ST. LOUIS 鈥 The Tax Increment Financing Commission on Thursday endorsed millions of dollars in subsidies for two major developments: a historic downtown building being remodeled for payment processing company Square and an apartment project in the Skinker-DeBaliviere neighborhood.
The Board of Aldermen will have to give final approval to the TIFs, which let developers use increases in taxes caused by redevelopment to finance their projects.
The $91.5 million mixed-use development next to the Forest Park-DeBaliviere MetroLink station is proposed by Pearl Capital Management, an Indianapolis firm led by 50度灰视频 native Jeff Tegethoff that has embarked on several high-profile developments in recent years. It plans a 306,000-square-foot project with 290 apartments, 30,000 square feet of retail space and 440 parking spaces.
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Some of those spaces would replace spots from a MetroLink parking lot the developer has under contract. Pearl would also demolish an existing strip retail center to the north along DeBaliviere Avenue.
It is seeking $14.1 million in TIF assistance, with about $1.4 million of that coming from a new sales tax district. The remainder of its financing would come from a $55 million loan and $22.5 million in equity.
Alderman Heather Navarro spoke in favor of the project, saying the developer has met many times with neighbors and its plans will improve neighborhood safety. The 50度灰视频 Development Corp., the city鈥檚 economic development arm, and the mayor鈥檚 office support the project, SLDC Director Otis Williams said.
SLDC analysts estimate the project鈥檚 rate of return of 7.3% falls within the market average for the area. Based on new revenue to the city over the years, analysts gave the project a score of 3.5 out of 5, on the low end of what it considers a good return to taxpayers.
Pearl received $3.8 million in TIF assistance for its 100-unit Hibernia project in Dogtown. Its $80 million, 188-unit project in Chesterfield isn鈥檛 using any incentives, though that development is being built on open land.
One 50度灰视频 resident objected to the city鈥檚 use of incentives, which affect property taxes that mostly go to schools.
鈥淎s a parent of two kids in 50度灰视频 Public Schools, I really don鈥檛 agree in general with the amount of TIF money that goes out and gets stolen from our kids,鈥 Jennifer Elam told the commission.
Companies that use TIF assistance are supposed to meet minority and women-owned business and workforce goals. Pearl hasn鈥檛 chosen a contractor yet for the Skinker-DeBaliviere project, but its contractor at Hibernia, Raineri, is below workforce participation goals, SLDC鈥檚 minority business compliance manager told the commission.
Tegethoff said his company has been meeting monthly with the contractor on the goals. Williams said there will be clawback penalties on the TIF if the developer doesn鈥檛 show good faith efforts to meet minority contractor and hiring goals.
When developers come to SLDC seeking incentives, 鈥渢hat鈥檚 probably the first thing we talk about at the first meeting,鈥 Williams said.
The commission voted 6-1 to recommend approval, with the member representing 50度灰视频 Public Schools, Chief Financial Officer Angie Banks, abstaining.
Post-Dispatch building
Also recommended for approval was the $11.85 million in TIF assistance for the $69.7 million redevelopment of the former Post-Dispatch building on the north end of downtown. The building, which the newspaper vacated in September, will house Square鈥檚 50度灰视频 operations.
Square plans to move about 500 of its employees from the Cortex tech district and employ 1,100 people in the 280,000-square-foot building by 2023. Another 150 jobs are anticipated to be added to a new 50,000-square-foot business accelerator in the building that will provide space for tech firms graduating from the T-Rex business incubator on Washington Avenue.
The developer is Jim McKelvey鈥檚 StarLake Holdings, led by John Berglund. It鈥檚 also seeking about $20.6 million in state and federal historic tax credits, $4 million in Missouri Brownfield redevelopment credits, state payroll tax breaks through the Missouri Works program and a sales tax exemption for construction materials.
It won鈥檛 borrow any money for the project, instead relying on $28.2 million in equity. McKelvey is a co-founder and board member of Square. StarLake is the Post-Dispatch鈥檚 landlord at its new location.
Remediation of the building has already started and construction should begin in January with completion set for January 2021.
鈥淭his sets the stage for the redevelopment of that north end of downtown,鈥 Williams said.
Even so, the city estimates the 11% rate of return on the project is above average. SLDC proposed changes to the TIF but was told by attorneys that they were 鈥渦nacceptable,鈥 city analyst Jon Ferry told the commission.
Gerry Connolly, who follows the city鈥檚 development incentives, pointed out TIFs are supposed to be granted under a 鈥渂ut for鈥 test that says a project couldn鈥檛 be financed without it. But the developer is mostly self-financing and the construction already happening on the building 鈥渋ndicates they鈥檙e going to proceed and do this regardless.鈥
It passed 7-1, with Banks, the SLPS representative on the commission, voting against it.