In late 2009 several individuals who are members of the Northside Community Benefits Alliance took up the opportunity to sue the city on the ground that the approval by the City of St Louis of the TIF application filed by Northside Regeneration, LLC and Paul McKee, Jr. was illegitimate. They are Bonzilla Smith, Isaiah Hairis, and Cheryl Nelson. Also joining the suit with other legal representation was Elke McIntosh.
The original plaintiffs are represented by attorney Dorian Amon. He is lifetime St Louis resident and graduate of the Washington University School of Law. He is also dedicated to fighting the abuse of power represented by real estate development projects such as the Northside Project.
Representing the joining plaintiff are attorney’s Eric Vickers, W. Bevis Schock, and James W. Schottel, Jr. Eric Vickers is a former St Louis City Attorney. W. Bevis Schock is a board member of the local Show-Me Institute, a libertarian advocacy organization.
All plaintiffs sought to invalidate the ordinances that authorized public support for this project. This public support came in the form of almost $400 million of tax increment financing and a redevelopment agreement with Northside Regeneration, LLC covering the 2.5 square miles mentioned in yesterday’s post. The redevelopment agreement qualified Northside Regeneration to access a $95 million state tax credit program that reimburses the developer for half of any acquisition costs, all maintenance costs (grass cutting and board-up for example) and very importantly any interest costs incurred on borrowings to purchase the property. This tax credit is called the Distressed Areas Land Assemblage Tax Credit or the McKee Tax Credit since he’s the only one in the state who could qualify for it and his lawyer Steve Stone of Stone, Leyton, and Gershman wrote it for the State Senator who sponsored it and got it passed.
One of the key provisions of this tax credit is that it covers interest costs. Thus, any loans for assembling the land for the project are without cost and create an enormous incentive not to have any equity in the project at all. You have to have some amount of seed money, but if you find a lender willing to finance 100% of your costs at this point you can pull all of that equity back out for use elsewhere. Apparently, Bank of Washington in Washington, MO is such a bank. As was Cornbelt Bank and Trust of Pittsfield, IL who also lent Mr. McKee money for this project.
I recommend you check out Bank of Washington on bankrate.com. One ratio of a bank’s solvency is the Texas Ratio. That ratio is the dollar value of bad loans and real estate taken back because of bad loans divided by money the owners have in the bank and the money bank management has set aside to cover future bad loans. Bank of Washington’s Texas Ratio places them as one of the 50 least solvent banks in Missouri. There are over 250 banks in Missouri so this places them firmly in the bottom fifth of all Missouri banks in terms of solvency as judged by that ratio. They also have taken $20 million in TARP funds as part of the US Treasury’s capital purchase program. $20 million is one quarter of their equity and means that we, as taxpayers own about 25% of Bank of Washington. Without this $20 million dollars of public money invested in Bank of Washington their Texas Ratio would be even worse than it is.
Unfortunately, you can’t check out Cornbelt Bank and Trust on bankrate.com. Cornbelt doesn’t exist any more. They were seized by the FDIC in late 2008 because of insolvency. Cornbelt and Bank of Washinton were the two banks that lent to Mr. McKee for his Northside Project. One is out of business, one is not feeling very well, so to speak.
When you look at all the McKee projects in the area, you are left with the distinct feeling that Mr. McKee’s track record is, at the very best, a mixed one. Hazelwood Logistics Center is falling apart. He has abandoned various Winghaven businesses he was a driving force in. North Park is primarily still vacant land and without Express Scripts (who get a state subsidy every time they ask) it would be much more vacant than it is. He seems to have borrowed more money against vacant land in Illinois (corner of Greenmount Road and Frank Scott Parkway south of O’fallon) than he paid for it. Nothing is happening there and with the economic recovery in slow motion and Mr. McKee's financial problems nothing probably will any time soon.
More tomorrow.
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