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Kennedy requests veto of his own Lindell Market Place bill
(by Rebecca Rivas and Kara Krekeler - March 26, 2008)
Eighteenth Ward Alderman Terry Kennedy has asked the mayor to veto a bill regarding a community improvement district for Lindell Market Place. It is a bill that Kennedy himself has sponsored and shepherded through the Board of Aldermen.
At press time the mayor’s office had not confirmed that Mayor Francis Slay, who is out of town, intends to veto the bill but it seems unlikely that he would back a bill primarily of local interest that has lost the support of its key sponsor.
Kennedy said information in two previous West End Word stories about how the CID would work played a part in persuading him it was “not worth the risk.”
“The city department that I consulted” — the St. Louis Development Corporation — “didn’t know much about this topic and CIDs,” Kennedy said. “Based on the lack of clear and consistent information, I don’t feel comfortable going forward with this. It is best to look to other ways to help the Lindell Market Place.”
Kennedy said this version of the bill is essentially dead but he is still in discussions with all the parties involved.
The St. Louis Development Corporation, the city umbrella agency that is intended to foster economic development, is not obligated to oversee or help in the planning of CIDs, said Pat Bannister, business development director for the SLDC, but in this case it advised Kennedy on the Lindell Market Place CID petition.
The development corporation does not frequently handle CIDs, Bannister said. Bannister said the corporation counseled Kennedy that it was a good plan because the developers were going to “add more store space and make improvements to the facility to retain its economic impact.”
However once residents learned about the potential sales-tax increase at their local Schnucks and other stores in Lindell Market Place, they began to ask questions about what exactly the money would fund. Throughout the process, however, THF Realty, which owns Lindell Market Place, has been reluctant to provide details.
In February, THF submitted a petition to the city to create the Lindell Market Place CID, which would allow business owners to raise money for area improvements by taxing goods. The sales tax of up to 1 percent would generate $2.5 million for improvements to Lindell Market Place.
Michael Neary, property manager for THF, said that the company did not intend to submit its five-year plan, which is required by state law, until after the CID bill had been approved by the mayor. The Lindell Market Place CID bill was approved by the Board of Aldermen earlier this month and is currently on Mayor Francis Slay’s desk.
Neary said the majority of the $2.5 million budget would go toward security and parking-lot lighting.
However, those two items amount to about $140,000, according to a copy of the budget provided by Kennedy. Neary called the budget a preliminary plan.
Neither did THF representatives inform the affected businesses about the plan to create a CID or increase sales tax. When asked why this information had not been shared, Neary said, “No particular reason.”
According to the THF website, the company is the sixth largest commercial real estate company in the St. Louis area and owns more than 100 properties, mostly shopping centers, in 23 states. In the St. Louis area, THF owns the Chesterfield Commons shopping center, Wentzville Crossroads Marketplace and three shopping centers in O’Fallon, Mo., among others.
While none of those mentioned above are part of a CID, THF has obtained CID financing for other local shopping centers.
In September 2006, THF purchased the Hilltop Plaza Shopping Center at 11986 St. Charles Rock Road in Bridgeton for $32 million. Last spring, the company established a community improvement district at the center, which includes K-Mart, Lowe’s, PetSmart and Sports Authority.
The Bridgeton CID tax — which it is estimated will generate about $21 million over 30 years — will only pay for a portion of the renovation. The renovations were paid for by a sales-tax revenue bond and additionally there is a tax increment financing district that intersects with the CID.
Tom Haun, Bridgeton city administrator, said he was happy to see the center’s new parking lot and the buildings’ new roofs. Haun said none of the community members complained because they are used to sales taxes, which are 1 percent less than in neighboring St. Charles County.
THF sold Hilltop Plaza Shopping Center for undisclosed price about 90 days ago, Neary said.
Jim Lahey, underwriter for the Bridgeton CID, said selling the property after securing a CID happens frequently.
“There are no negatives here,” Lahey said. “You take centers that are not doing well; they’re eyesores. The developers are taking them and improving their infrastructures. The taxpayers are paying for a small portion. It’s such a positive thing. People should be saying, ‘If it were not for these types of projects, the areas would never improve.’”
“The community had an eyesore and now they have a beautiful shopping center. Everybody wins,” he said.
Many options for CIDs
“One of the things … is there isn’t a lot of information out there,” said Michael Konroy, TIF manager at the city of St. Louis’ Collector of Revenue’s office, which says there are 34 CIDs in the city. “The Missouri Department of Economic Development has a short synopsis on its website, but it just leaves you with more questions.”
Because CIDs primarily benefit properties owned by private companies, legally the creation of a CID must be initiated by property owners.
To set up a CID, the property owner must create a petition that includes a five-year plan, the intended purpose of the CID, a budget and the list of potential members of a governing board, among other requirements.
In the case of Lindell Market Place, the CID petition lists five board members, all employees of THF or McCormack Baron Salazar, which developed the property with THF. Most CIDs have a number of property owners involved but in this case there was just one.
“Each CID is different; there’s no cookie cutter,” Konroy said. CIDs do not have to collect revenue through sales tax; some do it through property taxes, using special assessment fees, using a formula such as 40 cents a square foot. Nor the law does not obligate the owner to remain the same while the CID is in place, he said.
Why a CID?
With so many funding options available for fixing up commercial districts — including transportation development districts, tax increment financing and tax abatement — why would a property owner choose to pursue a community improvement district?
Andrew Glassberg, an associate professor of political science at the University of Missouri-St. Louis, said that CIDs are sometimes chosen because of the low impact the created district would have on the city at large.
“They’re ‘self-funded,’ in that the money doesn’t come out of the regulating tax district. They’re better than abatements or TIFs, which take money” out of the general revenue for the city, he said.
Glassberg said that the impact is also relatively hard to see on receipts, explaining that “you have to very carefully stare at your receipt and know exactly what you’re looking for. There’s no evidence that a tax difference of this size causes people to go somewhere else. The evidence is that the impact on the businesses is pretty small.”
That said, CIDs have their flaws, particularly in obtaining data after the CID is in effect. “It’s still public information, but it’s very-hard-to-get public information,” Glassberg said, noting that because the monies collected don’t go into the city’s general revenue fund, it won’t be included in data for the city as a whole.
“You almost have to go through meeting by meeting, set of minutes by set of minutes, to figure out what’s going on.”
While a CID’s board of directors is technically a public body, and therefore must host public meetings, very few people are generally aware of CIDs and fewer still show up to the meetings, Glassberg said.
Glassberg added that governmental bodies can close meetings for sensitive legal and financial issues, which would make just about everything the CID board discusses eligible for a closed session.
“If you don’t know [what’s going on], you’re certainly not going to act on the information,” Glassberg said.
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