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In the Path of a University City Costco, the Displacement Has Already Begun 

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Councilman Stacy Clay says University City is committed to pouring millions in new tax revenue into Ward 3, where homes values have never recovered from the recession. - DANNY WICENTOWSKI
  • Councilman Stacy Clay says University City is committed to pouring millions in new tax revenue into Ward 3, where homes values have never recovered from the recession.

On a recent Sunday, University City Councilman Stacy Clay parks his SUV in front of a two-story home on Wellington Avenue, in the center of Ward 3. The house, sandwiched between tidy lawns and crisp brick homes, has been unoccupied for years. It is decorated with a handful of nuisance abatement orders.

"When property values get depressed, you get a house like this going for $30,000 or $40,000," Clay explains. "The only reason it looks as 'good' as it does" — and here he emphasizes the sarcasm on the word good — "is because it was recently cited."

When home values plummet to the $50,000 level, Clay explains, banks demure at making loans, leaving the structures ripe for snatching by outside investors who have no intention of living there or, for that matter, mowing the grass more than twice a year.

One of Clay's constituents, a woman who lives down the street, pulls up in a white sedan and rolls down her window to talk with her councilman. She shares some gossip about the house: Apparently, she says, the house's elderly owner moved and left it to a relative living across the street. The relatives "didn't want to do a thing with it" and sold it for $35,000 to an investor, sight unseen.

"It just dropped all of our property values," she says, adding that the new owner "has never been here since."

Clay says similar examples are cropping up all over Ward 3.

"The Third Ward, to me, is a classic middle neighborhood," he says. "These are generally African American folks who have pride in their homes. When you have this dynamic in the midst of folks trying to maintain their community, trying to build equity in their homes, trying to do that American dream thing, it hurts."

From the house on Wellington, Clay drives south, crossing Olive Boulevard and into Ward 2, where home values are among the highest in University City. He passes two-story brick homes, tidy lawns and front doors with no visible nuisance orders.

"These homes, they're not appreciably different from the homes on the street we were just at," Clay remarks. "They're not many times larger, but they have a greater value because they're on the other side of Olive. Just the fact alone, irrespective of condition."

Absent owners and vacancy is a widespread problem in the metro region. In St. Louis city, for instance, the problem has reached overwhelming proportions, with roughly 7,000 vacant homes and structures, more than half condemned. In some parts of north St. Louis, entire blocks are gone, the homes gutted by a combination of thieves, vandals, fire and rot.

Clay drives east, crossing Olive and heading toward the border with Wellston, one of the most vacancy-riddled and poverty-stricken neighborhoods in St. Louis County. Here, the trees start to cave in on the street, and he passes what appears to have once been a one-story apartment complex, now completely abandoned.

"Blight doesn't respect municipal borders," he says. "It just kind of goes, and where it sees an opportunity, it's like water. It just intrudes and gets in."

Currently, Ward 3 may not look "demolished" like the worst stretches of St. Louis' vacancy crisis, but Clay makes the case that University City is being crushed by the combined forces of low home prices and bank mortgage policies that continue to keep good buyers out of Ward 3. He worries that his neighborhoods will wither in an economic vacuum, becoming steadily abandoned and uncared for.

This is why Clay says he's hopeful about the Costco development planned on the far western border of his ward: When the plan was first announced publicly in April 2018, city officials touted a benefits package that earmarked $10 million specifically for Ward 3 improvements, with $7.5 million coming as an upfront payment after Costco signs a lease. Another $5 million would go toward improving the commercial corridor of Olive Boulevard.

In fact, former University City Community Development Director Rosalind Williams, who helped kickstart and plan the project's early stages, describes the entire retail development, including the Costco, as a kind of "diversion" from the real goal.

"The whole reason why I think everybody bought into this is the Third Ward did not recover from the recession," she says. "This whole TIF thing was a little diversion from the fact that the Third Ward needs action and attention from the city now, before it's really too late."

Tax increment financing, or TIF, is a method that cities use to fund private development. The basic idea behind it is that if a city can argue an area is "blighted" – a technical designation that can mean as little as cracked sidewalks – then it can entice a developer with a TIF, which is derived from the area's property and sales taxes. The city, in turn, can then issue bonds on the TIF, thus turning the future property tax revenue (which otherwise would go to fund things like schools and public safety) into present-day subsidies for the developer.

When it comes to University City, the council's promised investment of $70 million in public funds would make up nearly 40 percent of the development's total cost. While Novus and Costco are private entities, the proposed "University Place" is a mixture of public and private resources — and the public benefit, Williams insists, would be most sharply felt in Ward 3.

But reversing Ward 3's slide will take work. And lots of money. She suggests that, with $10 million, the city could buy out some of the investor-owned homes languishing in disrepair, or even subsidize developers to buy them and rehab the homes, thus increasing their value on the market to the point where a bank would actually be willing to provide a loan.

It will take more than just a "home improvement program," Williams adds. The history of University City, and its Third Ward, is also a history of how the racist housing policies of segregation and Jim Crow extended into into "redlining," which used the pretense of "blight" to deny loans to predominately black areas.

"The dynamics of redlining, the mortgage gap, low appraisals and lack of confidence of even homeowners trying to sell their house, it's a dynamic that has to be reversed," Williams continues. "It's something that's going to take a lot of wheels spinning at the same time."

To begin the work in Ward 3, however, the development needs to start in earnest. Novus needs to raise $110 million on its own. Until then, without Costco and the other proposed retailers, there is no money to pour into Ward 3.

As the months have dragged on, the project and its $70 million proposed investment have been dogged by controversy. To Williams, it's a frustrating but familiar feature of publicly subsidized private development.

"When you try to add a component of public benefits to a private development, somehow no one wants to listen to why we are trying to do this," she complains. "There's a mistrust that government would actually do anything that benefits anybody."

Kathy Tripp, who saw what Novus did in Sunset Hills, sounded an alarm on the new University City project. - BRIAN KING/@BKJPHOTODESIGN
  • Kathy Tripp, who saw what Novus did in Sunset Hills, sounded an alarm on the new University City project.

University City Councilwoman Paulette Carr is among the strongest backers of the proposed development. But last year, she discovered that one of the loudest calls of dissent was actually coming from inside her own house. Literally.

Carr's housekeeper, Kathy Tripp, and Novus go way back, and not in a good way. More than a decade ago, she opposed a proposed Novus shopping center in her own hometown of Sunset Hills. When she learned in 2018 the developer was planning another major project, this time in University City, she tried to warn Carr about Novus' history. But the councilwoman had no interest in discussing the city's development policies with the hired help.

According to Tripp, Carr "didn't want to talk about it, so I stopped talking about it with her. But there was still this thing nagging at me." She adds, "I just wanted to make sure they knew who they're in business with."

Tripp's own business with Novus began in 2004, when the developer and the city of Sunset Hills embarked on a redevelopment project named Main Street at Sunset. It called for the redevelopment of 254 homes, among them the one occupied by Tripp. Along with other residents, she turned up to city meetings, pestered Novus' Browne with questions and eventually made enough of a nuisance of herself to get quoted in news coverage, thereby drawing attention to Novus' possible use of eminent domain in the project.

At the time, it was an open legal question as to whether eminent domain — a legal process that allows governments to compel the sale of property "for public use" — could be used to aid private development. In 2005, the U.S. Supreme Court case of Kelo v. New London ended in a controversial 5-4 decision, with the court ruling that a development's projected economic growth, including additional taxes generated and jobs created, met the standard for "public use."

And suddenly, developers like Novus had a massive piece of leverage with which to negotiate with homeowners.

Sunset Hills approved $60 million in public funds, mostly through a TIF, and Novus' next step was to obtain financing for the $160 million shopping center and its anchor, reportedly a Macy's. In 2005, with the project seemingly a done deal, Novus sent letters to homeowners under option contract, laying out a schedule of closings on their homes for the next month. The letters were signed by Novus' president, Jonathan Browne.

With the end seemingly in sight, dozens of owners started to gut their homes, presuming that the structures would soon be demolished anyway for parking lot and retail space. The owners ripped out their air conditioning units, copper wires and anything of value. They took out new mortgages for new homes and made plans for their new properties.

Then the Sunset Hills project collapsed.

The memories are still vivid for Tripp. In May 2018, she authored an op-ed published in the St. Louis Business Journal, titled, "University City development proposal mirrors failed Sunset Hills plan." As she had done with her employer, Carr, Tripp again attempted to raise an alarm about Novus, which she blamed for devastating her neighborhood thirteen years ago. She wrote:

"Four days prior to Novus' deadline to execute the home options, it announced its bank funding had collapsed and it would not be closing on the homes. While Novus insisted it was continuing to seek funding, the company never closed on a home, never again announced a tenant, and never built a thing at Main Street at Sunset ... The residents of Sunset Manor saw only broken promises and a neighborhood ravaged by the threat of a development built on TIF money and eminent domain."

As a final strike, in 2006, a judge ruled on a lawsuit filed by opponents to the Sunset Hills project, finding that a cost-benefit analysis given to the city hadn't provided "sufficient information" to evaluate whether the project was feasible. The judge struck down the $40 million TIF commitment as a violation of Missouri law.

Tripp had spent years fighting Novus. But for her employer, Carr, the op-ed represented something more nefarious. When Carr discovered Tripp's writings, the city official reacted decisively. She fired Tripp by text.

Two weeks later, in Carr's monthly newsletter to constituents, she blasted Tripp by name amid a scorching, 5,000-word diatribe titled, "Are Outside Forces Threatening the University City Redevelopment Plan?" in which Carr insisted that not only was the city's project not like the one that crashed and burned in Sunset Hills, but that the Sunset Hills failure had actually been perpetrated by those who now wanted to see Novus fail.

University City, Carr wrote, could not afford to see the project collapse in squabbles.

"For the last 50 years we have been talking about redeveloping Olive and for almost 20 years, no significant, catalytic redevelopment has taken place in University City," Carr wrote, defending the use of TIF funds — and suggesting that the presence of opposition indicated the presence of "outside forces" threatening University City.

Ominously, Carr wrote that these threats were "not unlike the type of forces" that had helped end Novus' development in Sunset Hills.

Tripp, though, insists that she isn't part of a nefarious force of development destroyers. "It was never my intent to go into University City and derail their project," she says.

Still, six months later, Novus' project would indeed, briefly, leave the tracks.

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