Aldermen debate CID proposal for Crestwood Square

Proposal would bring Ace Hardware, additional one-cent sales tax to shopping center

By BURKE WASSON

A proposal to enhance the Crestwood Square shopping center through a community-improvement district has some aldermen and residents wondering if Crestwood will become “tax city.”

The community-improvement district, as presented to aldermen last week by developer Gary Grewe of G.J. Grewe Inc., calls for an additional one-cent sales tax at each business in Crestwood Square for up to 20 years. That tax would refund Grewe for up to $2 million in costs that he has planned to pay for building and site improvements.

Grewe told aldermen that West Lake Ace Hardware would move into a 30,000-square-foot store at the shopping center and that four other retail spaces would then be divided from Crestwood Square’s currently vacant buildings that once housed Office Depot and the Sports Authority.

He said that Ace Hardware representatives would like to begin the renovation project in early 2007 and asked aldermen to pass an ordinance approving the CID by no later than the board’s last meeting of the year on Dec. 12.

Aldermen already have approved a $50,000 preliminary funding agreement from Grewe toward the project.

Specifically, the bulk of the proposed $2 million CID would refund Grewe for an estimated $1.7 million in building improvements. These include, but are not limited to, roof repair and replacement, HVAC unit repair and re-placement, mechanical work, electrical work, plumbing, subdivision of tenant spaces, redesign of store entrances, facade renovations and tenant improvements. The CID also would reimburse Grewe for an estimated $200,000 of site improvements, which include the repair and replacement of asphalt, site lighting, signage, curbing and striping. The CID would also help cover Grewe’s costs for an estimated $100,000 of such “soft costs” as legal work, engineering and architectural and professional services.

But when asked Nov. 14 by Ward 4 Alderman Steve Nieder exactly how much money Grewe plans to spend on the project, the developer replied, “We have no idea what it is.”

Grewe conveyed that until he knows which businesses other than Ace Hardware would be leasing the remaining retail spaces at Crestwood Square, he cannot accurately predict what he will spend on the project.

“If we try to make this a spreadsheet development, we should stop now,” Grewe said. “It will not happen. The investment is we allow two national tenants to buy out a lease so we can redevelop it. So the answer is it’s impossible with the pay-as-you-go CID with the position that we’re at today to come up with the formula for an investment.”

“OK, well then, I guess it’s fair to ask how much are you contributing in relationship to how much you’re asking taxpayers to contribute?” Nieder asked.

“There’s no way of telling today,” Grewe replied. “At the end of the project, you will know.”

Grewe told aldermen last week that if he cannot obtain approval of a CID for the project, he then would ask for tax-increment financing, or TIF. If a TIF could not be agreed upon, he said Crestwood Square would “become something a lot less desirable than anybody wants. And it will be leased for what it is, which is warehouse space, a call center, something like that. It cannot compete as a retail center as it is.”

He also indicated to aldermen that Applebee’s representatives are awaiting the outcome of the proposed redevelopment at Crestwood Square to determine whether they will keep their restaurant at that location.

“We have a 5,200-square-foot Applebee’s restaurant that’s operating at about half of the national average in terms of sales,” Grewe said. “And, in fact, had Chili’s not beat them to the punch, they also would have gone to Sunset Hills with the other retailers that left. If this shopping center only performs at $150 a square foot when we’re finished and the dream comes true, it’ll be back to $12 million worth of sales, Applebee’s will be up to its national average, the city will be receiving $365,000 a year in taxes and there will be $145,000 to help pay the cost of the pay-as-you-go, $2 million, community-improvement district.”

However, the proposed one-cent sales tax at Crestwood Square that shoppers would pay to refund Grewe for that CID has some questioning whether an extra tax would drive people from nearby cities away from Crestwood.

“One of our biggest competitors is south county,” resident John Foote said. “Their tax is a full two-and-a-half cents lower than we have at Kohl’s at this point in time. A 1-percent additional tax on top of our taxes already in the city may put our taxes at a point where we’re going to be known as tax city if we’re not already known. I worry that a part of our demise has come from the increase in our taxes on our shoppers.”

But other residents and a majority of the Board of Aldermen said that instead of viewing the proposed CID as simply another tax, people should see it as a way to bring more shopping options into Crestwood.

“I see that we don’t have a lot of choice,” resident Char Braun said. “I’d rather pay 1 percent more for a certain store that I choose to shop at than not have the store there at all. That’s what I’m worried about as a resident. I look at the empty buildings. I talk to people in my neighborhood. They worry about the strip malls. They worry about all the empty buildings on Watson (Road). I don’t know what else we can do as a city. Hopefully, we do look carefully, we tighten negotiations and maybe some of the things that get paid off down the road like the aquatic center will help us. But I’m willing to pay an extra 1 percent to have a choice.”

The rationale for that 1-percent sales tax, however, had Nieder questioning whether the tax is completely necessary for Grewe to complete the renovation project.

“You’ve received for the last four or five years, whatever period of time it was, you’ve received your income from the property,” Nieder told Grewe. “From what I can tell, you didn’t have to invest a whole lot. It’s been pretty well vacant. There’s been improvements that have to be done, but yet you’re asking us to help you subsidize this redevelopment. I’m having a hard time understanding how a person who has this property sitting there bringing in revenue with little cost involved in bringing in that revenue can’t afford to reinvest that money into that particular facility to keep it going. That’s what I’m having difficulty wrestling with at this point. Right or wrong.”

“I see that you’re having difficulty with it,” Grewe replied. “I know that you’re not a shopping-center developer. So I understand why you can’t understand it.”

Economic Development Specialist Ellen Dailey said she can understand some of the confusion about the project simply because of its “pay-as-you-go” nature.

She also said that questions that Nieder and Board President Jerry Miguel of Ward 3 had about funding and design plans for the project would be better answered in the city’s proposed development contract with Grewe.

A draft of that contract originally was scheduled to be sent to aldermen last week, but Dailey said that some additional changes needed to be made after last week’s meeting.

“… It’s really not the city’s dollars or the city’s revenue that’s going into the project,” she said. “He’s requesting the creation of a CID community-improvement district and the city’s approval to approve a 1-cent sales tax. Again, shoppers can choose whether or not they want to shop at the stores that have these sales taxes. And CIDs and TDDs are not just in Crestwood. They’re all over St. Louis County. So I hope that’s a helpful explanation. But certainly, we need to question carefully and evaluate the project. But I think there will be more of an opportunity to do that when we’re looking at the actual development proposal.”

But before viewing the development proposal, Miguel indicated last week to Grewe that he would feel more comfortable knowing a range of funds that Grewe might possibly invest toward the future project.

“Are you willing to invest an equal amount?” Miguel asked Grewe. “A greater amount? I need some indication of how much you as a developer are willing to invest in this property. Are you willing to match what the CID may yield? I mean, you could conceivably limit your cost to $2 million, in which case, the CID would pay all your redevelopment expenditures. So, if you need to invest $4 million, that would be asking the CID to cover half of your expenditure. I would very much like some indication of how much you as a developer or your developers group are willing to invest in bringing back property to the point where it can be leased.”

“I already have a very significant investment in it,” Grewe responded. “You’ve mentioned it. What’s on the tax records today. There’s very significant investment there today. If it is going to be redeveloped for the benefit of sales tax, then it requires this kind of investment. If it’s going to be a huge storage facility or a residential condominium project, it requires a completely different investment. But for a retail standpoint, I’ve already invested what I’m investing. We’ve already put $7 million into that project.”

Ward 2 Alderman Jim Kelleher said he would much rather see Crestwood as a city that is friendly to proposals from developers like Grewe and views the project as an opportunity for more business.

“We’re talking about Crestwood being a high-tax city that people don’t want to come into,” Kelleher said. “I’m more worried about Crestwood being a city that’s unfriendly to business. And that atmosphere has been in this city for some time. We’ve had a reputation for it. And it continues to this day with more grandstanding that I think is uncalled for.”

Ward 3 Alderman Gregg Roby also expressed his support for a CID at Crestwood Square.

“There isn’t a citizen out here in Crestwood that wants to see those businesses down there vacant or those buildings vacant,” Roby said. “It becomes a matter of pride for the city. When people drive through and they see a lot of vacancies, it just doesn’t look good. And I think we’re all pretty well resigned to the fact that this is going to happen. The money’s not coming out of the city’s pocket. It’s being paid by citizens that are going to be patronizing this hardware store or whatever business goes in there. And if they don’t want to shop there, then go elsewhere if they’re afraid of paying that one extra cent per dollar. And quite frankly, I think it’s a great asset to the city and I do hope we move forward with it.”