Responding to allegations that developer Paul McKee and another property owner inflated real estate values in “sham†sales to procure state tax credits, one St. Louis alderman is asking colleagues to join a call for a criminal investigation and another plans a hearing on McKee’s NorthSide Regeneration project.
The action from city officials to determine the value of one of the properties — the former Buster Brown building near Jefferson and Cass avenues owned by Jim Osher. It was taken through eminent domain two years ago to make way for the future National Geospatial Intelligence Agency western headquarters.
Alderman Shane Cohn, 25th Ward, plans to hold a hearing May 30 in the Neighborhood Development Committee about McKee’s project. He sent an email to committee members saying he wants to hear from city economic development officials at the St. Louis Development Corporation and those from the mayor’s office about McKee’s NorthSide Regeneration project.
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Meanwhile, Alderman Cara Spencer, 20th Ward, is circulating a resolution calling for a criminal investigation from state and federal authorities.
As details of the transactions came out in trial, Mayor Lyda Krewson released a statement Wednesday saying she was “committed to investigating these claims thoroughly and taking appropriate action.â€
The allegations came out in trial to decide a challenge to the value of a property the city acquired by eminent domain as it was assembling land for the NGA's planned western headquarters.
“I agree with the mayor that we should conduct an internal investigation,†Spencer said Friday. “But I think given the players here, this is bigger than what we can handle internally.â€
McKee’s lawyers have said there was nothing “nefarious†about the purchases, which occurred in 2011 and 2012, and that no one overpaid because the Buster Brown building was at a “key corner.â€
But the evidence at the trial has raised questions about the structure of the sales and revealed that the Missouri Department of Economic Development by 2013 had flagged them and refused to continue issuing Distressed Area Land Assemblage tax credits for them. Many saw that program, written with help from McKee lawyer Steve Stone, as tailored for the developer’s efforts to amass 1,500 acres north of downtown over the last 15 years. He was able to tap it for over $40 million before the state Legislature let it expire.
It reimbursed him for half the sales price of properties and other costs, including interest. Lawyers representing the city allege that sales prices between Osher and McKee was well above comparable sales and what Osher had paid to acquire the buildings.
The DED eventually clawed back the credits by issuing lower amounts in other McKee transactions.
In an emailed statement Friday, McKee lawyer Darryl A. Piggee asked why the eminent domain trial was being “used as a referendum on the (Distressed Area Land Assemblage Tax Credit) and whether (NorthSide Regeneration) has used the tool appropriately?â€
“What we do know is that SLDC (but not Mayor Slay, or Mayor Krewson or her new Development Director) have opposed this project since 2006, when they initially became aware of it,†Piggee wrote. “SLDC’s opposition picked up pace after Paul McKee brought NGA to the table and their opposition, and efforts at delegitimizing McKee, increased after NGA selected a site in the middle of NSR’s project area.â€
The trial that began this week is the culmination of a two-year fight waged by Osher over the value of his former Buster Brown building, which he claims is worth close to $5.5 million. The city ended up paying around $800,000 when it condemned it in 2016.
Osher’s legal fight led to discovery that netted documents and emails from McKee and his associates describing the transactions with Osher. Those interactions include another sale structured as a seller-financed leaseback to the west of the NGA site.
NorthSide “made applications for credits regarding more than 750 purchases, and only three or four of them were denied,†Piggee wrote. “Two of the denials related to seller financed sale-leaseback acquisitions. The transactions were not ‘sham’ transactions.â€
Piggee said McKee and his lawyers still disagree with DED’s conclusions but that there was “no allegations of fraud in their findings.â€
The details of the transactions, though, threaten to finally rupture a long marriage between McKee and the city, which years ago gave him development rights to the area north of downtown. But development has been slow to follow McKee’s acquisitions, and the two sides almost had a falling out as the city was trying to buy back land to assemble a site for the NGA.
Troves of public documents recently obtained by the Post-Dispatch, and interviews, tell of a development deal that nearly came apart, but ended up keeping 3,000 jobs in the city.
As part of the deal finally struck to buy McKee’s land for NGA, the city entered into new agreements pledging to amend its existing development agreement with McKee. It gave the developer more time to start work before the city could claim a default by McKee under his development agreement with the city.
Spencer’s resolution also claims that SLDC Director Otis Williams didn’t have the authority to enter into agreements modifying the NorthSide Regeneration development agreement without aldermanic approval.
In a statement, Williams said those agreements to facilitate the NGA land transfer didn’t amend the existing redevelopment agreement with McKee and are “no different than many redevelopment projects undertaken by†SLDC that need final approval from aldermen.