By Gloria Lloyd – Reporter, St. Louis Business Journal Jul 16, 2024
Over the past five years, developer Kevin Bryant thought he’d lined up broad support across the city of St. Louis for the more than $150 million in projects he plans for a long-neglected, 206-acre area in north St. Louis.
His proposal to redevelop the Kingsway district along Delmar Boulevard and neighborhoods to the north secured a $750,000 city-funded loan supported by the city's economic development agency, St. Louis Development Corp., to cover pre-development costs. And the city's Board of Aldermen approved a nearly $7 million tax-increment financing (TIF) package for the development.
But despite checking nearly every box for what city leaders have said they hope to see in neighborhoods long ignored by other developers, Bryant continues to struggle with city bureaucracy, imperiling the project.
The biggest obstacle, he said, is St. Louis Comptroller Darlene Green, in particular a policy she's followed since taking office nearly 30 years ago to avoid using city funds to back bonds for TIF projects. Green, who has come under fire in the past year for the way she manages her office and faced down a movement to eliminate the powerful comptroller's position entirely, said her policy is meant to protect taxpayers from covering the costs of projects that don't generate enough tax revenue to cover the bonds, which has happened several times in the past.
That might not be a problem for bigger developers with enough capital to monetize TIF-backed bonds and cover any revenue imbalance. But that's not Bryant, a first-time developer who was able to find financing for Kingsway's $75 million first phase, but from developers who want the TIF financing backed by the city. And the clock on that deal is ticking, with just over a month to go before the scheduled close of financing.
In a May 29 email to Green, Bryant asked for a meeting on the issue, noting that the project had the “full backing” of Mayor Tishaura Jones, Missouri Gov. Mike Parson and Neal Richardson, president and CEO of SLDC.
Green said she hopes the project can move forward, just not with city backing of its incentives. SLDC referred questions to the comptroller's office, while Jones' office issued a statement echoing Green's concerns about city backing of incentives, noting that no city-backed bonds have been issued under the mayor's administration.
But an urban planning expert believes if there is any case to be made for the city to change that longtime policy, Kingsway could be it. Since the project meets all the city’s strategic goals for development, and would correct prior market failures in the long-ignored north St. Louis neighborhoods that Jones' Economic Justice Action Plan is meant to address, it's possible that backing bonds for the project could make sense when it hasn't for other projects, said Sarah Coffin, a professor at Saint Louis University and program director for urban planning and development.
The Economic Justice Action Plan pledges funding and support to encourage private development in the city’s historically disinvested areas, especially north St. Louis. As called for by the action plan, Kingsway consists of a range of projects. Its first phase includes a new business incubator inside a converted historic building, a new $65 million apartment complex called The Bridge and a performing arts center for inner city youth. A later phase promises a 100-room hotel, more housing and historic rehabilitation.
“I don’t understand why this isn't a top priority project for the city," Bryant said.
developers who want the TIF financing backed by the city. And the clock on that deal is ticking, with just over a month to go before the scheduled close of financing.
In a May 29 email to Green, Bryant asked for a meeting on the issue, noting that the project had the “full backing” of Mayor Tishaura Jones, Missouri Gov. Mike Parson and Neal Richardson, president and CEO of SLDC.
Green said she hopes the project can move forward, just not with city backing of its incentives. SLDC referred questions to the comptroller's office, while Jones' office issued a statement echoing Green's concerns about city backing of incentives, noting that no city-backed bonds have been issued under the mayor's administration.
But an urban planning expert believes if there is any case to be made for the city to change that longtime policy, Kingsway could be it. Since the project meets all the city’s strategic goals for development, and would correct prior market failures in the long-ignored north St. Louis neighborhoods that Jones' Economic Justice Action Plan is meant to address, it's possible that backing bonds for the project could make sense when it hasn't for other projects, said Sarah Coffin, a professor at Saint Louis University and program director for urban planning and development.
The Economic Justice Action Plan pledges funding and support to encourage private development in the city’s historically disinvested areas, especially north St. Louis. As called for by the action plan, Kingsway consists of a range of projects. Its first phase includes a new business incubator inside a converted historic building, a new $65 million apartment complex called The Bridge and a performing arts center for inner city youth. A later phase promises a 100-room hotel, more housing and historic rehabilitation.
“I don’t understand why this isn't a top priority project for the city," Bryant said.
Private developers commonly secure their own bonds, but Kingsway doesn't have the equity for that, Bryant said. That leaves him to rely on city government to issue bonds that are guaranteed or secured by the city's credit. His total $75 million in financing for the first phase, scheduled to close in as soon as 45 days, is contingent on the TIF funds coming through up front, he said.
Any city-issued bonds would have to go through the powerful office of the comptroller, the city's chief financial officer and an elected official separate from the mayor's administration. Green has served since 1995 in the office, which oversees and reviews all the city's invoices. All city contracts require Green's signature.
Ahead of the pending August completion of the first Kingsway project, Elevation, a $6.2 million mixed-use office building and business incubator that is 70% leased with office tenants, Bryant said he tried again this year to set up a meeting with Green to work out how to monetize his TIF.
Bryant said he’s lined up two undisclosed private lenders to finance the $75 million first phase — a lender with Property Assessed Clean Energy (PACE) funding and a multifamily construction lender. In addition to anticipating construction finishing on Elevation, the lenders want the TIF money to be available up front, along with backing of the TIF from the city by guaranteeing or securing TIF bonds, which the comptroller would have to sign off on, Bryant said.
“In order to actually move the TIF to a bond, we need something showing the city’s faith and support in the bond, otherwise it has no backing — there’s nothing that the bond buyers can secure,” Bryant said.
A newcomer to development and to dealing with city bureaucracy, Bryant was unaware that Green had a more than 25-year policy against the city financially backing TIF projects using the city's credit or capital. Nobody in city government warned him about that key policy ahead of time, even as he was granted the TIF as a smaller developer who wouldn’t have private funding to back any TIF bonds himself, he said.
Green told the Business Journal that soon after she took office in 1995, she created best practices for incentives based on the city's past experiences that "created a balance to protect taxpayer dollars and grow economic development in the city at the same time."
That has meant that in the past she has mostly declined to agree to the city guaranteeing TIF bonds, a position that has in some cases spared the city from making payments that other cities have agreed to. For example, Green in 2009 blocked a bond guarantee request from the Cordish Cos., the Baltimore-based co-owners of downtown entertainment district Ballpark Village. At the same time, Kansas City leaders agreed to guarantee Cordish's TIF bonds for downtown Kansas City's newly built Power and Light District. When that now-popular entertainment area's TIF revenues fell short due to the Great Recession, Kansas City was on the hook for more than $4 million in bond payments.
The skittishness about guaranteeing TIF bonds can also be traced back to some disastrous early projects that left the city paying back millions in shortfalls from bonds it had guaranteed. The first TIF awarded to a project in St. Louis, in 1991, sought to redevelop the vacant Scullin Steel plant into a retail shopping center called St. Louis Marketplace, at 6700-6800 Manchester Ave. But when retailers vacated the site years later, the city had to pay back shortfalls of more than $5 million until the TIF ran out in 2011. The city also was on the hook for more than $13 million in bond payments for the 1998 construction of the 23-story, 800-room Renaissance Grand Hotel downtown, now the Marriott Grand, when it failed to meet revenue projections in 2008.
Taking that history into account, Green's long-standing incentives policy "usually requires substantial completion of an economic development's project for the issuance of bonds on that project," which has helped protect the city in the past and "has not slowed down development projects at all in our city over the past 29 years," Green said. To figure out when to issue the bonds, a certificate of substantial completion would be issued by SLDC, as outlined in the signed development agreement, Green said.
Jones Chief of Staff Jared Boyd said in a statement, "In an effort to handle the taxpayers’ money with care and respect, the City of St. Louis typically does not provide TIF revenue guarantees, which would risk losing the taxpayers’ money if developments do not succeed. The City has not given a TIF revenue guarantee during this administration. To my knowledge, that has only happened twice in the past 30 years, and in both cases, the developers went out of business.”
Controlled by the comptroller
Bryant said Green’s office has barely communicated with him since the TIF was approved, other than a 2022 email that said issuing a city-backed bond was a “nonstarter," and that such an idea being considered meant that "perhaps the developers and financing team have overreached." Bryant said he and his attorney have since tried to reach out to the comptroller, with little response. Mostly, he said, he hadn't heard from the office at all, even though he also tried to reach out through intermediaries.
"After I’ve invested hundreds of thousands of dollars of my own money and it’s gotten the community approval and every box is checked, your job is to be a city administrator, not a judge on America’s Got Talent," Bryant said.
The inaction and subsequent delays in figuring out a way forward on the TIF bonds, Bryant argues, have jeopardized his ability to close on $65 million for The Bridge, with the closing date for financing scheduled in about 45 days, he said. That could be delayed as long as progress is being made toward issuing the TIF, on which the $75 million financing package is contingent, he said. His lenders see the viability of the project, but would like to see the city's full support in securing the TIF, he said.
As months go by, however, Bryant worries that any delays give his private lenders time to back out altogether, at a time when financing is difficult to come by. Any wait could also risk the $3.2 million state transportation grant awarded to Kingsway for Delmar Boulevard streetscape improvements that will expire if not used quickly enough, Bryant said. It's allocated for fiscal year 2025.
Once a TIF is approved, the government typically issues a TIF agreement outlining the deal. Bryant said Green signed that document for Kingsway less than a year ago, after he put "pressure" on her office. After that, he said he continued to hear nothing from Green's office and saw no steps taken toward potentially issuing TIF bonds until a few weeks ago. Emails provided by Bryant show that he reached out to Green on May 29 to ask for a meeting, and an intermediary reached out again June 13. Green replied to Bryant on June 26 – the day after she was contacted by a reporter and Board of Aldermen President Megan Green – telling Bryant to have his attorney contact an attorney for
her office.
Darlene Green replied June 26 to Bryant’s May 29 email that she was “familiar enough with your project and instead of another meeting,” would prefer that his attorney speak with the comptroller’s office's attorney, Tom Ray of law firm Armstrong Teasdale. Bryant's attorney, David Sweeney of Lewis Rice, reached out, but that meeting had not yet been set up as of this week, to Bryant's knowledge.
Green wrote June 27 in response to a question from the Business Journal about whether she had delayed the Kingsway project: “You have been misinformed about the Kingsway project being held up in our office. We have reached out to relevant parties’ attorneys regarding the TIF and have received no further response.”
Green also said that while attorneys for both sides are now exchanging emails, a meeting had not yet been set up as of this week. Green told the Business Journal Friday that both sides' "attorneys are supposed to be in communication, but I’m told his side has not been responsive as of late."
In any case, Bryant said he would prefer to meet with Green directly rather than what he called a “have your people call my people” type of meeting.
The dispute comes as Green has come under scrutiny for her work ethic. The St. Louis Post-Dispatch reported last fall that Green came into work once or twice a week and mostly left management of the office to deputies, while the office has failed to pay some of the city’s bills on time. And it comes after Jones this month came out against a plan to ask voters to amend the city's charter and eliminate Green's office, effectively ending that campaign. Green, who is paid $112,000 per year, said it was a plan to "muzzle the city’s watchdog."
The citizen-led Charter Commission tasked with proposing ways to modernize city government in June recommended cutting the comptroller’s office and streamlining the city’s executive branch to eliminate how spending is currently governed by the Board of Estimate and Apportionment consisting of the mayor, comptroller and president of the Board of Aldermen. A few days later, the commission removed that proposal from its suggestions after public feedback at a town hall in north St. Louis where a Jones representative spoke against the change.
Green has responded to the reporting about office absences by saying that while she often works remotely, she is in the office when necessary, and any delays paying bills have come because city departments haven't properly submitted invoices and contracts.
Regarding Kingsway, Green told the Business Journal in an email, "I’m always hopeful we can be supportive of economic development in our city in a positive and fiscally responsible manner. I’m excited about the possibilities and the future of the Kingsway development project area. On behalf of economic justice, it is an important economic development project to the city. I support it and want to see it succeed."
She added, "I believe this project was interrupted by Covid and should be given the opportunity to benefit from available funding sources provided for infrastructure needs, for example. Delmar has a lot of good things happening now and I consider this project to be one of them. I continue to be very hopeful."
Crossing the 'Delmar Divide'
A longtime business owner in the area where the Kingsway projects are to be built, Bryant was persuaded by SLDC officials in 2019 to get more involved in developing the neighborhood. That area of Delmar and the Kingsway district to its north are historically Black neighborhoods that have seen little private development in comparison with the more affluent and in-demand Central West End, located a block to the south.
In seeking to cross the so-called "Delmar Divide" that has often separated St. Louis along racial lines, Bryant wants to revitalize the area with the type of "transformative development" that other, more deep-pocketed developers haven't chosen to
pursue there.
Later Kingsway phases are slated to include a new 100-room hotel; a $51 million live-work, mixed-use apartment complex with townhouses; a theater that would serve as a performing arts center for youth; an event center in a historic bank building; and a business center coming from redevelopment of an abandoned candy factory.
Byrant said he understands officials’ reluctance to put up money for a private project, especially for an unproven developer, but noted that one of the central themes of the Economic Justice Action Plan is that the city would take steps and provide funding to remedy the historic lack of investment in north St. Louis. To Bryant, that’s where he, a small developer with a big project, comes in. He said he's provided third-party feasibility studies to the city in the past, including the comptroller's office.
"Nobody wants to develop this area, and this area didn’t want anybody who didn’t look like me. So here I am. And if that’s not enough to get the attention and the incentives we need to move this community forward, then these communities are doomed," Bryant said.
If Kingsway could resolve the TIF issue and move ahead, the project would be less dependent on the city moving forward since it could close on the private funding, Bryant said. He has financial projections that show how the project will generate revenue to pay back any TIF bonds, he said. The first bill to be paid once financing closes would be the$750,000 city loan, he noted.
"The likelihood of us closing $75 million worth of loans and not getting done is preposterous. And, frankly, worth a ... gamble because of the amount of new development and taxes that’s going to go into the area," Bryant said.
Bryant said that the $7 million streetscape project along Delmar Boulevard is itself an argument for the city stepping in to secure the bonds.
"If we fail, you still need to fix the street anyway," he said.
Even if city officials were unwilling to back the TIF with what is called a moral obligation bond, or a promise to pay back the money if Kingsway defaulted, Bryant said his attorney and financial adviser would come to the table with other ideas for options that the city could pursue to help move the TIF forward, if they could set up a meeting to relay those ideas to Green. Some of the options could include securing a smaller portion of the TIF or using some of the city's federal pandemic funding to back the bonds, he said. For the amount of development it would trigger, the TIF is a relatively small amount of money compared with the return on investment, he said.
SLU professor Coffin said that it can understandably be difficult for city officials to move beyond thinking about earlier missteps with incentives when it comes to current projects, but the Kingsway project would have an advantage over some of the past failures since it has a variety of planned uses, rather than being anchored to one type of development, like St. Louis Marketplace with retail or the Renaissance Grand with hospitality. Backing the project could make more sense than past projects since it's anchored in the city's strategic plan for development, she said.
Although a smaller developer like Bryant taking on tougher projects in disinvested areas can be a tougher sell, in the case of Kingsway, Coffin said, using incentives could make more sense since city officials and the developer are "trying to correct market failures that are otherwise very difficult to correct. That’s where the city does need to come in."