Jacob, who has an attention-deficit disorder and a form of autism, "doesn't deal well with change," says his mom. He'd been sleepless for days over thoughts of switching homes and schools, and he didn't understand his parents' explanation: "We're moving because the city is kicking us out." That night Jacob blew a fuse. So did his dad.
"I got really angry," Dennis Smith recalls. "I made calls. I called [Eleventh Ward Alderman] Matt Villa and left him a nice message, like, 'Thanks!', 'cause he don't have to live with the problems my son has."
At 3 a.m. Smith was still boiling. Then it hit him -- sidewalk chalk. Smith took his son's 50-piece pack from the closet and spent the next two hours defacing the façade of his narrow brick home, scrawling sarcastic missives to Villa and St. Louis Mayor Francis Slay, and protests of "Not For Sale To Big Corporations," and "NO TIF."
Smith's south-city neighborhood near Carondelet Park is about to become the latest of many that the city is looking to grant a TIF, a thirteen-year-old tax-increment financing arrangement that allows developers tax breaks to raise new buildings in so-called blighted areas.
The Desco Development Group, a Clayton-based developer and the Schnuck family's development company, plans to put a $40 million shopping center called Loughborough Commons on the 30-acre parcel of land at Loughborough and South Grand avenues, adjacent to I-55. Desco spokesman Steve Houston says the firm is looking to build a bigger Schnucks and a Lowe's Home Improvement Warehouse, and to bring in some smaller retailers. The project has been in the works for eighteen months.
The site currently houses a Schnucks Supercenter, a shuttered furnace plant, the Carondelet Sunday Morning Athletic Club and twenty homes that will have to be razed, perhaps as soon as February.
Desco wants $11 million in tax-increment financing for the project that it hopes to complete in spring 2006. A public hearing before the city's TIF commission is scheduled today, December 1, at 8:15 a.m. at the St. Louis Development Corporation's offices at 1015 Locust Street. If the commission approves the financing plan, the boards of Aldermen and Estimate & Apportionment are expected to green-light the project.
Tax-increment financing, or TIF, took off in California in the early 1950s and is used now in nearly every state. Here's how it works: The government freezes property taxes in the designated TIF district for 23 years. All the while, the property owner puts some money in lieu of taxes (equivalent to incremental increases in real property taxes), plus 50 percent of the econonmic activity taxes (utility, local sales and earnings) generated in the TIF district, into a special fund. The monies are then used to float bonds and reimburse the developer for some project costs.
Once a property is TIF-ed, a city agency can invoke eminent domain, relocate any resisters and bring on the wrecking ball, so long as the proposed project is for "public use" -- traditionally, schools or roads.
But does a shopping center qualify as public use? In many cases, courts nationwide have answered "yes." The U.S. Supreme Court could decide next year the constitutionality of using eminent domain for economic-development projects, when it reviews a Connecticut case pitting homeowners against developers of a hotel and health club.
Though St. Louis County has been at the center of numerous TIF-related dramas over the years, the development-starved city has only recently begun aggressively courting developers looking for tax breaks and the right to blight.
The city approved ten TIFs between 1991 and 2001, confirms Dale Ruthsatz, commercial development director at the St. Louis Development Corporation. But in the past three years, forty-four projects have been TIF-ed, and seven are in the pipeline.
If the Loughborough Commons TIF is approved, bulldozers will roll over a hodge-podge of predominantly brick shotgun houses, most of them more than 90 years old.
Many of the homeowners, some in the neighborhood for decades, were outraged when they learned of the retail plan in a September 29 St. Louis Post-Dispatch story.
"We got broadsided," says Bill Sheahan, a twenty-year resident. "We were ticked off, mainly at the integrity part of it." At the very least, an explanatory letter from Villa, or some city official, should have been provided to affected residents, fumes Sheahan.
"No one knocked on the door, and no one left a business card," says resident Rachelle Brown. "I think they did this in a very back-door way. I'm very disappointed in Matt Villa. And I voted for him!"
Villa, who has endorsed the project and plans to seek aldermanic approval that will, if necessary, allow for eminent domain to obtain the land. Villa did not return calls requesting comment for this story.
When the news broke, Dennis Smith, who's lived on South Grand for 27 years, hurriedly organized a neighborhood meeting with Robert Denlow, a high-profile Clayton real estate lawyer. Most residents attended, listening to Denlow tell them they'd never win an eminent domain fight with the city and might as well try to sell for top dollar.
"He was saying, 'You don't need me, you don't need me,'" Sheahan recalls.
By the second meeting, a week or so later, factions had formed between the holdouts and the sellouts.
Five owners, including Smith, hired Denlow. Signs broadcasting in bright red letters, "NO TIF," and "NO BLIGHT," went up in their yards at the southern end of South Grand, and Denlow began negotiating for the highest possible price.
The city assessor's records list fair-market value of between $50,000 and $80,000 for the brick homes, but some of them have sold in recent years for more than $100,000, property records show.
Howard Thompson, who says his offer from Desco "wouldn't make good toilet paper," hired St. Louis attorney Michael A. Wolff. Thompson refuses to sell and is circulating petitions protesting the redevelopment that he intends to present to city officials at the December 1 hearing.
There are at least seven "quick nickels," as Thompson calls them, who during the past two months signed option-contracts with Desco, and, according to Sheahan, can expect to walk away with $150,000 to $175,000 once Desco exercises its buying rights. That could come as early as next month, residents believe, though Desco wouldn't confirm a date.
The firm insists there's no way to build the shopping center without acquiring and removing the existing properties.
Real estate lawyers claim the project is an outright abuse of Missouri and constitutional eminent domain statutes. They maintain the city is interpreting "blight" and "public use" too broadly -- that private property owners will lose their life savings while developers and large corporations line their pockets.
"This is a nice old St. Louis neighborhood," Wolff says. "You don't see anything in those residences that's in line with a 'blighted' area."
"To the city, if it's profitable, it's blighted," Denlow says.
The mayor's office disagrees.
"It used to be that nobody called, nobody had proposals, nobody wanted to develop in the city," argues mayoral chief of staff Jeff Rainford. "You've got to do TIFs in the city to jump-start development. Will there be a tipping point when we don't have to offer these? Absolutely. Are we getting close to that point? Absolutely. Are we at that point? No."
But Board of Aldermen President Jim Shrewsbury worries that tax-increment financing has spiraled out of control. "It's becoming a standard practice, and I think that's very dangerous, because what it's doing, it's threatening general revenue." He adds, "The purpose of a TIF is to make or break a project. It's not simply something that is offered to everyone."
Urban studies experts agree.
"When everybody gets a TIF, nobody gets any benefit," observes Saint Louis University public policy studies professor Todd Swanstrom. "The tax burden is shifted onto middle-class and working-class taxpayers from the retailers. It's not good public policy."
"I think the city has gone TIF-crazy," says Joseph Heathcott, American Studies professor at SLU. He points to the struggling St. Louis Marketplace on Manchester Road -- the city's first project to use tax increment financing -- as an example of the risk and burden levied on taxpayers' backs. "If more projects like that end up failing, we are going to be paying for decades."
All the while, health, parks and police departments, and schools, get short-changed in the short term, say critics of TIF.
Many of Carondelet's "quick nickels" are disgusted with the way the city has handled the Loughborough project and are now shopping for moderately priced homes in the county.
"We've been here twenty years. We go out in the city. We go to the opera. We defend the city to every person we know," Sheahan explains. "It ticks us off that after spending all this time and money they could care less."
Rainford says he's saddened by this sentiment, but he defends the project. "I think this is four steps forward, to one step backward."
To Dennis Smith, who's constructed and installed nearly everything in and around his home, including built-in aquariums, an expansive deck and a jungle gym, the "community betterment" argument leaves him cold.
In the Smiths' front hallway, several stacks of boxes stand sentry. The Smiths figure they probably won't have a choice but to leave, so best to start packing 27 years' worth of belongings now.
"How can you blight an area," asks Smith, "if you've got nice-looking homes here?"