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ST. LOUIS — The city says it needs more proof that minority contractors were paid before it doles out a $6.4 million subsidy to a new hospital developed by companies affiliated with Paul McKee’s NorthSide Regeneration.

McKee has been planning the new hospital in north St. Louis for a decade, and two weeks ago, the Homer G. Phillips Memorial Hospital, licensed for 15 emergency room beds, two triage stations and three inpatient beds, finally opened.

McKee’s lawyers pointed to the hospital’s completion at a city hearing this week as evidence that the developer’s promised projects are coming to fruition.

“We’re very proud — worked over 10 years to get it to this point,� last week. “This is something that’s been needed for years and years and years.�

But St. Louis Development Corp. CEO Neal Richardson said his office has been waiting for a year for final verification of the hospital’s compliance with minority contracting rules — and was withholding a $6.4 million city subsidy payment while it waits. Richardson said SLDC needs payment verification that the hospital cost the $20 million the developers say it did and that enough contractors were hired to meet the city’s minority and women-owned contractor hiring goals.

“Our compliance team continues to reach out,� Richardson said in an interview. “We’re still not getting the responses we need.�

Paul Puricelli, a lawyer for NorthSide, said Wednesday the hospital has exceeded the requirements for minority contractors.

“We have provided the City with all the information necessary to contact all of the subcontractors that worked on the project,� he said in an email. “We cannot account for the City’s reported issues. All subcontractors have been paid.�

The holdup comes as SLDC pushes for a new development plan that would give it the ability to use eminent domain to seize some of the hundreds of acres McKee owns in north St. Louis, something officials say is necessary to clear the way for development that McKee seems unable to finance himself. Aldermen advanced the measure Tuesday.

Richardson stressed SLDC is not holding up the process despite the city’s other issues with NorthSide.

But until it gets proof that the minority subcontractors were paid, as it requires for all city-subsidized developments, the hospital developer’s $6.4 million payment request won’t be approved. He said it was unusual to take this long to provide the required documentation, especially with so much money on the line for the developer.

“We want them to continue to move forward,� Richardson said. “But we need the proper documentation.�

Puricelli, however, said the city’s request for proof of payment was “unusual� in that they sought documentation from “sub-subcontractors.� The developer provided payment verification from the general contractor and subcontractors “quite a long time ago.�

“In any event, because those sub-subcontractors were once removed from the hospital’s general contractor, tracking them down and getting lien waivers was not an easy task,� Puricelli wrote. “The hospital expects to provide all of them shortly. As you can imagine, the hospital would like to see an end to this inquiry more than anyone.�

NorthSide Urgent Care Property, now known as HGP Management, first applied for $6.4 million in reimbursement from the area’s tax increment financing fund back in September 2022. The hospital construction was completed a year earlier, in September 2021.

NorthSide hospital’s reimbursement request, if SLDC approves it, could mean a sizable payout to McKee and his associates and a claim to future TIF revenue the city now uses as a “strategic infrastructure fund.�

The TIF was created back in 2009, when City Hall was backing the developer’s plans for a massive redevelopment to turn around the depopulated near north side.

TIFs allow developers to finance their projects by borrowing against future tax revenue generated by their development. A TIF fund is created to collect the actual increases in new taxes from an area.

Because the NorthSide TIF area is so large — it covers 1,500 acres across several neighborhoods of north St. Louis — it has collected millions of dollars from the natural increases in property appreciation along with new economic activity generated at McKee’s gas station and grocery store.

The bill was written so that $4.6 million of the $6.4 million TIF payment tied to the hospital could come from the larger TIF fund rather than from new taxes generated by the hospital.

There is about $750,000 remaining in the TIF fund after it paid out about $1.5 million related to infrastructure work along Market Street and the new soccer stadium over the summer.

Even though Mayor Lyda Krewson’s administration in 2018 canceled NorthSide’s development agreement following allegations of state tax credit fraud, the St. Louis Board of Aldermen still passed a measure in 2019 granting up to $8 million in TIF payments for the new hospital.

The bill was muscled through by former Aldermanic President Lewis Reed and former aldermen Jeffrey Boyd, who had accepted tens of thousands in campaign donations from McKee’s lawyer. They both went to prison on unrelated bribery charges.

About $2 million of NorthSide Urgent Care’s TIF request is to reimburse it for the cost of acquiring the roughly 5-acre hospital property from another McKee company, 20th and Cass LLC. The piece of land where the hospital is located is on the former Pruitt-Igoe housing complex site, directly across Cass Avenue from the new National Geospatial-Intelligence Agency campus.

That land price is double what NorthSide paid the city for the entire 34-acre Pruitt-Igoe site.

Homer G. Phillips

The hospital has long been one of McKee and NorthSide’s goals for the area. But it has generated controversy with many residents because of its name.

The original 670-bed Homer G. Phillips Hospital, located in the Ville neighborhood, was an anchor for the city’s Black community for more than 40 years, training generations of Black medical professionals before its 1979 closure. Former nurses of the original Homer G. Phillips have sued over NorthSide’s use of the name on the new hospital.

“I appreciate the concerns that have been raised about the name,� Puricelli said during a Tuesday aldermanic hearing. “But how about a hospital? He put a hospital in north St. Louis.�

Another McKee attorney, Darryl Piggee, who is Black and from north St. Louis, said the Homer G. Phillips name was his idea and was intended to pay “homage and respect� to the former hospital’s legacy.

In addition to emergency and triage beds, the new Homer G. Phillips Memorial Hospital also has an imaging center including MRI, CT, X-ray and ultrasound. McKee said the hospital will partner with for-profit Ponce Health Sciences University.

Homer G. Phillips Memorial Hospital has applied for Medicare and Medicaid certification. Puricelli said the hospital has been accepting all patients since its opening and hopes to obtain its Medicare accreditation within months.

“We are proud to be providing the first health care in north St. Louis in decades and continue to hope that the City will support this much-needed service for its residents,� he said.

Annika Merrilees of the Post-Dispatch contributed to this report.