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ST. LOUIS — The boarded-up house on Claxton Avenue in north St. Louis is owned by the city’s land bank and worth just $9,500, according to the assessor. A buyer willing to invest the money to rehab it may first have to pay the Metropolitan St. Louis Sewer District more than three times that amount — $34,183 — in unpaid bills.

An investor interested in fixing up the vacant house on Earl Drive in north St. Louis County’s struggling Castle Point neighborhood would inherit a $15,340 unpaid sewer bill along with the $29,000 property.

Two blocks east, another house the county is trying to unload for back taxes carries a $14,600 sewer bill.

There are hundreds more properties in the city and county saddled with thousands of dollars in unpaid sewer bills. Those bills weigh down already depressed real estate values and are sometimes more than what the property is even worth.

Those debts, like other taxes and liens encumbering abandoned properties, used to be wiped away when a government sold the real estate at tax foreclosure auctions.

But after a recent court ruling, MSD says it can now try to collect its sewer bills from new owners — indefinitely. It’s a matter of fairness, the sewer district argues, which unlike other utilities can’t shut off service and must use the courts and property liens to collect unpaid bills.

“For every dollar we don’t collect, that amount goes into our calculus of what our rate adjustments will be,� said MSD Finance Director Marion Gee. “If you ask the majority of our customers, they don’t want to pay for someone else’s sewer bills.�

It’s a new hurdle for a region that has struggled for decades to manage a flood of tens of thousands of abandoned properties and begin to repair the damage they have on home values and neighborhoods, particularly in north St. Louis and north St. Louis County.

MSD’s newly aggressive approach to collect on unpaid sewer bills follows . The court allowed public sewer districts like MSD to keep unpaid bills as liens on a property even if those properties are foreclosed by the government for unpaid taxes, a process meant to clear land of past debts to make it easier for a new owner to put the property back into productive use.

“A lot of these homes are in pretty rough shape,� said Amy Michael, a rehabber who buys property from St. Louis County’s tax foreclosure list.

The purchase she made from the county came just before the court affirmed unpaid MSD bills could remain on such properties, so she was able to get MSD to waive its sewer liens. Now, with lingering MSD bills adding thousands of dollars to the purchase price of many properties, even fewer of the abandoned homes held by the county make sense as an investment.

“The numbers won’t work, so they’ll just end up with more and more properties sitting and getting worse,� Michael said. “They’re really not helping the community by doing it this way.�

Gee, though, said the uncollected sewer bills add up. MSD has between $5 million and $6 million in uncollected sewer bills every year, he said. That’s a small portion for a public utility that collected about $533 million in revenue last year. But Gee said uncollected bills could be leveraged into more than $100 million in capital improvements for a system in the midst of a multibillion-dollar environmental overhaul that has caused customer bills to double over the last decade.

“We are trying to collect as much as we can,� Gee said. “Our policy never changed. Our policy always indicated that we should collect delinquent amounts to the extent allowed by law.�

‘Forever remain vacant’

The St. Louis Land Reutilization Authority, the nation’s first municipal land bank, was established in 1971 to take title to the properties piling up in the city during an exodus of hundreds of thousands of people to the suburbs. Once it takes title to the land, it can sell it for less than the amount of back taxes free and clear of liens.

MSD, however, says its bills can remain on LRA land.

“All of our customers, including those that don’t reside in the city, would have to basically subsidize LRA sales if we were to write those balances off or reduce the balances,� Gee said.

MSD is still waiving some unpaid sewer bills on LRA land, but a review of property records shows the sewer district doesn’t always release its sewer liens once properties go to the land bank.

“We have historically waived liens when a property is transferred to the LRA after a tax sale, but we haven’t been required to do this,� MSD spokeswoman Bess McCoy said in an email. “This is a practice we have commonly implemented to be a good corporate citizen, but we are not mandated to do so.�

Despite the potential impact on Mayor Tishaura O. Jones’ ambitious plans to revitalize north St. Louis neighborhoods, where a majority of the roughly 10,000 properties owned by the LRA are concentrated, it’s unclear the city office that manages the land bank considers MSD’s stance a problem. It referred questions about whether MSD was even still waiving sewer liens on LRA properties to the sewer district.

“Encouraging investment and redevelopment in north St. Louis where many vacant parcels are in LRA’s stewardship is a focal point of the Economic Justice Action Plan,� St. Louis Development Corp. spokeswoman Sara Freetly said in a statement. “Any impediment to that reinvestment has the potential to be problematic, however LRA and MSD have a good working relationship, which we hope will continue.�

MSD’s Gee said there’s been no communication or concern from the city about MSD trying to collect from the land bank’s potential customers.

“I’m not sure what impact it’s had on LRA,� he said. “I’ve not had any discussions with them. They have not contacted me.�

Still, there has been an effort from community groups tied to the to change Missouri law to clarify the issue in the wake of the 2021 court ruling. In 2022, state legislation amended the LRA law to try and make it clear that MSD’s liens would be extinguished in a tax sale.

However, MSD is fighting that in court.

A lawsuit filed in September by Tabernacle Community Development Corporation, which rehabs properties and provides community services in north St. Louis, is attempting to settle the issue of MSD bills encumbering abandoned property sold at tax sales.

MSD argues its powers to collect unpaid sewer bills are granted by the Missouri Constitution.

“MSD has an automatic lien by operation of law for any and all unpaid sewer charges and said lien can only be released by payment in full of all past due sewer charges,“ the district’s attorney, Jonathan Beck, wrote in a December filing.

Tabernacle’s president, the Rev. Andre Alexander, declined to comment on advice of his lawyers. But his attorneys at Lewis Rice recognize the impact the sewer district’s position could have on the region’s abandoned property problem.

“If MSD’s position is accepted, third-party purchasers of vacant properties in St. Louis will be subject to excessive sewer liens, which, in many cases, exceed the amount actually paid for the property,� attorney Patrick Thornton wrote. “This will inevitably chill investment and rehabilitation of tax foreclosure and LRA-owned properties in the City of St. Louis. The result: properties like (Tabernacle’s) will not be redeveloped and returned to tax productive status, and will forever remain vacant and unutilized, only to be demolished or maintained at further expense to taxpayers.�

Tenesia Brown with Keys Realty Group said she won’t buy property at the city or county tax auctions anymore after being surprised with thousands of dollars in unpaid sewer bills stuck to the properties. Brown has bought and rehabbed a handful of properties here in recent years, but she said clearing land titles of past due bills is much easier in Kansas City, where she is from.

“For an investor who is already having to put thousands and thousands of dollars into these mostly historic properties to try and bring them back, we don’t have endless amounts of money,� she said. “They’re not making it easy at all. Which is very disheartening because there’s so much inventory. We could actually get people into these properties if they make it easier.�