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St. Louis looks to scrap development deal with McKee

Developer Paul McKee owns much of the land in this picture, looking north from the intersection of Cass and Jefferson avenues. After nearly 10 years, the city of St. Louis wants to cut ties with McKee and his NorthSide Regeneration initiative.
Brent Jones
St. Louis Public Radio
Northside Regeneration owns much of the land in the TIF. Looking north from the intersection of Cass and Jefferson Avenues, the future site of the National Geospatial-Intelligence Agency is visible at right. Photo taken April 10, 2018.

Updated at 10 p.m. Tuesday with comments from NorthSide Regeneration — After nearly 10 years, the city of St. Louis wants to cut ties with developer Paul McKee and his NorthSide Regeneration initiative.

City counselor Julian Bush sent McKee a letter Tuesday saying that unless the developer pays his taxes and begins work within 30 days, the city will “take any and all action available to it under the Redevelopment Agreement,” which includes not paying McKee for any work he has done in north St. Louis.

“It is time to face facts,” Bush wrote. “Land lies fallow. Taxes go unpaid. Vacant buildings remain dangerous and unsecured. Regardless of NorthSide’s intentions, and regardless of NorthSide’s abilities, these are not the results the city bargained for when it granted NorthSide redevelopment rights for the area. It is time to terminate the Redevelopment Agreement. It is time to allow other developers a fair chance to improve our neighborhoods and the lives of our fellow citizens.”

The original partnership with NorthSide brought the promise of major redevelopment, Mayor Lyda Krewson said in a statement.

“But Northside Regeneration has not lived up to its promises,” she said. “The City has to take action. We had great hopes for this redevelopment agreement, but now we have to course correct.”

Darryl Piggee, a representative for NorthSide Regeneration, said the company would provide a full and detailed response after it has had a chance to review the city's claims. But he sent St. Louis Public Radio a memo NorthSide was prepared to present to a previously scheduled meeting of the Board of Aldermen's Neighborhood Development committee, where aldermen were set to get an update on the project. The memo accuses the city of actively underming McKee's attempts to develop his north St. Louis properties.

"One would think that NSR's efforts would be met with accolades and enthusiastic support," the memo reads. "Instead, city officials and the media are complaining that it has taken NSR too long to reverse 60 years of blight, completely losing sight of the fact that McKee has been the only developer willing to try."

The memo notes construction of a grocery store, and work on the new headquarters for the National Geospatial-Intelligence Agency. The decision to declare McKee in default does not impact either of those projects.

Credit File photo | Carolina Hidalgo | St. Louis Public Radio
Paul McKee during a meeting with St. Louis Public Radio in 2016

Big dreams for neglected area

The city accuses McKee and NorthSide Regeneration of failing to meet the 2009 deal that gave him the right to redevelop nearly 1,500 acres in north St. Louis in eight key ways:

  • Misuse of a state tax credit established to reimburse developers who want to buy large amounts of land in distressed areas;
  • Failure to do any development in two segments of the redevelopment area;
  • Minimal development in two other segments;
  • Failure to pay taxes;
  • Failure to comply with a plan to maintain the properties he owned;
  • Failure to do promised demolition;
  • Failure to find or engage a co-developer;
  • Failure to notify the city that NorthSide had purchased or sold various properties.

City officials said Tuesday that several of those problems came to light during a court fight over the value of a building in the footprint of the National Geospatial-Intelligence Agency. The city had originally eyed the old Pruitt-Igoe site, which McKee owns, for the facility, but the federal government required more land.

The city then looked to the area north of Pruitt-Igoe, near Cass and Jefferson avenues, and for a larger space. It put together a 97-acre site — McKee owned 60 percent of the land needed. The city ended up buying back property it had initially sold to McKee in a complicated deal outlined in an investigation by the St. Louis Post-Dispatch that showed how deeply in debt McKee was.

McKee had a grand vision for the nearly 2-square-mile area when he began buying land using shell companies in 2003. He planned to spend $8 billion over 23 years, bringing in 10,000 new homes, parks, schools, churches and three major employment centers.


McKee approached the city with shining credentials. He had brought Mastercard’s global headquarters to O’Fallon, Missouri. And his nearby planned community, WingHaven, was booming.

“We probably were guilty of reading your press, maybe, about some of the activities he had been successfully doing,” Otis Williams, the executive director of the St. Louis Development Corporation, told reporters Tuesday afternoon. “This was the kind of thing that was exciting given that there was no interest from a major redeveloper in the city.”

In 2007 the state of Missouri created an incentive known as the Distressed Areas Land Assemblage tax credit, which allowed McKee to be reimbursed for purchasing properties to establish a large development footprint. And in 2009, McKee secured the largest incentive package in the city’s history — $390 million in tax increment financing.

"We've got somebody with the money and [who] certainly has a great reputation in terms of ability to get big projects done,” then-Mayor Francis Slay said when he signed the bill at the Clemens House, a historic building at 1849 Cass Avenue, in the development footprint. (The mansion would burn to the ground in 2017. The cause of the fire has never been determined.)

Northside Regeneration's land included the historic Clemens Mansion, which was destroyed by a fire in 2017. Looking south from Mullanphy Street, the demolition site of the mansion is visible at bottom of this photo, taken in April 2018.
Credit Brent Jones | St. Louis Public Radio
Northside Regeneration's land included the historic Clemens Mansion, which was destroyed by a fire in 2017. Looking south from Mullanphy Street, the demolition site of the mansion is visible at bottom of this photo, taken in April 2018.

Slay did not comment Tuesday on the city's move.

The delays were almost instantaneous. Residents within the development footprint sued over the tax credit and the development deal, saying both were unconstitutional. Both cases would go all the way to the Missouri Supreme Court, which eventually sided with McKee. The recession also made financing all large redevelopment projects difficult.

Bevis Schock, an attorney who represented the residents, said Tuesday’s development was not a surprise.


“We knew the entire time that Mr. McKee had no real intent to develop this property the way he was describing because it was impossible. It made no practical common sense,” he said.

Even a cursory examination of the deal by the aldermen or the city’s development agency would have derailed the plan, Schock said. State law requires clear financing commitments, and at the time, McKee had just a letter of interest from the Bank of Washington. The Federal Deposit Insurance Corporationclosed another lender, Corn Belt Bank and Trust in Pittsfield, Illinois, in 2009.

“If the aldermen from McKee’s wards says let’s try it, the other guys just go along,” Schock said. “They don’t say wait a minute, the city’s going to go bankrupt, this is terrible, we shouldn’t do any of this. They just approve it.”

Tammika Hubbard, whose 5th Ward includes most of the development footprint, did not return a request for comment. April Ford Griffin, who represented the ward at the time, also did not return a phone call.

Schock was just as critical of Williams and the St. Louis Development Corporation.

“All that’s a sham,” he said. “They don’t really check anything out. They just go along, get along. There’s no real oversight in the city of anything.”

Williams defended his agency and the review of the project.

“I think in 2009 we were ecstatic that he had a bank of the quality of the Bank of Washington,” he said. “It was always anticipated that this would be done deal by deal. Generally, developers will end up with multiple financers. In 2009, that was not a flag that would cause any concern.”

In 2013, McKee went back to the Board of Aldermen a second time, and asked to extend some of the deadlines to complete various projects. He also asked for permission to be able to develop in all areas. Members of the Board agreed.

McKee made numerous development promises over the next five years. He got permission to build an urgent care facility. He eventually got started on a gas station and a grocery store. He announced deals for housing.

But aside from the gas station, no work has begun.

“We were hopeful that we were riding the right horse,” Williams said. “As it turns out, we are now, today, saying that we are not.”

Future development prospects

McKee being found in default only means that he no longer has exclusive development rights in the 1,500 acres. He still owns a significant amount of property in the area, which means future developers would have to purchase land from him. It also does not unwind deals with three other city agencies.

The notice from the city is only the first step, Williams said. He said other developers had tried unsuccessfully to make deals with McKee in the past, but the city had not approached any of them to take over revitalizing the area.

“We’re all into this to try and make sure something happens on the northside,” Williams said. “We’ve gone after everything we can. We went for the Choice Neighborhoods grant. We went for the Promise Zone. We have gone for every grant that we can get to try and help facilitate this.”

A history of the Northside Regeneration project

How it all started

McKee began buying north St. Louis properties under multiple real estate holding companies in 2003. Residents worried that at least one company, Blairmont Associates LC, didn’t seem interested in maintaining its properties.

It wasn’t until 2005 that preservationist and blogger Michael Allen identified that several companies with similar purchasing behaviors shared the same address. By mid-2007, the companies had accumulated more than 400 properties, reporting by the Riverfront Times found. But there was no word about how, exactly, Blairmont and its associates planned to use their acquisitions.

McKee starts reaping state tax credits

In August 2007, Missouri lawmakers approved the Distressed Areas Land Assemblage Tax Credit Act, which allowed developers to receive tax credits to contribute to redevelopment projects.

McKee received $43 million for his north St. Louis purchases between 2008 and 2013.

The program required developers to purchase at least 50 acres within a “distressed community,” form a redevelopment agreement with a municipality and devote the credits towards further redevelopment. The credits could offset taxes equal to 50 percent of the properties’ costs and 100 percent of their interest payments for five years after purchasing parcels.

At the time, McKee was the only developer who qualified for the program. Missouri lawmakers created the tax credits mainly to help McKee buy up land for NorthSide. McKee ultimately requested up to $95 million in tax credits from the state — the total aggregate amount of tax credits permitted by the act — but lawmakers balked in May 2013.

The Department of Economic Development clawed back $1.87 million in tax credits in a deal after McKee agreed to buy a building at 1516 N. Jefferson Ave. from Jim Osher for $3.75 million. The state determined that sale never took place. Similar cases came to light when the city took Osher to court over what they said was an attempt to falsely push up the sale price.

An embattled $390 million tax increment financing package

In May 2009, McKee unveiled his vision: a multi-billion dollar redevelopment project that would turn more than 900 parcels in north St. Louis into business campuses, mixed-income housing and retail spaces.

He submitted a proposal to receive tax increment financing from the city later that year. The plan promised “revitalization” of a “large deteriorated portion of North St. Louis.” The proposal designated nearly 1,500 acres as a redevelopment area for McKee’s NorthSide Regeneration, LLC.

Though many lauded the project, members of the community expressed doubt. On October 8, community residents filed a lawsuit arguing that the Board of Aldermen couldn’t approve the TIF because the plan was not detailed enough. The next day, two other northside residents sued the state and Northside Regeneration, arguing that the Distressed Areas Land Assemblage Tax Credit wasn’t constitutional.

On October 30, the Board of Aldermen approved the $390 million TIF.

Then-Mayor Francis Slay signed the bill in front of the Clemens Mansion on November 17, 2009. The mansion, hailed as the centerpiece for the project, would receive a $13 million redevelopment into senior apartments.

But the lawsuits dragged on, thwarting development. In August 2011, the Missouri Supreme Court ruled that the land assemblage tax credits were constitutional. A lower court decision blocked McKee’s use of TIF for the project, but on April 9, 2013, the Missouri Supreme Court gave him the final green light.

In October 2013, the Board of Aldermen reauthorized the $390 million TIF, and the project proceeded.

The National Geospatial-Intelligence Agency offers new opportunity

In November 2014, the NGA announced plans to move from its current location. McKee offered up the 34-acre site of the former Pruitt-Igoe public housing project, which he holds an option on with the city of St. Louis.

The NGA needed a larger site; McKee and St. Louis officials proposed a new location north of Cass Avenue, where McKee owned 339 of 551 parcels — more than half of the 99-acre site.

The city began negotiating to purchase the properties from McKee. In the meantime, McKee defaulted on several loans after a private lender for the project, Corn Belt Bank and Trust Company, went under. Titan Fish Two, a Kansas-based entity, sued McKee and Northside Regeneration, claiming it was owed $17.6 million.

Titan Fish Two won 46 of McKee’s parcels at a public auction.

In fall of 2015 McKee was among those threatened with eminent domain. The Post-Dispatch reported that the city agreed to pay $12 million, but no money went to McKee. “The Bank of Washington would receive the $1.4 million original purchase price for the land; an additional $4 million, partly to satisfy its books; and the former Titan Fish bank notes that the city paid $7 million to acquire,” the Post-Dispatch wrote.

On April 1, 2016 the NGA announced St. Louis was the preferred site for its new $1.75 billion facility, then finalized the decision later that spring.


Read: The letter City of St. Louis counselor Julian Bush send Paul McKee on Tuesday


Read: The city's press release about the Northside Regeneration announcement


Read: The city's 2009 TIF agreement with Paul McKee


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Rachel is the justice correspondent at St. Louis Public Radio.
Kae Petrin covers public transportation and housing as a digital reporter for St. Louis Public Radio.