Fueled by tax credits, downtown has building boom
This article first appeared in the St. Louis Beacon, Aug. 31, 2010 - If you want to take a break from the economic dirge of the past few weeks, here's a number to ponder:
It's not your share of the national debt, or the cost of an Ivy League education by the time your newborn becomes 18. It's the value of building projects going on right now in downtown St. Louis -- renovations, redevelopments and new construction under way at a time when the news about the nation's finances hasn't exactly been rosy.
"It certainly is a construction boom like we haven't seen downtown," says Maggie Campbell, president and CEO of the Partnership for Downtown St. Louis.
Some of the projects are familiar, such as the long-sought renovation of Kiel -- now Peabody -- Opera House, at a cost of $78.7 million, or the refurbishing of the Central Library for $79 million.
The construction ranges from residential, such as the Laurel at the northern end of what was St. Louis Centre, valued at $142 million; to office space, like the renovation of the Railway Exchange building for $122 million; to smaller projects like the roof of the Old Courthouse and the tram at the Gateway Arch, for $5 million.
The result, says Campbell, is more than 2,000 jobs and hundreds and thousands of square feet of usable space in what had been sitting idle.
Even with the construction jobs unemployment in the building trades remains near 25 percent, said Gerald Feldhaus, executive secretary treasurer of the St. Louis Building and Construction Trades Council. One way the unions try to help themselves is by investing money from their pension funds into building projects, he said.
"They have poured about $275 million into the city of St. Louis," Feldhaus said, "loaning it out to developers. You can get a good return on your money and put your people to work."
When it comes to the scale of the projects downtown, Campbell added, every source of funding helps, particularly in times like these.
"It's even more amazing when you consider the economy we're operating in," Campbell said. "If you travel around to other cities in our country, there are large development projects that didn't get finished or even get started."
The projects now under way help downtown move toward the vision outlined in a report titled Downtown Next, which paints what the partnership would like to see happen in the area by 2020. It focused on activity downtown in the first 10 years of the century and was designed to help complete what is missing.
As one of the people interviewed for the report said:
"We must fill in the gaps. It's like looking at someone with his or her two front teeth missing. You concentrate on the appearance rather than the message."
The dental makeover was aimed at attracting more jobs and more residents, expanding the presence of educational institutions, making downtown more inviting and more accessible, establishing a retail hub and taking best advantages of the area's unique attributes.
Knocking down the skybridge over Washington Avenue that used to link St. Louis Centre to Dillard's provided a "symbolic shift of momentum" as well as a lot of excitement, Campbell said. She said downtown now has to use the lessons that were learned by the failure of the defunct shopping center.
"A lot has been learned in the last 30 years about what works and what doesn't in a downtown," she said. "Retailing has changed a great deal, and if you are successful in bringing in the right tenant mix, you can create a critical mass of retail. The key will be bringing in a mix of businesses that you can't find in the mall."
As far as residential goes, Campbell said the number of people living downtown more than doubled, to 12,500, in the past 10 years. Many of the lofts built to be sold as condos have become rental units as the economy softened, but Campbell said vacancies remain few and demand remains high.
She also wants to dispel the perception that downtown dwellers are primarily either empty nesters or young couples who have not yet started their families. Having better public schools in the city would help, Campbell said, but to view the mix of residents downtown, "all you have to do is come out to the farmer's market on Thursday afternoons and see all the strollers, or see all the people who are out walking their dogs with strollers."
Giving credit to tax credits
Much of the construction, Campbell said, can be attributed to a financing aid that has received its share of criticism and is in the process of being overhauled in Missouri -- tax credits.
A report from state Auditor Susan Montee earlier this year said that tax credit redemptions in the state grew by 57 percent over eight years. She said that state agencies have frequently overstated the economic impact of the credits, primarily because of inflated amounts for activities undertaken as the result of the tax credit or inflated assumptions regarding the investments made and the number of jobs that were created.
Earlier this year, Gov. Jay Nixon revamped and reduced the scope of the state's tax credit program, citing the need for tighter controls as well as the state's financial constraints.
Christine Harbin, a research analyst at the Show-Me Institute who has studied the effects of the tax-credit program, said they are not the most efficient way to leverage state funds, primarily because they shift part of the risk for development projects from the developers themselves to the public and they take tax revenue away from programs that often become underfunded.
"They distract from programs that have competing needs," Harbin said. "Money that is going to developers downtown has to come from somewhere. You see all this development, and it's bright and shiny, but what's difficult to see is the economic activity that would have taken place otherwise."
John Fougere, a spokesman for the state Department of Economic Development, said the amount of tax credits is limited by law, by the number of applications and the amount of eligible costs for the applications we receive. He also said the vetting process for the credits has been tightened.
"We've increased the due diligence and audit of the cost certification and supporting documentation for eligible costs and expenses prior to the issuance of the credits," he said in an e-mail, "to ensure compliance with the statute and IRS code so that credits are being issued only for documented eligible costs and expenses."
But Campbell says the historic tax credit "has made the difference for St. Louis and even for many smaller cities across the state to be able to reinvest in their historic buildings and bring their downtowns back to life, when other states and other cities are sitting dead in the water.
"If we didn't have the historic tax credit program in the state of Missouri, we wouldn't have much going on. It has very much been a competitive advantage for us."
She said the credits don't involve a cash outlay by the state and help make unproductive sites turn into enterprises that contribute taxes and create jobs.
"This is hard stuff," Campbell said. "These developments don't just happen. Banks don't give money for risky projects. So public-private partnerships make the difference. They more than pay for themselves; the return on investment comes back several times over.
"If our legislators have a better way to create jobs, we would love to hear about it. This is a proven tool to create jobs. If there is a better way to use resources, we're very open to learning about it. We see this working around every corner."
With the $929 million in projects under way now, Campbell is looking forward to other development on the horizon: improvements to the Gateway Arch grounds and enhancements in the area around where the new Mississippi River bridge will land in Missouri north of downtown and other areas.
She points to the excitement stirred up by Citygarden's opening last year, and says the Gateway Mall and other parts of downtown are ripe for new ideas -- even Ballpark Village.
"The Cardinals know better than anyone it's in their best interest not to have an empty field next to their attraction," Campbell said. "Sometimes it's like fine wine: Its time has to come. But in the meantime, there is no single project we're hanging our hat on.
"It's much less about one or two multimillion-dollar developments and more about weaving together what we have and filling the gaps in the streetscape and the downtown experience, to connect all of this great development popping up all over the place. Density is the answer. If we can get more people in the buildings, it will support businesses. We will have more feet on the street and a more vital, 24-hour downtown. It's a very exciting time. I'm glad I'm here."