By Sarah Fenske
By Danny Wicentowski
By Lindsay Toler
By Danny Wicentowski
By Danny Wicentowski
By Jessica Lussenhop
By Lindsay Toler
By Lindsay Toler
For those in the know, land-tax sales are the closest thing to a modern-day land-run -- a place where bargain hunters can claim a sliver of American soil for pennies on the dollar. It works this way: When a property owner fails to pay real estate tax for a period exceeding three years, the city files suit for back taxes. If the landowner is still in arrears a year later, the property goes up for sale at the sheriff's auction for a price equal to or greater than the taxes owed on the property.
The result, it would seem, is a win for all parties involved. The city recovers its delinquent tax dollars and, after beating out any competing bidders, the buyer walks away with a bargain.
But what unsuspecting investors like Nael Abu don't know about the sale is that the public isn't the only one bidding.
Hoping to land a two-family flat on Minnesota Avenue, Abu attended his first sheriff's sale last month only to find himself locked in a bidding war with Synetta Wright, whose braided hair, reading glasses and matronly good looks suggested more interior designer than real estate baron. That Wright occupied the lone chair in the courthouse foyer -- preferentially positioned directly in front of the auctioneer -- seemed a bit odd to Abu, but did not discourage him from upping her bids.
Each time he raised his bid by a few hundred dollars, Wright would counter with a bid for a hundred dollars more. The back-and-forth continued until the property reached $45,600, more than $42,000 over the opening bid. Abu folded and Wright picked up her fourteenth property of the morning.
News that Wright represents the Land Reutilization Authority, a quasi-governmental body overseen by the St. Louis Development Corporation, came as an unwelcome surprise to Abu. Like others who lost out to the LRA at the sheriff's sale, Abu questions why the city put the property up for bid if one of its agencies was going to turn around and purchase it at a premium.
"Who's going to outbid the city? They've got the money to outbid nearly anyone," complains Abu, who claims to have rehabbed some twenty buildings in St. Louis, most of which he's purchased from banks at foreclosure.
Backing Abu is Isaac Flores, who, accompanied by his toddling son, drove from southern Illinois to attend the sale. He hoped to buy a small home on Iowa Avenue for his family, but lost out when he got into a bidding war with Synetta Wright.
"They're using taxpayer money to outbid us?" fumes Flores. "How's that right?"
Established in 1971 to oversee properties so undesirable that no one dared bid on them, the LRA over the past dozen years has transformed itself from pauper to major player at the sheriff's sale. At last month's sale, one of a handful held each year, only one investor, Robert Wood Realty, dropped more coin than the $207,000 the LRA spent gobbling up property throughout the city.
When asked to justify its role at the sales, the LRA defends its bidding as a proactive step to encourage development and weed out speculators.
"The objective is to get the property back into productive use and out of the hands of speculators," explains Rodney Crim, director of the St. Louis Development Corporation. "We don't bid on every property, just those that are seen as key or necessary for the development of a larger block."
Crim stumbles when asked how much the LRA has spent acquiring properties in recent years but says funding for the purchases comes by way of community-development block grants and other federal sources.
"All of this is clearly sanctioned," notes Crim.
In a curious aside, over the Memorial Day holiday Mayor Francis Slay posted an article on his Web site (www.mayorslay.com) defending the actions of the LRA: "One challenge of large-scale development in the city is to find parcels large enough to compete with the cornfields and flood plains in the outer suburbs. To assemble large parcels of land for redevelopment, I have asked the LRA to bid at the sheriff's sale for key parcels adjacent to its other holdings and for parcels in certain redevelopment areas."
But the LRA's bidding on properties baffles more than just investors. Preservationists have long contended that the LRA -- which owns more than 10,000 properties scattered throughout the city -- allows historic properties under its control to decay to the point of disrepair.
"Oh, they shouldn't be doing that," admonishes Landmarks Association director Carolyn Toft when asked if she's aware of the practice. "That's really disturbing."
Toft, whose organization works to preserve historic buildings in the city, refers to LRA's action as "land-banking" -- a maneuver in which property is acquired for future development, often at the expense of the existing housing stock.
"If they're going to be spending money, why not spend $5,000 to put a roof on a building they currently own, instead of letting it decay to the point that it's unsalvageable?" asks Toft.
Even among those plugged into City Hall, the LRA's practice of competitive bidding flies well under the radar.
"No, I didn't know they did that," says Board of Alderman President Jim Shrewsbury. "It could be there's a logical reason."
For aldermen determined to clean up their wards, the LRA's bidding at the sheriff's sale is a sound public policy. In the Ninth Ward, which encompasses parts of Soulard, Benton Park and Tower Grove East, alderman Ken Ortmann freely admits that he tips off the LRA on properties he'd like them to acquire. Those properties, he says, have played a key part in cleaning up downtrodden parts of his ward.
"I call it insurance for the neighborhood," says Ortmann. "At the sheriff's sale, you have every Tom, Dick and Harry trying to buy these properties. Many of them will buy something for $20,000 and the next day turn around and try to sell it for $40,000. Of course, it's America and anyone can bid on them. But what we're trying to do is protect what we've already done in the neighborhood. Who is going to benefit? The neighborhood is. The community is."
Ortmann maintains that when the LRA acquires land and buildings from the sale, it ensures that the developer builds a quality home and requires that the property be owner-occupied, which increases the tax base and stabilizes the neighborhood.
But for Jack Ulrich, a resident of the Twentieth Ward, the LRA properties have done little more than blight his neighborhood of Gravois Park. In 2002, Ulrich lost to the LRA in a bid to purchase the vacant house next door. Then for two years Ulrich watched as the house went untouched, attracting vagrants and drug dealers.
A carpenter by trade, Ulrich inquired about purchasing the house directly from the LRA but fell short of the financial rank the agency asks of its developers. Finally Ulrich convinced a friend to purchase the house. It's currently being refurbished but is one of only a few LRA properties that Ulrich says he's seen transformed.
Sputtering though his neighborhood in a rusting Volkswagen pickup, Ulrich points out a half-dozen houses that the LRA has acquired in recent years by outbidding investors at the land-tax sale. In each case the LRA property is the worst house on the block, with weeds growing waste-high, trees sprouting through porches and roofs caving in.
At one dilapidated home on Nebraska Avenue, Ulrich pulls over and surveys the crumbling building in much the same way that a marine biologist might diagnose a beached whale in the throes of death.
"I think we're going to lose this one," he says dryly. "It's going to fall down."
It's a double-edged sword, confirms Craig Schmid, Ulrich's alderman, who like Ortmann earmarks property in his ward that he wants the LRA to acquire.
"For developers, vacant buildings are opportunities, and you have to have them to attract new building and renovations," Schmid says. "At the same time, I understand that it's difficult to live next door to a vacant property."
As for the dreams of the little man who's been toppled by the LRA?
"We all have those dreams," counters Schmid. "Problem is that I can think of many wonderful dreams that have turned into nightmares. The owner runs out of money or falls into a bad situation, and the house sits idle and becomes an even bigger eyesore than before. That's what we want to avoid."