2/16/2006

Even in Clayton eminent domain debate rages: St Louis (MO) pPost-Dispatch, 1/14/06

By Clay Barbour

The city of Clayton has long been the envy of St. Louis County.

With its manicured lawns and thriving downtown, it has seemed - at least on the surface - above the economic struggles of the region.

Turn down Central Avenue on any given weekday and you'll see dozens of people racing back and forth between clean office buildings and one of the dozens of restaurants that have made the town a destination.

So it came as a surprise recently when city officials signed off on a $190 million development project that authorized use of eminent domain, a tool never before used in Clayton.

The Centene Corp., a giant in the health care industry, has struck a deal to build its new headquarters on Forsyth Boulevard. The project includes a 16-story headquarters building and a 15-story office building that will have significant retail space.

City officials say the project will be a boon for the local economy, creating hundreds of jobs and adding millions to tax revenues. However, that comes at the expense of several businesses, including Decker Tailoring and Edward L. Bakewell realty offices. Both have been in their current spots for more than 40 years. Both will have to move.

For some, the city's decision proved once and for all that the use of eminent domain was truly out of control. If it could happen in Clayton, it could happen anywhere.

But for others, it revealed the cutthroat nature of economic competition between neighboring communities.

"It's so competitive," said Clayton Mayor Ben Uchitelle. "And you can't just ignore the fact that (incentives) are being offered all around us."

No one is safe
In a controversial ruling last year, the U.S. Supreme Court affirmed government's right to force the sale of personal property for economic development.

While the decision broke no new ground, the court's official approval sent shock waves across the country. Since June, legislators in 28 states, including Missouri and Illinois, have introduced bills to curtail eminent domain.

Locally, at least three cities - Maplewood, Ellisville and O'Fallon, Mo. - have already passed ordinances or resolutions limiting eminent domain's use for economic development. Several others are considering similar legislation.

Clayton never seemed to need incentives to attract business. But according to City Manager Mike Schoedel, changes in the local economy have hit the county seat hard. For the past three years, the city has had an operating deficit, forcing it to dip into its reserves.

And last year, for the first time in 10 years, the city raised property tax rates to meet higher expenses for services and salaries.

"We've taken some major hits recently," Schoedel said. "You can't just sit around and hope things improve. You have to do something."

The hits Scheodel refers to are the loss of two major corporations: Sara Lee and Smurfit-Stone Container Corp. Sara Lee is moving to Chicago.

Smurfit-Stone, in a move that stings the most, is moving right down the street to Creve Coeur. "We lost them to a tax abatement deal," said Mayor Uchitelle, pointedly.

This is why Les Sterman, executive director of the East-West Gateway Council of Governments, has argued for limitations on such development tools.

Sterman said one of the problems with things such as eminent domain and tax increment financing is that they rarely attract development from elsewhere; they just take it away from neighboring communities.

"It just ends up pitting neighbor against neighbor," he said.

The Centene deal
The section of Clayton targeted for the Centene Plaza development has long been a tough sell for the city. Schoedel said much of the area has been on the market for five years, with no takers.

Centene provides managed health care for Medicaid recipients and for children whose family income is too high for Medicaid but not enough to afford private insurance. At the end of last year, it served about 772,700 people in seven states including Missouri. The company also operates specialty programs such as behavioral health care.

Its total revenue last year was slightly more than $1 billion, compared with $221.35 million in 2000.

The project is expected to generate 800 new jobs for the area and roughly $20 million in tax revenues in the next 15 years. Schoedel said the overall economic impact is too hard to calculate now, but should be considerable when considering the number of new workers and the money they could spend in the area.

"This will be a big boost for the region as a whole," Uchitelle said. "This is the kind of development that we want to attract."

But that doesn't come without a cost. The Centene deal would force out five property owners and several companies leasing space from them.

Decker Tailoring is one of several businesses on Forsyth facing possible eviction. The shop has been at its current location for more than 40 years. In that time it has built a loyal following. Owner Aleksandr Grinberg is worried about the effects of such a move.

"To do this, to make us pick up and move, it is very hard," he said. "We are a small business and our customers like us here. I need to stay in Clayton, but who knows what will happen."

Laura Dierberg Ayers, an attorney for Debbie Pyzyk, one of the five owners being forced out, said the owners feel like they are being bullied.

"We don't want to go and we truly don't appreciate the city giving Centene a hammer to force us to sell," she said. "Once you put eminent domain on the table, honest negotiations are over."

On Monday, the Clayton city clerk rejected a petition seeking a public vote on the use of eminent domain for the project, saying a referendum is not allowable under the city charter.

Ayers said the owners have not finished fighting the project. The next step, she said, would be litigation.

"The bottom line is we want to stay," said Daniel F Sheehan Jr., president of Dolan Realtors, one of the property owners.


St Louis Post-Dispatch: www.stltoday.com