urbanSTL

I think the tax abatement is justified here and that the Mayor did this for political points because this was a project that people on Twitter didn't really like.

• The neighborhood is still changing. It's better than what it once was, but there's still a long way to go. New apartments here could do well, but there's absolutely no guarantee of that. In this case, the Risk is high.
• The developer is small and has big aspirations. While this is controversial because of obvious reasons, it shouldn't be an excuse to use the developer as an example for a political move and not approve a tax abatement to help finance the project.

I get the frustration people have about the 95% for 10 year abatement, but it's fine in my view. The property/properties currently contribute $0 in City Property Tax, so even if it is a 95% abatement, the City is at least getting some money out of the property after years of it being owned by SLU. 

I think that for those who want incentive reform in the City should look at a Risk-Merit model.

• Risk is determined by several factors in a neighborhood. What are the crime statistics? Are there comparable projects? What rent do the comparable projects fetch? What's the average occupancy of the comparable properties? Is there a known demand for housing/offices/etc? 
• Merit is determined by several factors regarding the developer. What is the value of the past 10 years of projects developed by said company (if applicable)? Has the developer invested in St. Louis before? If so, where and what was the success? Is the developer in a financial position that limits what they can do? Has the developer paid all their taxes on other properties they own? Has the developer made an effort to maintain properties that they bought? Is the developer minority owned? 
• Regarding TIF, it should only be used to replace and improve public infrastructure (sidewalks, street lights, repaving of roads after the completion of a project, replacement public parking only [if applicable], waterlines [if applicable], sewer lines [if applicable], power lines [if applicable], etc). Under what I would like to see, TIF wouldn't be used for anything else and would only be considered under what I mentioned.

So in the model I'm pushing for, a developer like Mac Properties would not be eligible for any incentives because...

1. They developed 100 Above the Park and spent over $130 Million on it.
2. Their company has developed over a billion dollars in other projects in Chicago and KC, so they're financially well-off.
3. The Central West End is a strong enough neighborhood that incentives aren't warranted unless under the Merit section. 

So for this example, the risk is low and the merit of the developer is high. However, in the event the developer insists on needing incentives, a provision is made that caps incentives at 50% (or so) and requires a certain percentage of the proposed housing units to be set aside as affordable housing. 

Whereas a developer like Neighborhood Properties (Jesuit Hall) would be eligible because...

1. The firm is small and has a handful of projects in planning or underway in the City of St. Louis.
2. The developer is minority owned.
3. After a previous tax payment issue, they paid up on their taxes and are now up to date.
4. The Grand Center area has no true comparable housing units to what's proposed at Jesuit Hall. Additional projects are proposed nearby (Foundry Phase 2, Armory Towers, and Steelcote), but not completed. (Verve is not a comparison because it directly markets to students).

I get the social media crowd's frustration with incentive issuance in the Central Corridor, but I see the loss of 592,000 people in a 70 year timespan as causing way more harm than incentive issuance will ever cause. That 592,000 figure included workers and property owners that paid taxes and maintained their own properties as well as students who could help fill classrooms and, as such, keep the lights on at many schools. The unfortunate shrinking of our City has got us in the place where we are today. We are not Nashville, Seattle, Austin, Charlotte, or even Indy. We're not growing like those cities where incentive usage there is ridiculous because of how high the rents you can fetch are along with the factor of being an "it city" (meaning people will move in regardless of what the rent is. if they want to be there, they'll find a way). We could get there one day, but the move taken by Mayor Jones and her cohort send a message to developers. I expect some will meet with the Mayor to discuss incentives, but many will either walk away from proposing projects or propose without incentives and hike the rent substantially. And in that case, the City could not mandate the inclusion of affordable housing because the city isn't helping the developer with making the numbers work. 

This is a very complex game and there's two sides to this game. I'm on the developer side to it because I work with a small developer and can see the challenges we face if we don't pursue incentives for a project. For a group like us, we're too small to financially make a project work in the Central Corridor without incentives. It's the only way for us to get investors signed on and that's the case for a few other developers I know. When we see people on social media trashing us as "greedy" and "deadbeats", we just shake our heads because if only the really vocal crowd knew the complexity that goes into this stuff. You can sit behind a keyboard and pound away all day about the sinfulness of requesting incentives and what not, but until you actually get into the nitty-gritty planning of it all and reality hits, then I really think people should keep their mouths shut. 

Vocal people want to make a point and I'm fine with that. They have the freedom to do that, but please don't demonize people who really want to make the community better and don't attack developers if they reach out to explain things that you may not understand. Besides, Twitter is not the best medium for debate because of limited character count. This all circles back to Jesuit Hall. Sure, you're across from SLU. Sure, you're in a neighborhood that's slowly coming back. Sure, this is the Central Corridor. Sure, there are other luxury developments planned nearby, but the area just isn't here yet like the the vocal opponents of tax incentives think. 

There's a ways to go and I sincerely hope the moves by the Mayor do not throw a wrench into anything that's presently planned or in the works.

Sorry for the long post, but I had a lot I wanted to include.

^I understand where you're coming from with your assertion that this is a small developer marketing a new sort of project, but to be frank I don't think it would fundamentally unfair to compare it to the other projects in the area. There's enough residential in Midtown now that we can safely say it works. We can ask what sorts of incentives comparably sized projects used. Even if their target audiences were different the basic math should be similar enough to figure it out. Is there a good reason why residential targeted at working professionals should be more heavily subsidized than student apartments? Are we really sure that's the sorts of people that will end up renting here? I could easily see this becoming student housing at more or less any possible price point, in which case the E-tax argument fails. What sorts of incentives are going to the Masonic Temple? What about Verve, 3949 Lindell, Drake Plaza, PW Shoe? We should have some case studies we can look to. What's worked? What will lenders support? It's a different game now than back in the days of the Continental or the Moolah. 95% for ten years has become too often the standard ask and you do have to draw the line somewhere. I'd like to see some comparisons before I say this is just a political stunt.

Why can’t the city say to a developer, you want 10 years 95% in the central corridor, fine, but here are 10 LRA houses in North City that you have to renovate and sell within 3 years? If you’re not interested then you get 5 years and 50%.

SouthCityJR wrote:Why can’t the city say to a developer, you want 10 years 95% in the central corridor, fine, but here are 10 LRA houses in North City that you have to renovate and sell within 3 years? If you’re not interested then you get 5 years and 50%.

Because if there’s no demand in those neighborhoods, then it’s a waste of money.

I hope this still happens. Maybe they could get historic and/or LIHTCs to make up for a smaller abetment. It'd be great to get a better deal as we all know the school district and city need more tax base. We also need more people living in walkable places because the wealth lost to driving and enabling driving comes at an opportunity cost to other things like schools and city services and  infrastructure. Construction jobs are a good thing too.
I wonder how the rise in the cost of materials and labor is impacting all this. It may help their but-for case. Maybe we'll see more transparency from developers regarding their numbers as a result of a mayor willing to veto. Two things can be true at the same time- the central corridor is booming relative to other parts of the city, and there's still a gap in the numbers for some developments. 
This project got a perfect score by the SLDC. Is the scoring system going to get an overhaul?

^^Thanks for that, Imran. That's good to know. A little perspective is always welcome.

^Historic credits sound like a shoe-in for this proposal. Had they not already sought them?

The info in the Jan LCRA agenda didn't list HTCs as a source of funding.

If they haven't even sought them then there really should be more funding on the table for them. I do hope this project goes forward . . . with the most reasonable deal for the city and the folks pushing it. In the end it is an exciting project.

Is the building not eligible for HTCs because of significant interior alterations over the years? They could probably seek them for exterior repairs. I'm not 100% sure how the HTC process works, so... yea.

chriss752 wrote: ↑

May 10, 2021

Is the building not eligible for HTCs because of significant interior alterations over the years? They could probably seek them for exterior repairs. I'm not 100% sure how the HTC process works, so... yea.

The scoring system in MO for HTCs now make it nearly impossible to attain them for residential projects over $1m.  There has to be a jobs component (which usually means office space being added to a residential building, i.e. Peper Lofts) and if the jobs are not "created," the credits can be clawed back.  And even if a developer goes office/residential mixed use, and are lucky enough to be awarded credits, the lender will then require LOIs prior to committing the remainder of the capital stack... which triggers the steal-a-tenant game we play in a zero-growth market. 

Mayor Jones has vetoed the tax abatement bill for this project

Wow

I hope "improvements" means build a building

"The parks slated for improvements are ... Ellen Clark Sculpture Park near Jesuit Hall. Details have yet to be worked out, Pruitt said."

^That dog park has annoyed me for decades now. Something tells me it's not buildings, but . . . that would be hot!

Hmmmm . . . maybe Mayor Jones's new tax-credit policy will work out after all . . .  

Good news.

There are lots of people who want to make this city a better place and are willing to come to the table, so it seems.

I'm still skeptical, in this case both and to be nitpicky.    First, the Developers being to pull off the new building or 2nd phase.   Second Mayor Jones precedents that she might move forward with this deal.  Note that the current building gets 90% tax abatement on 10 years and but the new construction is where most of the pull back in incentives.     Between Mayor and Developer the deal make new construction and infill less likely IMO.   But time will tell.

The other item that not sure is really a good idea.   I can understand incentives to bring outside companies but making a business relocate part of their existing business as part the deal, this case the warehouse, from county to city or say even city to county creates a new front locally that doesn't advance the region.    What are thoughts on this part of the deal??    

Imo, this is a coup for the new Jones administration and further validates her campaign promise. A couple more projects like this and the status quo will be irreversibly changed.  

^^Jones isn't requiring developers to relocate jobs to the city. Its just one of many bargaining tools at the developers disposal when working out a fair deal for the development incentives. 

To me the most important thing about this is it sets the tone that the City doesn’t have to be terrified of developers. The City can and should actually negotiate with developers and get something in return for tax assistance. We actually have a City government that will put on the big boy pants and act like grownups. Makes a whole generation of previous (and some current) City leaders rightfully look like the lightweights they are.

At any rate even without a second phase, this building was basically off the tall rolls regardless.  So it's still a net gain, even if fairly small on the front end.