When the Levy Breaks

Two years and more than $4 million later, a downtown tax is drowning under charges that it was illegally imposed

Standing at the corner of Fifth and Olive streets, the young woman is snappily dressed in khaki shorts, a white shirt emblazoned with "Downtown Courtesy Corps," and a safari hat. She smiles expectantly at pedestrians as they walk right past her, almost none of them paying any attention. Nevertheless, she perseveres: smile, no response, a periodic look up to the sky, smile again. A half-hour later, with five more hours to go, she is still there, beads of sweat rolling down her face. Her smile is less perky as she drapes herself over a newspaper box.

"It is kind of boring," she says candidly. "Sometimes people don't even notice you. We're supposed to give people directions but hardly anybody ever asks." She smiles and shakes her head. "Sometimes I feel silly standing out here, but it pays $9 an hour so I'll keep doing it."

The dozen "distinctively uniformed sidewalk ambassadors" are just one of the many things funded by a Community Improvement Taxing District (CID), which in the two years since its inception has raked in more than $4 million to Downtown St. Louis Partnership Inc. The money also pays for a variety of other things: 114 sidewalk planters, 600 banners hanging on streetlights, extra police protection and equipment, graffiti removal, litter pickup, and special events such as Downtown on Ice and Thursday block parties in June at Union Station.

The CID was established under state law, which requires a majority of property owners in the district to sign a petition in favor of a "special assessment" on all property owners based on lot size and square footage of buildings. The Partnership managed to squeak out a majority by a narrow margin of four signatures. A month later, on July 23, 1999, the Board of Alderman approved the measure creating a downtown CID; on July 29, then-Mayor Clarence Harmon signed it into law.

But not all downtown business owners are satisfied with the CID or the benefits it has spawned. In fact, two groups of property owners have filed separate lawsuits, and lots of others have quietly backed them. One suit, filed against the city, charged that the "special assessment" is really a tax and that only a political subdivision, not a not-for-profit corporation like the Partnership, can levy a tax. In late June, a judge agreed that it was a tax and ordered the city to refund the money collected from the five plaintiffs -- plus interest.

The other lawsuit charges that the district was illegally formed and that the Downtown Partnership, in its zeal to set up the CID, didn't play by the rules. That suit is still pending in circuit court. An examination of the petitions, the manner in which the Partnership calculated property owners, and the selective inclusion of properties in defining the district boundaries raises questions about the validity of the petitions and the process that created a CID, which, over its five-year life, is likely to collect between $10 million-$15 million.

A lonely attendant watches over rows of tightly packed cars at the surface parking lot at 904 St. Charles St. It's not quite a major downtown property. And yet the lot's owner, Jack Pohrer, signed the CID petition three times. On paper, the lot is divided into three parcels -- one owned by the St. Louis Parking Company, of which Pohrer is president; another owned by the Myra Reyburn Trust, of which he is "owner/representative"; and the third was once owned by the nonprofit Little Sisters of the Poor. Trouble is, Pohrer signed for the parking company and the trust on Oct. 30, 1998 but signed as "lessee" of Little Sisters of the Poor in April 1999 -- even though he had bought the parcel from them eight months earlier.

Asked about this, Pohrer was reluctant to talk. Before hanging up, he said: "I am a representative, and it's the same as if I own it. I am not sure where you are going with this or what you're trying to do, but I am afraid you are into some real legal things you probably don't understand."

Little Sisters of the Poor didn't understand, either. In fact, the agency wasn't even aware its name was associated with being in favor of the CID. "We sold the property to [Pohrer] in September of 1998," says Bernie Huger, the lawyer for Little Sisters of the Poor. "We would have no reason to give him authorization to sign the petition since he was already the owner. I can't and won't even speculate how this happened."

Whereas Pohrer signed three times for the parking lot and four more times for other properties he owns or controls downtown, Ralston Purina, which owns 35 parcels south of downtown, was allotted only one signature. The difference, say critics, is Pohrer was a board member of the Downtown Partnership and a supporter of creating the CID, and Ralston was neither.

Beyond Pohrer's questionable signatures on the petitions, there are a few others:

Arthur and Paula Littleton, who jointly own two parcels at 1210 Washington Ave., signed twice.

Cupples Development and C&S Properties signed in favor of the CID, even though Cupples owned both parcels at 920 Spruce St. and C&S was simply leasing one from Cupples.

John Hancock Life Insurance Co. signed for a property at 200 N. 8th St. Later, on June 8, 1999, the company sold its property to Laclede Tower Associates, a New York partnership. The new owners weren't contacted for their signature; the original signature was allowed to stand. Five other similar cases -- where owners signed, then sold the property before the petitions were turned in -- were accepted as well.

Blackwell Printing Co. and Comfort Companies Inc. got one petition each for the parcels at 1611 Locust St. Both forms were signed by developer Craig Heller, an owner of Printworks, which owned both parcels and leases them to the two companies.

If just those 10 signatures were to be excluded, the Downtown Partnership would not have had a majority. In December 1999, Mark Finney, who owns the Syndicate Trust Building, and Richard Deutsch, owner of R-D Two Inc., filed a lawsuit accusing Downtown Partnership and the city of misrepresentation and asking that the CID be dissolved. The suit was dismissed, but portions of it were reinstated later. Another property owner, the Globe Building Co., joined the suit on April 10, 2000. "They didn't have enough support and knowingly manipulated names to get the right number," says Finney. "They shuffled things around until they got the answer they wanted -- a $15 million CID downtown -- and we are the ones who have to foot the bill."

John Fox Arnold, a longstanding board member of the Downtown Partnership and its attorney, defends the process as a fair one. "It is clear to me," he says, "that at the time the petitions were being considered everyone was trying to comply with the statute and do so in a manner that everyone who wanted to be heard could be heard," says Arnold. "If that constitutes being fair, yes, to that extent it was a very fair process."

But Michael Gross, a lawyer for the plaintiffs, says the signatures alone are reason enough to question the validity of the CID. Compounding that is the fact, he says, that the Downtown Partnership excluded 25 nonprofits from the overall total of property owners. "It is fairly clear from the documents that there were arbitrary decisions made on whose signatures counted and whose did not," he says. "There was clearly some sloppy work along the way, and the city wound up approving signatures that are beyond suspect."

Buddy Hochman, who owns two small parcels on Chouteau Avenue, did not sign the petition. He says the CID was forced down the throats of property owners. "Were we fairly represented? No, we were not!" Hochman says. "Downtown Partners didn't want to hear from anyone who was opposed to this. We could have put up a fight, but it was pretty cut-and-dried from the beginning that they were going to get this proposition passed even if it meant railroading it through."

The push to get a Community Improvement Taxing District was spurred by a reorganization of Downtown St. Louis Inc., which was established in 1958 by a group of St. Louis businessmen interested in the revitalization of downtown. In 1996, with executive director Kim Kimbrough in charge, the group changed its name to Downtown St. Louis Partnership Inc., an umbrella group with three distinct corporations, each with a different focus. Then it pushed for state legislation to create Community Improvement Taxing Districts, a popular move nationwide.

There were already two taxing districts downtown -- one on Laclede's Landing and the other on Locust Street, both controlled by a special board appointed by the Board of Aldermen. But the Partnership wanted its own pot of money.

"Downtown St. Louis Partnership had a contract to provide services," explains Arnold, "but it had no voice and governance in the disbursement of those funds. It was found that CIDs worked better because the people who paid the money also made the decisions on how it would be spent."

On June 28, 1998, then-Gov. Mel Carnahan signed the measure into law. And, unlike the other taxing districts, Arnold and his group had successfully lobbied to base the levy on lot size and square footage, rather than assessed value of the property, so the larger tax-abated properties -- of which there are many downtown -- had to pay their fair share. The law also mandated that the CID must meet two requirements: A majority of property owners must sign a petition in support, and the property owners who sign must represent more than 50 percent of the assessed value of the district. "That is to keep the big dogs from beating up on the little dogs and the little dogs from beating up on the big dogs," says Arnold.

But no one was watching the watchdogs. The law left it to the sponsor of the CID -- the Downtown Partnership, in this case -- to define the district's boundaries and to define which property owners would be excluded from the total count, thereby affecting the number that constitutes the needed majority. And the Downtown Partnership made some strategic -- and questionable -- decisions.

Laclede's Landing, for instance, where there was little support for a CID among property owners, was excluded from the district. Arnold says the Landing owners "opted out," and Tom Purcell, director of the Laclede's Landing Redevelopment Corp., concurs, saying the Landing has its own assessments and "saw no reason to duplicate it."

But Ralston Purina, which is less a part of downtown than the Landing, wanted to opt out as well, but the Downtown Partnership paid no heed to that. Gene McCoskey, director of Ralston Site Services, expressed as much in a letter to Ald. Phyllis Young (D-7th), whose ward includes downtown, and to Kimbrough: "Ralston Purina's participation is not warranted. Therefore we should not be assessed any tax or fees for unnecessary services or requirements."

A Ralston employee who spoke on the condition of anonymity says the entire process left a bad taste in the mouths of many of the larger companies, including Ralston. "Basically we were forced to pay into a district that we didn't want and that really offers us little benefits," the employee says. "All we are getting out of the deal is banners and a promise of increased police patrols that we have never seen."

Landing properties weren't the only ones left out. Downtown Partners exempted 25 nonprofits, lowering the overall property-owners count to 349 and the needed majority to 175. The state law clearly exempts nonprofit property owners from having to pay a CID assessment but is less clear on whether they can be excluded from the total number of property owners needed to define what constitutes a majority. "It does seem like they were picking and choosing which nonprofits were on their side," says attorney Paul Henry, who helped prepare one of the lawsuits. "If you were a nonprofit and were interested in the CID, you will be included as petitioner. But if you weren't, you were excluded completely. By doing this, they were increasing the number of potential voters but they were also ensuring they were only getting a 'yes' vote. It was getting them closer every time."

By the spring of '99, the petition-gathering apparently wasn't looking good for the Partnership. And the arm-twisting began.

"I wasn't really in favor of the CID," says J. Peter Dolan, who owns property at 400 Locust St. "But I made a deal with Kim Kimbrough that if he could get the St. Louis Community Foundation to lease my building, I would sign." Dolan did sign and the foundation did move into his building. Kimbrough, who moved in February to take a job in Portland, Ore., did not return numerous calls.

The state law doesn't leave a CID sponsor to police itself regarding petitions -- it relies on the local government to check and certify the petitions. If the Downtown Partnership bent any rules along the way, it was because the city wasn't a good referee.

Kimbrough submitted the petitions for certification on April 29, 1999, to City Registrar Rita Krapf. In a letter enclosed with the petitions, he stressed "a level of urgency." The Downtown Partnership wanted to make sure the CID assessment would be included on tax bills sent out that year, and it still had to get the Board of Aldermen to approve an ordinance.

"We were trying to get it done before the deadline, but we were working on it when we could in addition to our regular duties," says Krapf. Asked about the lessees signing for owners -- as in Pohrer's case -- Krapf says her office simply checked to make sure the signatures matched the owner of record. "But honestly," she says, "we didn't hold a magnifying glass as to who signed. We trusted Downtown Partners to do that." Deputy Assessor Leo Hamm agrees. "To the best of my recollection, that responsibility to verify the signer would fall on Downtown Partners, who notarized the signatures," he says.

Krapf says the time-consuming task was complicated by the fact that nobody had done it before. There were numerous questions, especially on how to count multiple ownerships like trusts and partnerships. The city turned to Arnold, who at the time was chairman of the Downtown Partnership board, for advice.

"It is amazing to me that no one challenged this," says Finney's attorney, Neil Bruntrager. "Clearly [Arnold's] interests were in creating the district. This was not a detached opinion."

Arnold bristles at the notion that he had a conflict. "I didn't advise the city," he says tersely. "My opinion was directed to the Partnership. I wrote an opinion addressed to the Partnership, and a member of the city counselor's office asked for a copy."

In his written opinion, Arnold says multiple owners of one parcel of property can only be counted once. But he adds that there is no statutory definition on how "votes of owners of multiple parcels of property will be counted." Nor does the law provide any guidance on how "multiple parcels owned by separate entities with a common ownership" are to be counted. In his opinion, Arnold wrote, "each entity should be treated as a separate owner and considered separately for the petition." This was the opinion that allowed Pohrer to sign seven times, as well as other owners of multiple properties.

Besides relying on Arnold's opinion, the city also let him fix problems with the petitions.

On May 12, almost two weeks after the petitions were turned in, Arnold signed out petitions that were flagged as questionable by Krapf's office. On May 26, Kimbrough returned the same petitions to Krapf with a letter; in it, he wrote that "questions of clarification raised by your office" have been "satisfied and resolved."

Downtown Partners continued to submit petitions to Krapf throughout the certification process. On June 25, Krapf filed the petitions with the Board of Aldermen, stating in a letter that "the petition and signature forms were reviewed by me and by personnel from the offices of the Assessor, Collector of Revenue and City Counselor. Based on my review and on the information and advice provided to me by those offices, I hereby report the petition substantially complies with the requirement of the act."

Arnold won't comment on any petition-gathering questions because of the lawsuit.

Opponents of the CID were shocked when they heard a majority of property owners had signed petitions. "They had been scrambling to get signatures for months and suddenly they had a majority," says Finney. "It didn't make sense. None of us really believed it."

Even before the CID was established by the aldermen in late July, property owners began questioning the city on how the Downtown Partnership arrived at a majority. On July 7, Mark Finney's brother, Daniel, an attorney, faxed a letter to Eugene Hanses of the city counselor's office on behalf of his brother, requesting "any and all pertinent information" concerning the CID, including "copies of the original signatures and verification information."

He was simply told he could view the signature forms at the registrar's office. But not knowing how the Downtown Partnership determined the number of property owners or the number of votes allowed per parcel, the petition forms were not very helpful. Finney turned to specialists in property rights, the law firm of Denlow and Henry, for help. On Sept. 3, Paul Henry sent another letter specifically requesting the list of property owners who were eligible to sign a petition and which owners were eligible to sign more than once.

It wasn't until the beginning of October that Henry received the boxes of information he needed. "But there, tucked in these boxes, we found the tally of who can vote and who can't and the gates parted," says Henry. "We knew we had a case."

Finney and Deutsch's lawsuit was filed in the city's circuit court in December 1999. Circuit Judge David Mason recently heard the case and is expected to rule some time soon.

Another judge's ruling in the other lawsuit concerning the CID may influence Mason's decision. In that lawsuit, filed in March 2000 by the Missouri Athletic Club (MAC), Boatmen's Trust Co. and two others against the city, the plaintiffs charged that the "special assessment" is really a tax. In essence, they argued, the July 1999 city ordinance creating the district set its operational date as Jan. 1, 2000, but in its haste the Downtown Partnership adopted a resolution in September 1999 levying the tax -- a time frame when, legally speaking, the district didn't exist.

On June 25, Judge Julian L. Bush agreed -- in a rather colorful opinion. "How many angels can dance on the head of a pin? Can that which has been established nevertheless not yet exist? Is it possible to be both fish and fowl? Can one legal entity be a corporation, and then both a corporation and a district? These are the issues, as much metaphysical as legal, raised by this case and the very strange statutes and ordinance involved," Bush wrote. More important, Bush ruled the next day that the levy is not a "special assessment" but a tax and that the September resolution "was invalid and the levy thus void." He ordered the city to refund the plaintiffs what they had paid under protest, plus interest.

Unfortunately, the ruling doesn't apply to the rest of the property owners who paid their share but did so without formally protesting. Nor did Bush rule that the tax collection must stop. Says Mark Lawson of the city counselor's office who handled the case: "In terms of the money already collected, unless it was paid under protest, those folks probably don't have any vehicle to get a return of any of the payments made."

If that's true, it is a good thing for the Downtown Partnership, but not for the unhappy property owners, who have already paid more than $4 million into the CID. Even some of those who signed the petition are unhappy with the results. "I thought it was a good idea at the time, but I really didn't see any return on it," says Robert Winfield, a downtown property owner who signed the petition and has since sold his property. "It turned out to be just like everything else -- a lot of hype and not a lot of results. I just got tired of living downtown. Between the higher taxes and torn-up streets, it just got to be too much."

Dolan doesn't see much happening, either. "I see planters on the street," he says. "Unfortunately, the flowers are dying. They put everything in place, but now there is no leadership. I went to a CID meeting and there were four business owners that showed."

Fred Wark, interim president of the Downtown Partnership, defends the way the money has been spent. "We've got cleaner streets, more security, greater housing on the way and crimes against individuals are down," he says. "We are removing tons of litter and graffiti. The number of downtown residents grew by 6 percent, and we have 176 new businesses coming in. Relative to living here and working here, all things are heading in the right direction."

He adds that the money is being spent responsibly. "There are 120 board members that get a monthly report on how these funds are spent," he says. "We are watching every nickel."

Among the larger items in the group's budget are nearly $900,000 for maintenance and beautification, including removal of litter and graffiti, another $900,000 for improving security, including paying for two bicycle patrol officers, and about $400,000 for generating housing reports, conducting house tours and occupancy surveys. As for the "sidewalk ambassadors" greeting people and helping with directions, that falls under the "image and communications'' line item of about $318,000.

Arnold says that even if property owners are dissatisfied with the CID, they can overturn it in 2003, when another round of petitions will be needed to keep it going. "Essentially, the owners know that if we don't do a good job and they are not happy with the results after five years, it is dissolved anyway," he says.

Not if the petition process is handled the same way it was handled this time by the city, says Gross. "The city was lackadaisical in scrutinizing the process, and what resulted is the creation of taxing authority that was handed over to a nongovernmental agency," he says.

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