At the end of 2009, developer Paul J. McKee, Jr. received $19.62 million in Distressed Areas Land Assemblage Tax Credits. According to the developer's application, McKee's Northside Regeneration LLC claims a little over $25 million in assemblage, interest and maintenance costs to date, and projects an additional $66 million in acquisition costs. Only part of the application has been released publicly, so a breakdown of those figures is not yet available.
The $25 million figure corresponds to the amount of a $25 million Second Mortgage and Deed of Trust filed with the St. Louis Recorder of Deeds by Northside Regeneration LLC on December 10. That second deed of trust is guaranteed by Paric Corporation, the construction company founded by McKee and now headed by his son Joe McKee.
Now that McKee has the tax credits he claimed all last year he needed to proceed, what will the developer do with the proceeds of selling them? Pay down his debt.
That use of the credits may surprise those who put stock in the words of supporters of the tax credit, including Lt. Gov. Peter Kinder, who claimed those credits would enable development of north St. Louis. Those who read the tax credit bill realized that it was in effect remuneration for questionable acquisition activity already underway.
Now that McKee has received his first payment and announced his intended use of the proceeds, we know that he will have paid down most of his claimed debt. Since McKee's company continues to fail to secure and adequately maintain holdings, his holding costs must be minimal. This payment enables him to sit for another length of time.
More importantly, however, this payment enables city government to look more carefully at the Northside Regeneration project. McKee can no longer claim that the Board of Alderman's lack of action is keeping him from money he needs to survive. The developer has redevelopment rights and TIF financing secured through the ordinances passed in October 2009. Both sides are even. There are going to be additional bills needed to enable redevelopment of the four areas McKee has divided the project into, and to activate the tax increment financing. This time, the Board of Aldermen and Mayor Francis Slay should not rush the process.
There needs to be a full and open debate of whether or not the project's boundaries are appropriate, whether eminent domain restrictions need to be stronger, whether historic preservation planning ought to be included in additional ordinances, and what happens to McKee's holdings outside of his project boundaries in the Old North St. Louis neighborhood.
Let's lay this all on the table before passing more enabling ordinances.
Wednesday, January 6, 2010
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11 comments:
Did you see Bill McClellan's piece in today's Post? He points out that since the first two phases are not in the North Side, it leaves ample opportunity to renege on the bulk of the project that concerns people the most.
I saw Bill McClellan's column and wondered why he didn't mention Gaslight Square and the numerous other "organically grown" areas that are now as dead as St. Louis Centre. Oh well.
I actually think it’s encouraging that the tax credits went to pay down debt. The tax credits are now tied into the property. Instead of cash, McKee took equity in the property.
If "renege" means "renegotiate," that would be fine with most people.
The last two phases are areas that should not be done by one developer using one plan.
The first two phases also include three possible opportunities for securing Federal TIGER Grants for Near Northside streets near the new MRB, new 22nd interchange and rebuilding/expanding city docks at the end of Market street. Whats so bad with proceeding with the non-residential portion of this plan and having a better chance of securing those grants that will certainly reduce TIF needs. I actually believe the phase approach as it stands now is a very good way to proceed. Slowing the first two phases really puts the city at a disadvantage for any remaining stimulus funds.
If the historic tax credit program is any indication, McKee will get about .85 per dollar of DALTCs. Discount is the word. Tax credit investors need to make money too.
After getting the tax credits, it's all about using public funds and resources to support the hopes for more trade, especially from China. MoDOT, our elected and corporate leaders are planning for transformational change based on past trends and market conditions. They are misreading history and will fail miserably.
The results will be a fiscal disaster for the City and more pollution, more truck traffic and depopulation for the region. This is going to be really ugly.
Once and if McKee's DALTC paperwork because public, we will see to what extent this reimbursement of costs were for acquisitions in areas that he had admitted that he will not develop until 2015. In other words, the acquisition and subsequent deterioration of much of the residential portion of Northside was in essence a shell game to get state funding. Is there any legal mechanism, as Anonymous 1 suggests, to ensure, now that McKee has received state funding to reimburse their acquisition, that McKee has some obligation to redevelop the property? What about property outside of NorthSide that McKee owns? Did or will McKee ask for DALTC reimbursement on those ones?
If there is no legal mechanism, DALTC will end up being a worse subsidy that CDBG or other conventional urban instruments, where the developer receives access to public funds only after specific redevelopment targets have been met. In essence, McKee pockets the money and can walk away from the properties if "the economic climate is not right." Sounds familiar..
If you look at the model of Winghaven, what interests McKee is the commercial portions of the project. That is proving true in Northside as well.
The name NorthSide should be removed entirely. One single part of North St. Louis might receive redevelopment years after downtown.
Sounds rather typical. North St. Louis last.
Lots of cynicism, little talk of solutions. Go ahead and keep blazing again all you think McKee represents and package all your little fears (relation to North St. Louis or not) together an blame him.
We have proposed solutions online and on the public record.
Paul McKee isn't a developer, he's a destroyer up to this point on the near north side. It is plain as day. He's on the take, and St. Louis has been taken. "Tax Credit" is code language. It's translation is "FREE MONEY" for the wealthy, and "FREE MONEY" for the banks. The general population is left holding the bag.
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