Proposed TIF to be Backed by City’s General Revenues
Remember the first TIF project in the City of St. Louis? The failed St. Louis Marketplace on Manchester Road! Well, it was the only such project in the city to be backed by the city’s general revenue. That is, if it did not generate the necessary revenue to pay off the bonds the city would be stuck with the bill. Well, last year, this year and possibly next year that is over a million dollars annually. The city may well be on the hook until the TIF ends in 2011.
Enter John Steffen of Pyramid Construction. In a board bill before St. Louis Estimate & Apportionment Board (E&A) related to 600 Washington (aka St. Louis Centre) the city would be obligating their general “City Revenues” should revenues from the project prove insufficient to cover the annual debt payments for the $14,500,000 TIF. The maturity date is 23 years from approval, a long time to commit general revenue.
The E&A, consisting of Mayor Slay, President Shrewsbury, and Comptroller Green will meet at 2pm Wednesday in the Mayor’s office. The meeting is open to the public. I spoke with the Comptroller’s Public Information John Farrell about this issue, he indicated the Comptroller’s office has some concerns. Here is a list of their concerns distributed at last weeks HUDZ committee (Housing, Urban Development and Zoning) where board bills 313 & 314 were passed out of committee:
The redevelopment agreement and these two board bills are fundamentally flawed.
- The TIF borrowing uses the full faith and credit of the city.
- The building is overpriced at $26 million.
- Board Bill implies the city obligation is $14.5 million, but the term sheet indicates we are obligated for $28 million.
- The office building is not class A space. It must compete in a very crowded market.
- There are 85 TIF’s City-wide only one uses the general fund backing.
- Per the Term Sheet, it appears the city will agree to increase borrowing up to $28 million.
- The moral obligation backing is a pledge of the general fund.
- Using the general fund of the city for TIF bonds is against the city’s financial policy that is based on Best Practices.
- The general fund will be called on to pay $1.2 million per year for the new TIF debt.
- The only other general fund backed TIF is the Market Place TIF to which the general fund paid $1 million this year and last year.
- Using general fund backing sets a bad precedent and is very difficult to reverse.
- A $14 million debt will be added to the city’s balance sheet
- We have huge unmet costs facing the city in the near future. Some are:
- $73 million for past pension costs plus double what we currently pay annually into the foreseeable future.
- $30 million convention center improvements
- $10 to 15 million renovation of 1520 Market Street
I am by no means an expert on TIF financing but I know this much: if the project does not perform well over the life of the TIF bonds I don’t want the city to have to step in and make up the difference. If the project cannot stand on its own after substantial public assistance and the developer is unwilling to make up the difference should it come up short then maybe, just maybe, this is not the right project. Both bills were sponsored by Alderman Phyllis Young (D-7th Ward).
Mayor Slay’s office is in support of the TIF and apparently President Shrewsbury’s office is also leaning in favor as well. As indicated, the Comptroller’s office is not so keen on this TIF but it only take a 2 out of 3 vote to be approved. What do you think? Is the new project worth risking general funds to cover the debt for the next 23 years?
What do I think? I think that the composition of the Board of E & A is a pivotal decision for Pyramid.
If Green and Shrewsbury balk, they don’t get their way. Green isn’t up for re-election soon, so she can’t be challenged. Besides, as a popular African-American, she is hard to oppose.
But Jim Shrewsbury is up for re-election now and has had some political support problems lately. Exploit those problems and his being a white male, and you could put together a candidacy of great benefit to Pyramid. A new TIF-friendly vote on E&A would help, and Pyramid would only have to wait until the spring to get approval. In the meantime, Shrewsbury will be pressured to support the TIF or else be called a “foe of development.”
Brilliant.
The Mayor’s Office is calling this a “Hobson’s choice.” But if we’ve learned nothing from St. Louis Marketplace, you would think the City would at least back TIF with general revenue only as a “decision of last resort.” Whether a “Hopson’s choice” or a “decision of last resort,” the obvious risk involved then begs many questions on whether other options have truly been exhausted. For starters:
Why not redevelop St. Louis Centre independently of One City Place?
Would the philanthropic community be willing to offset the cost, such as the demolition of the skybridge(s)?
Would other private developers be willing to join Pyramid if there were equity or return on investment at stake?
If wanting to go it alone, why can’t Pyramid just sell their other holdings like Jefferson Arms and Arcade-Wright to finance 600 Washington?
If the concept is ultimately not profitable to anyone in the current market, could the blight of St. Louis Centre just be addressed minimally (skybridge, first floor retail) until surrounding development makes a larger project more attractive?
From last week’s MayorSlay.com
http://www.mayorslay.com/desk/display.asp?deskID=592
Legally One City Center and St. Louis Centre are two seperate entities. But the physical link is so close that it would be virtually impossible to do a quality redevelopment of one without the other.
If One City Center is in poor condition with an owner unwilling to invest in keeping the building viable, why not eminent domain?
The City is gambling that issuing this debt will pay off in the end. The question is whether a higher quality development like this project will actually pay off? Certainly it has the potential when compared to suburban strip malls, yet with all things Downtown, is a roll of the dice. Hopefully our elected officials will look hard into this TIF as it could put us into more dept. Regardless, financing capital improvement projects are one thing, yet this is not a private work. Issuing public debt to pay for private developments? Do they need the incentive? As I have said before, when Joe Blow gets more incentive for home improvements, then I will support huge subsidy for corporations.
I’m not sure what the comptroller means by saying it is not Class A space. It is recognized as Class A by brokers and if you have seen some of the office finishes of remaining tenants it is some of the nicest in downtown. Not very marketable Class A, but Class A none the less.
The thing that prevents it from being competitive as Class A is its connection to St. Louis Center and its extremly poor street presence which would be dramatically improved with Pyramid’s plans to improve the Center and the city’s plan to improve the streetscape.
I’m still pissed off over Pyramid’s botched McDonald’s relocation. Let them sell off some other asset they’ve got to get their project financed. Isn’t that what the average citizen would have to do?
Steve – I agree that both surface parking and parking garages are ugly. Surface parking is (should just be?) a place holder to generate revenue until a new structure can be built to replace what was taken down. Unfortunately, as we all know, this is not the case in many instances – given market conditions, they tend to linger for years, and in many cases, decades. Parking structures are a different beast. I know you think that if you remove them, people will find another way to get downtown, like they do in bigger, “real” cities, like Chicago and New York. Reality check – we’re not in that league. If 90%+ of the people who now work or recreate downtown couldn’t/can’t drive there (and yes, park!), they simply wouldn’t/won’t go, they’ll find other (suburban!) options. We need to accept this paradigm and work to make our parking structures as street-friendly as they can be, with retail storefronts facing the street (as many already do). While what’s “up above” is important, and in many cases with existing structures, not great, it’s really what’s happening (or not!) along the sidewalk that makes or breaks certain blocks. And yes, cars create congestion and pollution, but as you like to point out, they also help to energize the city. Parking structures also give our buddies, the valet parking companies, a place to (potentially) park their patron’s vehicles somewhere other than on city streets. We can all have our dreams, including blowing up all that’s “bad” about downtown, but life, in reality, is both messy and incremental. Much of what’s here now needs to stay, to create a critical mass and to maintain and help grow the urban fabric. Taking out existing parking structures just because they’re big and ugly will just result (in the near term) in more surface parking lots, not less, which in my mind would be a major step backwards!
Jim, you’re right that parking garages are a necessary evil for St. Louis as we know it, and an essential part in making downtown begin the process of becoming a vital place again. However, the design of most of the existing downtown parking decks presents a dark, ugly, unmaintained blight on the urban streetscape that adds to the perception that downtown is dangerous. The gradual replacement of these decks with structures that provide storefronts on the street level and parking above, similar to the new Schlafly Library deck in the CWE and University City’s parking deck in the Delmar Loop, would be a City-funded or TIF project I would strongly support.
So far as the St. Louis Centre/One City Centre deal goes … I have grave reservations about the City backing this deal out of general revenues. I think Brian (comment #2) has the questions we as citizens should be asking … and satisfied with the answers before the deal is approved.
I need a lot more convincing to believe that this is necessary. I haven’t seen any proof that St. Louis Centre couldn’t go ahead without one city center.
I would much rather go forward with a development plan that works around one city center and/or try to take it through iminent domain. Why cave in to the building owner when the thing is half vacant and they have to be losing money on it (AB just left their 110,000 square feet of space at One City Center and moved to South County and the only other large tenant is looking to leave too).
I just don’t see why the city should put general funds behind this thing to buy out an owner who is holding us hostage. The place has been a dump for so long, I don’t see why we can’t wait a little longer to avoid being extorted.
The city wouldn’t pay an excessive price backed by general funds if it was a block of single family homes.
Though I am not an expert on TIFs, I do know this arrangement is typically considered ill-advised.
But … if ever a development called for an extraordinary amount of public participation … this would be the one. St. Louis Centre has got to be addressed. This isn’t just a private development matter, it’s a matter of public good.
Of course it is the comptroller’s job to register those fiscal concerns. But there’s more to it than one deal’s return. The convention business we are losing because of this eyesore cannot be quantified, but I can only assume that it is huge. If I were a meeting planner (and in my business I work with a lot of them as they advise their clients), I could not put my clients and their hundreds of “guests” into that environment.
If I had a dollar for every time I spoke to a convention visitor who had wandered into St. Louis Centre and wandered out stunned…if I had a dollar for every time we were having the “isn’t it great what’s happening downtown” conversation around town and someone said, “yeah, but what’s going on with St. Louis Centre…” If I had a dollar for every time an out-of-town guest asked, “What’s THAT!?” as we drove under the horrific Wash Ave pedestrian bridge … I could almost guarantee the TIF personally. And I would. Cause it’s gotta go.
Here’s an idea: take the entire budget of the Convention and Visitors Bureau and put it toward guaranteeing the debt payments. The ROI would be more direct.
It is a cancer in the middle of downtown. Take it out. Pay the man. Git R Done.
“This isn’t just a private development matter, it’s a matter of public good.”
What is? Acquiring One City Center? That hardly seems pressing.
That building’s future will look brighter once St. Louis Centre’s rehab is complete.
Won’t John Steffen get rich enough on St. Louis Centre alone?
And… What about Pyramid’s inability to start rehab at the Arcade Building? Its role in the McDonalds controversy? Its involvement in the plot to tear down the northside?
Our elected officials should be asking for some answers on those matters before selling out our general revenue.
ACC is reporting that Darlene Green has come out against the STL Centre TIF proposal.
Will Shrewsbury and the Mayor form an alliance on this one? Those E and A meetings must be getting a little tense!
Margie,
I hear ya. I work right across the street from the center. It used to be a good thing to have a laugh about, but even that has become stale. If they were going to knock it down and make a park, I would love to take the first swing with the wrecking ball.
However, I am not comfortable at all with the city using general revenues for what could potentially be another failed project. There is nothing I have heard about the plans for this project that differentiates it from any other office/residential project to the point that it will be a guaranteed success.
Plus, if I read the Mayor’s blog correctly, they are talking about using this general revenue backed money to buy One City Center, not St. Louis Centre (Pyramid already owns that). I just walked by there today, and I wouldn’t call One City Center an eyesore by any stretch. I have heard that the current owner, Angela Whitchard I believe, is letting it get run down in anticipation of cashing out, but if the city and Pyramid go forward without One City Center, Whitchard might be forced to cooperate.
You guys are assuming you can a la carte the tower. Do you know that for sure?
My feeling: St. Louis cannot afford NOT to gamble on this deal. I don’t like the TIF either, but it’s time for action. It’s time to get the slumlord property owners out of downtown. It’s time for a big, bold gesture that sends the message: it’s gonna be okay.
Jim:
Parking structures are a different beast. I know you think that if you remove them, people will find another way to get downtown, like they do in bigger, “real†cities, like Chicago and New York. Reality check – we’re not in that league. If 90%+ of the people who now work or recreate downtown couldn’t/can’t drive there (and yes, park!), they simply wouldn’t/won’t go, they’ll find other (suburban!) options.
I agree that competition is an issue. If downtown does not provide suburban options then the suburban residents will go somewhere else. Yet suburban visitors do not generate sustained pedestrian traffic and suburban development will not attract urban residents from other cities nationally or globally. I would say this is why we are in our current situation. St. Louis, out of a dire need to attract people to the City, is replicating suburban development. We cannot do the suburbs as well as suburbia. We need our own self-identity.
For us to look like a global city, we must adopt an urban built environment that extends from paper to reality. St. Louis already has the economic activity of a global city and the culture yet our politiciaans are busy infighting thus regional agenda building is absent. The entire region must recognize that St. Louis City is the urban center of the region. Our leaders, both in the City and the surrounding Counties, must support the urban progression of St. Louis. Zoning codes must be changed within the City but also within the fragmented County. Citizen-leaders must require this! Continued suburban development within the City prevents our progression. The status quo must change, as it will only result in further sprawl away from the core and decline.
The greats do not side on the bench saying “we are not in that league.” They practice before and after the game and get better. Settle for mediocrity, no thanks. We will continue to loose the best and the brightest with that attitude.
Well, today’s Post indicates that Green lost her fight and was outvoted by Slay & Shrewsbury, so this will be heading to the Board of Alderman for a vote. Sigh.
I guess it’s time to contact my alderman and voice my displeasure with this. 23 years is a long time; if the city has general revenue funds to commit for that long, then how about committing it to the real problem “property”, i.e., the schools for 23 years?
I’m not sure how this devolved into Ye Olde Parking Controversy. While a valid discussion, with valid points on all sides, we need to address the overcommitment of funds *NOW*.