court will hear 40 minutes of oral arguments Wednesday morning on the case, which has blocked nearly $400 million in tax increment financing — and McKee’s plans — for nearly three years. There’s no time frame for when the justices will rule.
At stake is the future of McKee’s grand plan to remake some of St. Louis’ most battered neighborhoods with potentially thousands of new homes and hundreds of acres of office, retail and industrial space. But also, more broadly, the ruling could affect the way cities and developers use one of the region’s most popular incentive programs.
The case hinges on St. Louis Circuit Judge Robert Dierker’s 2010 ruling that McKee’s plan was too vague to justify blighting two square miles of the city and authorizing nearly $400 million in TIF financing. It was a plan, he wrote, without any particular project.
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“Without a defined project, the TIF redevelopment process allows cities to expand redevelopment area designations ad infinitum,” Dierker wrote. “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.”
In June, three Appeals Court judges said they generally agreed with Dierker’s ruling but passed the case up to the Missouri Supreme Court for a final verdict, given the implications.
Those implications could be widespread. McKee’s is far from the only TIF that local governments in Missouri have approved without knowing exactly where everything will be built.
While many TIFs in Missouri are small and site-specific — financing a particular building or shopping plaza, for instance — there are a sizable number of so-called “area TIFs” that draw a bigger footprint to be redeveloped over time. It has been a particularly popular strategy in urban areas, used to boost neighborhoods ranging from Lafayette Square to Grand Center to the CORTEX biotech district in the Central West End.
If the court agrees with Dierker and finds that TIFs require a very specific breakdown of what will get built and where, it could make area TIFs of all kinds harder to pull off, said Paul Puricelli, an attorney for McKee.
“If you take the strict interpretation of Dierker’s ruling, you’d really make it impossible to use TIF for anything other than a one-off project,” he said. “It’s a big issue.”
It’s such a big issue, retorts Bevis Schock, one of the attorneys representing plaintiffs in the suit, that the courts shouldn’t broaden state TIF law, which he describes as narrow and specific. That should be up to Missouri lawmakers.
“If Paul McKee thinks as a policy matter that we should have large-scale TIF, so his vision of what is right and good should trump the existing property owners’, he should go to the Legislature and get the law changed,” Schock said.
McKee’s project is by far the biggest TIF ever approved in Missouri. It blights two square miles of the city’s near North Side while providing little more than broad strokes about what it would put there. That puts it in a class by itself, said John Brancaglione, vice president at the St. Louis urban planning firm PGAV, and makes it more controversial than most.
“There is such a thing as making the area so big that you really can’t have the plan be completely believable,” he said. “Maybe that’s what this one is suffering from.”
Other large TIFs have boosted their credibility by laying out specific projects, Brancaglione said. The Grand Center TIF covers nearly 300 acres, but it included plans for parking garages and rehabilitation of actual buildings, even if it didn’t have specific developers lined up.
But even that might be a stretch in the current climate, said Brancaglione.
“They said ‘Here’s what we’re going to do. Here are the costs and here are the benefits,’ ” he said. “Would that pass muster today? I don’t know.”
Area TIFs — especially ones that aren’t tied to one particular developer — have already grown harder to pull off in recent years, Brancaglione said, after changes to state law that require more detailed financial projections. That makes it tough for a city to create a district and then use the incentive to lure developers, he said. The easier ones are small and specific, driven by developers and often for retail projects — exactly what many TIF critics rail against.
“If you’re trying to induce development in a large area, why make it more difficult?” asked Brancaglione. “You want to make it more difficult when they’re going for a small project.”
Still, even the big TIFs should be fine, as long as they keep to specifics, said David Richardson, head of the real estate and development division of the law firm Husch Blackwell in Clayton. Grand Center, he said, has been smart to amend its TIF agreement several times over the years as plans have changed.
“If there’s specific buildings, specific plans, there will really be no impact,” said Richardson, who has worked for the city on NorthSide but is not directly involved in the suit.
Still, the impact on McKee’s NorthSide plan could be huge. He has already been stalled for three years, unable to lure large-scale redevelopment without access to TIF money.
If the Missouri Supreme Court sees things his way and frees up the financing, McKee says he’ll head straight to the Board of Aldermen to authorize bonds, and projects could start in the spring. If the justices shoot down the TIF for good, he’ll likely ask the Board of Aldermen to pass a new redevelopment agreement. But even that, says McKee attorney Puricelli, may not be specific enough to satisfy the project’s most vocal critics, which could put NorthSide in court for some time to come.
“If we’re forced to do a redo,” Puricelli said, “we know what’s coming.”
