Easy Money

Developers like the Sansone Group are using a state law to rake in millions of tax dollars for retail projects in the burbs. Trouble is, the legislation was designed to help blighted inner cities.

At dusk, the mist wreathes halos around the headlight beams of the cars whooshing up the westbound entrance ramp onto Highway 30 from Route 141. The harried travelers come in waves: wheels whirring, wipers wiping, racing through the gathering darkness, with windows rolled up against the damp, chill air.

None of them hear the spring peepers on the far side of the guardrail, down the embankment among the shallow stands of flood water. In the fading light, they can't see Fenton Creek running brown, either, as the stream carries away the topsoil from the barren hillside that looms over this crossroads. Behind the First Baptist Church, where the Wednesday-night prayer meeting is in progress, twisted clumps of forest debris are all that remain of the trees that once grew here.

That the wooded hillside survived almost into the new millennium is no small feat. But in this case the 28.5-acre slope has been clear-cut not for logging purposes but for retail sales. The groundbreaking for the new Fenton Crossing shopping center, which will be anchored by a Dierbergs supermarket, took place on April 15.

To develop this area, the hill itself will be sawed in half and the creek bed relocated. Plans call for excavating 640,000 cubic yards of earth, with more than half of those materials to be hauled from the site. By next year, much of the ground will be graded and covered with asphalt. The work entails blasting a series of rock terraces into the incline. An architectural rendering of the finished product depicts a manmade palisade towering 100 feet over the strip mall.

The cost of this project is estimated at $23.8 million, with more than $6.7 million of it to be publicly subsidized.

Another way to view the site is to drive farther west on Highway 30 and double back on Country Home Road. Once beyond the Summit Heights subdivision and the monolithic Solid Rock Ministries church, with its bank-style time-and-temperature display, the road narrows into the kind of lane that its name denotes. Traffic thins out here and rural mailboxes still line the shoulder, but things are about to change. Nearby, the road abruptly ends at a sign that says: "Welcome to the City of Fenton, pop. 3,343." Behind the sign, two yellow bulldozers stand idle in the mud.

After the city recently annexed this area, it took the land of one property owner through eminent domain. As a result, Joe Murphy's property is now within spitting distance of the new development. The Murphy homestead is situated near the crest of the hill, about a quarter-mile off of Old Smizer Mill Road. Murphy, 69, lives there with his wife, Joyce. English ivy climbs one corner of their shake-shingled cottage; conifers tower in the background. There are a screened-in porch and a toolshed out back.

"They kind of ruined it. That will be a cliff soon," says Murphy, referring to the adjacent area that has already been clear-cut. "I imagine we'll be able to see the tops of some roofs. There will probably be some noise and some lights and so forth. It's just heartrending to see the bulldozers. A tree that's been sitting around for 150 years they can knock over in about 15 seconds.

"We've owned the place for 72 years," he continues. "I was born here. My dad bought it in 1927. I've always said that the law was for the rich and the poor. The little guy in the middle is the guy who really gets screwed."

Murphy is alluding to the tax-increment financing (TIF) statute. Under the state law, a municipality can designate a redevelopment area as a TIF district if it meets certain criteria. This allows the city to issue bonds that pay for the necessary infrastructure improvements to spur new development, including the purchase of property. In addition, the money can be used for everything from constructing roadways to paying for legal and consulting fees. The debt is then amortized -- for up to 23 years -- by earmarking half the increases in applicable sales and property taxes generated by the new development.

TIF, which originated in California decades ago, became sanctioned in Missouri in 1982. The framers of the law intended for it to stimulate economic growth in the inner city, not realizing that statute loopholes would allow for its eventual misappropriation. After federal tax credits shriveled up during the Reagan era, private developers began to seek other ways of capitalizing their ventures with public funding. They hit on TIF because it provides for up-front financing rather than tax breaks later.

As a result, TIF use has soared in the last few years for all the wrong reasons. Instead of helping neglected urban settings, the law is frequently used nowadays to promote suburban retail projects. Sometimes, as in Fenton, the public subsidy triggered by the law is used not to clean up abandoned areas but to "straighten out" natural phenomena such as hillsides.

More often, it is used in the inner suburbs to finance the acquisition of residential property. In these cases, TIF employs a carrot-and-stick approach. Developers, with the assurance of TIF backing, will routinely acquire options to buy housing at above-market value. But their enticing solicitations to homeowners come with an implicit threat. Under the law, the city can invoke eminent domain and expropriate the property. The dubious public-private alliance also allows for the blighting of entire neighborhoods for the scantiest of reasons. Once an area is marked for such redevelopment, it tends to freeze any financial investment, and home and commercial improvements are placed in abeyance. Disinvestment becomes the rule, not the exception, which ultimately leads to further decline.

Next Page »