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.

Meanwhile, property taxes get spent elsewhere, as everyone waits for the deal to go down. Each inaction reinforces the next. The Olivette TIF proposal, for instance, points to the deteriorating streets -- the chink in the street in front of Zeid's house -- that the city itself has refused to repair. Since signing options to sell their properties, many homeowners have already relocated and rented out their former residences. The Olivette TIF proposal cites the increase in decaying housing and rise of rental units as another sign of deterioration. The neighborhood is in the process of destroying itself, with the assistance of the city and TIF.

Zeid finds himself caught in the middle, having taken on the role of a behind-the-scenes negotiator. "I'm kind of frustrated because I think the developers are using me, as well as the city," he acknowledges. "The city knows I'm in contact with the developers, and they can use me to try and get their points across and vice versa."

It all began in July 1997, says Zeid. While he was busy carrying out his duties as an organizer for Olivette's annual Summerfest celebration, Sansone Group, through a third-party real-estate agent, was quietly obtaining options to buy the houses on the 30-acre tract that fronts Olive Boulevard. The Sansone proposal would have left Zeid and his neighbors surrounded by commercial and industrial property.

After word of the deal was leaked by St. Louis Post-Dispatch columnist Jerry Berger, Zeid and his fellow subdivision trustees convinced the Olivette City Council that Arrowhead Park should be included in the development. The subdivision then hired Mello. Meanwhile, a competing effort was under way by THF Realty, which contacted the Armstrong-Teasdale law firm and started buying options on houses in Arrowhead Park, says Zeid. Ultimately, the two competing developers formed a partnership to develop the entire 80-acre tract.

"When the city was starting to negotiate with both developers, they were trying to play one developer against the other, trying to get the best deal for the city," says Zeid. "Nobody ever thought they would merge, because these guys were known not to have a fondness for each other."

The partnership, indeed, seems to be a marriage of convenience. Sansone Group possessed the bulk of the sales options on the front half of the needed property but had failed to include Arrowhead Park in its proposal. This left THF an opening. Michael Staenberg and E. Stanley Kroenke own THF. The latter developer holds an interest in the St. Louis Rams football team. More important, he sits on the board of directors of Wal-Mart, and his wife is the niece of the late Sam Walton, the founder of the retail behemoth. Forbes magazine recently estimated her worth at more than $600 million.

That Kroenke is married into the Walton family is merely a coincidence and has nothing to do with his realty company's efforts to build a Wal-Mart in Olivette, says Lewis, the spokesman for THF in St. Louis. "We have no tie to Wal-Mart other than we've developed a lot of shopping centers with them," he says.

Using TIF money to raze hundreds of houses to make way for a Wal-Mart is an idea that astonishes Merriman, the Loyola economist. "That's insane. If people are living in the houses, there is no way I would think that (possible)," he says. "A lot of times TIFs have moved very far from the original intent. That's one of the things that I find disturbing. You start out with this law that makes some sense, even (that's) debatable, and then the way that it's implemented makes no sense."

In a position paper released in April, the East-West Gateway Coordinating Council, the regional-planning agency, acknowledged the problems endemic to TIF. "In the mobile regional marketplace, many local governments are vulnerable to pressure from private developers to make tax increment financing available in order to 'win' new jobs, retail activity, and associated sales tax revenues," says the report. "In the absence of other tools and enforcement standards regarding its use, TIF districts are cropping up throughout the region in areas in which evidence of blight and distress is scant or non-existent. Nor is it always defensible that public sector intervention in the market is necessary in order for the redevelopment to occur.

"If the region is going to stabilize the industrial and commercial areas which are truly blights on the economic landscape, TIF must be targeted to its originally-intended use. Individual local governments acting alone cannot make this happen. It requires both statutory and procedural changes and a long-term commitment to more sweeping reform."

East-West Gateway recommends the following changes to the TIF law:

*Blighting for TIF developments should be restricted to economically distressed areas.

*Public-sector-intervention standards should be established and enforced.
*TIF proposals should be approved by an objective third party.
*TIF-district boundaries should not extend beyond the area found to be blighted.

*Cost-benefit-analysis requirements should be more stringently applied.
Anthony F. Sansone Sr., the patriarch of the Sansone Group, will never be displaced or disturbed by a TIF project. The 73-year-old developer is far from the bulldozers' roar, ensconced in the tony St. Louis County suburb of Huntleigh, where, according to St. Louis County property records, he occupies a 15-room mansion that has seven baths and a market value of almost $1.5 million.

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