U. City Committed To $70M TIF Deal Despite Errors, Lack Of Info

UNIVERSITY CITY, MO — University City officials held a press conference Monday morning to discuss a proposed TIF-funded development at Olive Boulevard and Interstate 170. The final redevelopment agreement will be introduced at next Tuesday's council meeting, with a vote expected June 10. An initial plan was put forward in January, but the city was forced to renegotiate its deal with Webster Groves-based Novus Development after a local watchdog discovered a multimillion-dollar mistake in the city's numbers. Officials say, despite previous errors, a lack of transparency from the developer isn't a red flag for them.

While the city made a substantial number of compromises to secure the deal, the council remains firmly behind the "unprecedented" project, according to a press release. Officials say the retail shopping center will offer protection against other municipalities dropping out of the county's shared sales tax pool, create 150 to 250 livable-wage jobs and provide money to reinvest in the city's poorest communities.

But promises have shifted over the past year. The city had originally pledged to invest $15 million into the city's third ward almost immediately if the deal passed. Now, the majority of that money will come in $200,000 chunks over the next 20 years, depending on future revenues. The developer will backstop slightly less than half that amount should revenues fall short.

City Manager Gregory Rose said he hasn't looked at how much less that money will be worth over time, as opposed to a lump sum payment, but acknowledged "the net present value probably diminishes as relates to the city's ability to use those funds."

He also said that none of the money will come from revenue not directly related to the TIF development, though, according to the new agreement, "the City will commit ... any TIF Revenues generated from [the residential third ward and Olive Business Corridor]" toward the promised $15 million.

In a subsequent email, Rose clarified that he meant any economic activity or property tax revenue from those areas will be minimal when compared with the primary development. Still, some third ward residents fear the development could cause property taxes to rise, pricing them out of their own communities.

The new deal guarantees just $3 million up front for revitalization efforts, with some of that money going toward relocation assistance for the development area's existing businesses, Rose said Monday. How much isn't clear. How the rest of the money will be allocated between the residential third ward and the Olive Business Corridor also remains unclear.

"It's a negotiated agreement. We didn't get everything that we want. Certainly Novus didn't get everything they want," Rose said. But when pressed on what exactly Novus gave up during negotiations, he was unable to say.

"As far as what did they give up, I wish I could tell you," Rose said. "That's a better question for Novus."

On Friday afternoon, the city posted a slew of new public documents related to the TIF on its website, including a long secret financial analysis by the St. Louis Development Corporation's Jonathan Ferry, an outside expert hired by the city.

According to a memorandum dated April 18, 2019, Ferry recommended a taxpayer subsidized incentive for the development between $51.6 million and $65.8 million. That's at best $5 million less than the $70.5 million the city has promised to hand over to Novus over the next two decades. At worst, the city is chipping in almost $20 million more than it needs to for the project to work.

Ferry's analysis was not provided to the TIF Commission that greenlighted the deal last summer.

Rose said Novus will use the additional money to offer residents better prices for their homes and businesses, hopefully making eminent domain unnecessary, but it's not clear if the city has any written commitment from the developer on that point or if it's simply taking the matter on faith.

Most — but not all — homeowners directly impacted by the development say they're happy with the buyouts they've been offered. Business owners, though, are far less enthusiastic.

According to the memo, Ferry says he was tasked by the city with reevaluating the project last month after the recent changes, including a change in the project's junior anchor.

"It is very common for projects to evolve over time," Ferry writes. "However, any change in the type of uses, which would ultimately affect the expected developer net operating income and the potential TIF/CID revenues generated from the use, may have a material impact on my analysis."

But, according to Ferry, Novus declined to provide him with the information necessary to update his analysis.

Despite its previous financial errors, Rose said the city didn't feel the need to demand Novus hand over the information because it was able to conduct its own estimates based on — well, it's not clear what the city's estimates were based on.

"We based the estimates just on averages," Rose said. "We looked at what information that a junior anchor tenant of the nature that was included prior to this company pulling out, as well as looking at the low end."

Rose continued, seeming to contradict Ferry's memo: "If we believed that it would make a material difference in the redevelopment agreement, we would have demanded it. ... We recognize the business that dropped out. We know the impact that could potentially have. So it was a decision that I made."

Read the Ferry Memo below: