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Tuesday, May 22, 2007

If Vetoed, Land Assemblage Proposal Could Be Improved to Address Concerns

Governor Matt Blunt has not yet signed or vetoed the economic omnibus bill passed by the Missouri Legislature (HB 327) that contains the $100 million tax credit program to benefit Paul J. McKee Jr.'s north St. Louis land assemblage project.

Meanwhile, no other bills containing the "Distressed Areas Land Assemblage Tax Credit Act," as the proposal for the credits is formally known, passed the both houses. The House inserted the land assemblage tax credit into SB 22, a bill concerning local political subdivisions, but during a joint conference on the bill Rep. Thomas Villa had the language removed. (However, Villa is a co-sponsor of HB 991, which would directly enact the Distressed Areas Land Assemblage Tax Credit Act, and voted in favor of HB 327.)

The Distressed Areas Land Assemblage Tax Credit Act is far from the most controversial part of HB 327, a bloated bill containing many questionable tax credit proposals and bearing an estimated cost of $113 million in lost state revenue. Should Blunt veto the bill, the Distressed Areas Land Assemblage Tax Credit Act would be defeated for now.

Of course, the proposal will return. Two obvious paths exist:

The proposal could return in its current form, engendering the same opposition as it has attracted from north side residents, progressive legislators and urbanists.

The proposal could be refined through conversation with critics so that their concerns are answered.

Personally, I love the idea of a $100 million tax credit program directed at north St. Louis. Given that many residents of surrounding, wealthier counties are the descendants of those who abandoned north St. Louis, but who are still culturally and economically dependent on the city (which cannot tap the revenues of its neighboring counties), state aid is logical and fair. However, the details of the proposal do not create the sound public policy that should be crafted to guarantee that the $100 million program actually results in quality development in north St. Louis.

- The project size is greatly out of scale with north St. Louis. Nowhere in north St. Louis do 50 contiguous acres of vacant land exist. The largest vacant site is the Pruitt-Igoe housing project site of 33 acres, which remains undeveloped. The proposal should reduce the minimum project size to 5 acres and cap it at 45 acres. This would encourage more context-sensitive planning, and allow multiple developers with different plans to utilize the tax credit.

- State tax credits should not be used to cover bills and fines from municipal government for code violations or demolition. That's just wrong.

- The tax credit needs to require that the applicant's properties meet municipal codes at the time of application. State law should not encourage the violation of municipal law.

- The tax credit should establish a time line for redevelopment. Land assemblage alone does not revitalize distressed areas. If that was the case, north St. Louis would be in great shape given the vast amount of city-owned real estate there. The proposal should provide greater guarantee that assemblage projects will lead to actual development.

- The tax credit should not be used to acquire occupied housing units. What is most needed on the north side is creative reuse of vacant property. Allowing use of the credit for occupied housing seems to encourage the displacement of existing residents. McKee's project has involved acquisition of dozens of occupied dwellings that are now vacant nuisance properties. The people his agents moved out of north St. Louis could have been stakeholders in renewal efforts.

- The tax credit should require historic preservation planning for affected areas. North St. Louis is one of the most architecturally significant areas in eastern Missouri, and should not be bulldozed wholesale. As written, the tax credit actually reimburses up to 100% of demolition costs.

Should the tax credit proposal be defeated, there is then a chance to improve it greatly. Hopefully its supporters will consider doing so.


Doug Duckworth said...
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Doug Duckworth said...
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Doug Duckworth said...
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Doug Duckworth said...

Paul McKee has shown that, when left on his own, cannot be trusted to produce innovation. I cite Winghaven, ESI, and North Park as prominent examples. If we are going to do business with McKee, or any other developer, there must be strings attached. This is our City not theirs. If they want to do business here, and receive subsidy, then they should abide by urban and historical standards, ironically which need to be enumerated.

The way for this to happen is through an interest group. Hopefully Revitalize St. Louis will be that medium.

Eric said...

Hear, hear! If only the act had been like that in the first place!

GMichaud said...

Why is even 15 acres considered a minimum? The Federal tax credit program as well as the State of Missouri tax program for historic structures allows one building to be submitted. Both programs are wildly successful.
Even if you figure 5 houses per acre (suburban density, the community/city should have density discussions), you are probably talking 1 to 2 million in development costs per acre, meaning even 15 acres has an entry fee of around 20 million dollars.
Why in earth does our culture need to cater to the wealthy? The tax incentives could also work for 15 acres and above, by why exclude small developers?
The city/community should have a plan that all developers plug into. The plan would include considerations such as future transportation, row housing and density, walkability, corner stores, commercial areas, energy efficiency etc.
Maybe someone can explain exactly why 15 acres or 70 acres is a minimum. Sure there is economy of scale, but my experience is that small time business people often do a more individualistic, creative and cost efficient job than big developers. In any case if the developer of one or two buildings can’t make money, they won’t undertake the work and the development will naturally be 15 acres or above.
There could be a whole discussion about the development of small business, minority owned business, economic opportunity and the like, but the bottom line is there is no reason to keep on bowing to the demands of the wealthy, such a Paul McKee.

GMichaud said...

Buckminster Fuller called people like McKee pirates. As I have said elsewhere the actions by the state are criminal. Since the laws are written by his friends, he has broken no law. But the intent, the moral and ethical corruption are self evident. How does an individual warrant a law, written expressly for him, so he can have a profitable venture? It is capitalism democracy at its worse. Make no mistake the legislators new found interest in North St. Louis is because they want to serve the people; no they want to take care of their benefactor Paul McKee. Nor does Paul McKee have any real interest in North St. Louis and the community other than a means to further enrich himself.
What is truly amazing that everyone (except on this blog) acts if this is okay. The Post and major media ignore this fraud. They pretend pseudo donations are not bribes.

If true concern for the welfare of the people was the major factor for the law, there would have been discussions in the community about the best approaches, how to write the best law for the redevelopment of North St. Louis. (That discussion is still needed, what would the ideal tax credit law to spur development look like?)
No it is merely a type of embezzlement from the government, with the cooperation of government officials at the highest levels. It is a dictatorship of the wealthy, similar to communist Russia the way the influential officials directed the benefits of government to themselves.

Michael R. Allen said...

GMichaud: I actually meant to type "5 acres," not 15.

GMichaud said...

Even 5 acres would require 7 to 10 million investment. Economic opportunity should be available to everyone, not just McKee. And if in fact projects prove not to be feasible at a small scale then 5, 10 or 70 acres is where they will naturally end up. Although there is ample evidence that they are feasible at one, two or three buildings at time. It is happening now all over the city at that scale.

It is also extremely important that the city/community develop an urban plan with guidelines for the future, otherwise, as Doug point out above northside will become a suburban mismash, with no connection to the rest of the city.

Anonymous said...

1 acre is approximately 1/2 of an average city block... full density of that I would say is 7-12 average size units. Average gut rehab cost (w/ historic tax credits) or new construction cost is going to be 175k per unit min. 175*9=1.575 mil per acre or a little over 3 million per block. Of course much depends on purchase price of the property and money costs of the rehab/build period. Recent purchases have been in the absurd neighborhood of 100k. But a 100 yr old building needing gut rehabbed is realistically worth 0-50k. Interest should be 10-15k (unless a tax credit covers it all so there is NO INCENTIE TO HURRY). 25+10*9=315k purch & int per acre. 630k per block. Totaling roughly 2milish per acre or 4milish (min) per block for (re)development.