7/25/2005

Eminent domain: boon or bane? St Louis (MO) Post Dispatch, 7/23/05

By Tavia Evans

Developers are finding more corners of the metropolitan area ripe for retooling, and they're staking their claims to land for new projects.

Their plans include multimillion-dollar retail and commercial centers and industrial parks, aimed at creating jobs and revitalizing neighborhoods. And more often, those plans include the use of eminent domain to acquire the properties.

The recent Supreme Court ruling expanding the power of eminent domain has captured the interest of state governments and cities, and riled critics and property owners who say it is a violation of their constitutional rights. In Kelo vs. City of New London (Conn.) the Supreme Court ruled in June that the government can use the power of eminent domain to take private property for economic reasons.

Missouri Gov. Matt Blunt has created an eminent domain task force to review state and federal laws on its use, especially in connection with tax increment financing in large-scale developments, according to Gerard Carmody, a St. Louis attorney appointed to the task force.

City planners and municipalities defend the Supreme Court's ruling. They believe eminent domain is necessary to revitalize "blighted" areas and secure financing that will make redevelopment projects feasible.

John Brancaglione, an urban-development consultant with the architectural firm Peckham Guyton Albers & Viets, said eminent domain is commonly used as part of city planning.

"It's a natural evolution of cities who stay on top of their growth and development issues. They look at land use and try to figure out what's going on, what's happening to property values and what's the best economic use of the land."

But critics say the way eminent domain commonly is used in Missouri as an economic-development tool runs counter to its original purpose as a way for cities to acquire land for public use.

"None of the controversies have swirled around cases where the government needs to build a road, a school or a firehouse, where it's clearly a public use," said Jerome Wallach, a local attorney who represents home and property owners in eminent domain cases.

"Curing blight has become a public purpose now by city governments, and they're using private enterprise as their method."

Developers argue that tax increment financing is necessary to complete the redevelopment.

For example, Novus Development Co. will receive $42 million in TIF funds to build a retail lifestyle center in Sunset Hills; the total project is expected to cost $160 million. The land, at the southeast corner of Interstate 44 and South Lindbergh Boulevard, is a transportation development district. The project is expected to generate $20 million for highway and road improvements.

"Without TIFs, this would not happen. It levels the playing field," said Jonathan Browne, president of Novus Development. "The TIFs offset the costs, because you couldn't go and pay what we're paying for ground and develop it."

In return, Novus says, the redeveloped area will generate $2 million a year in property taxes for Sunset Hills, up from $400,000 in taxes produced by homes now in the Sunset Manor area. Novus also projects retail sales taxes of $200 million, up considerably from the $5 million generated by commercial property in the area. But developers aren't always the first to speculate on possible land for redevelopment. Cities often initiate the process.

The Hazelwood Commerce Center, a proposed $250 million business park, has been in the works for several years. The city of Hazelwood issued requests for proposals on the old Robertson neighborhood, just north of Lambert Field. Most residents left in an airport-noise buyout in the 1980s. The city had already designated the area blighted.

Financing details have not been completed, but McEagle Development expects to receive some form of TIF money for the business park.

"It's a tool that cities can use to attract or encourage developments," said Bruce Sokolik, president of McEagle Development. "In our case, the city had already gone through the process of blighting the land for eminent domain, so we responded to the offer to develop it."

However, five businesses and several parcels of land are standing in the way because the property owners say they're getting a raw deal.

"The developer convinces the city they can improve the tax base, create jobs and put the land to a more profitable use at the expense of happy and thriving businesses if they can receive tax increment financing," said attorney Robert Denlow, who is representing the businesses. "The city just jumped at it."

Susan Woltering is president of C.R. Frank Popcorn Co. and Select Drinks. Her father founded the businesses 34 years ago and bought the property at 5401 North Lindbergh. Woltering said McEagle's latest offer of $325,000 would not be enough to relocate and buy new property.

"They stand to make plenty off of this development, but we can't even buy ground for the amount they're offering," she said. "In order to continue business, we need a new building to go to. The way the law is written, everything is in their favor."


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