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McKee clears legal hurdles for Northside development

This article first appeared in the St. Louis Beacon, April 09, 2013 - The Missouri Supreme Court cleared the way for developer Paul McKee to use $390 million in tax increment financing to redevelop two square miles of north St. Louis.

The court ruled unanimously that St. Louis Circuit Judge Robert H. Dierker Jr. erred when he ruled in 2010 that the St. Louis ordinances authorizing the huge project did not set out a “defined development project.”

Chief Justice Richard B. Teitelman, writing for the court, said that Dierker had been wrong to decide the case based on an issue that had not been raised in the original lawsuit and that was only tangentially mentioned during trial.

W. Bevis Schock, one of the lawyers for those challenging the project, said his side was “disappointed the court didn’t reach the merits” of the case. He called the project “classic crony capitalism” and predicted that the “city will go bankrupt” providing McKee with subsidies.

Schock said that there were no more legal challenges that could stop the project. As conceived, the project would use $390 million in tax increment financing as part of an $8.1 billion redevelopment of 1,500 acres.

Paul Puricelli, attorney for McKee, said it was “a good day for the city. It is important for the city to get this project going. … This is a victory and a shutout – 6-0.”

Dierker had ruled that the ordinances authorizing the project were void because they did not include “defined redevelopment projects and cost-benefit analysis of such projects.”

But Teitelman noted several times in his opinion that Dierker has himself said that the issue of whether there was a development project was one that he had “detected” and that may not have been “fairly embraced by the pleadings” in the case. Teitelman noted that the issue came up only tangentially during the trial.

Teitelman wrote: “In sum, neither plaintiffs nor intervenors offered a substantive pleading or evidence that properly raised the issue of whether the ordinances violated any particular provision of the TIF act by not including a sufficiently specific redevelopment project. Neither party requested to amend the pleadings or otherwise attempted to specifically raise the issue. The issue of whether there was a sufficiently specific redevelopment project was not tried by implied consent of the parties. Therefore, the judgment went beyond the scope of pleadings and is voidable.”

The Supreme Court also rejected the claim that McKee’s Northside Regeneration firm had not shown adequate proof of financing.

“Northside received a financing commitment from the Bank of Washington to finance the first two redevelopment project areas in addition to an existing loan of nearly $30 million,” wrote Teitelman. “Every witness at trial indicated that it is not commercially reasonable to expect a lending institution to issue a firm commitment to lend $8 billion toward a 23-year project.”

Finally, the court also rejected the claim that the redevelopment plan did not conform with the city’s comprehensive plan.

Schock, the lawyer for those challenging the project, said the Missouri Supreme would “not have upset the Missouri judicial applecart” had it sidestepped the procedural issue and addressed the substance of the legal challenge to the project.

He also questioned whether McKee would now “build 5,000 half-million dollar homes.”

Asked if he really thought the project would bankrupt the city, he responded, “Well, sure. You can’t give away hundreds of millions of dollars and make it work. Who is going to pay these bills? … It is going to cost each resident of St. Louis $1,000.”

William H. Freivogel is director of the School of Journalism at Southern Illinois University Carbondale and a professor at the Paul Simon Public Policy Institute. Previously, he worked for the St. Louis Post-Dispatch for 34 years, serving as assistant Washington Bureau Chief and deputy editorial editor. He covered the U.S. Supreme Court while in Washington. He is a graduate of Kirkwood High School, Stanford University and Washington University Law School. He is a member of the Missouri Bar.

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