The city of Crestwood should work with Pulaski Bank to hash out a new development agreement for Sappington Square because “the alternative is not an attractive one,” the bank’s attorney said last week.
Pulaski Bank attorney Kevin King believes the Board of Aldermen should reconsider its recent rejection of a new development agreement for the Watson Road retail center to avoid costly litigation. An ad hoc committee comprised of Ward 4 Alderman Deborah Beezley and Ward 2 Alderman Jeff Schlink met last week to discuss the benefits and drawbacks of having such an agreement in place.
The committee originally was formed in September after aldermen voted 4-3 to reject a proposed development agreement for Sappington Square with Pulaski Bank, the Sappington Square Community Improvement District and Priority Property Holdings LLC — a wholly owned subsidiary of the bank.
Beezley was appointed to the committee to represent aldermen who favored the agreement, and Schlink was appointed to represent board members who opposed it.
But Schlink told the board last month he and the other aldermen who voted “no” saw no reason to change their minds. His report drew criticism from other aldermen and King, who said the committee never met with the bank.
Ward 4 Alderman John Foote, who did not vote on the agreement in September because he wanted more clarity on the issue, moved last month to reassemble the ad hoc committee to come up with a list of “pros and cons” of having an agreement. Beezley seconded the motion, and it was approved 4-3.
At last week’s committee meeting, King said there had been much confusion and misunderstanding from some aldermen about the new development agreement. He indicated that Schlink, in particular, had obstructed discussion of the issue.
“What I’m trying to say is I think it’s just imperative and it makes a lot of sense, instead of being closed-minded about this — which I by the way think you have been from day one — is to open up your mind and let there be a complete and open discourse about this agreement. There hasn’t been,” King told Schlink. “It’s been obvious through the course of these hearings there is a lot of misunderstanding about this agreement.”
Schlink responded that he never misunderstood or was confused about the proposal.
The original development agreement, which was approved in 2007, fell through late last year when the center’s previous developer, Sappington Square LLC, defaulted on a loan it obtained from Pulaski Bank for construction of the roughly $13 million redevelopment project. The bank foreclosed on the property and bought it at public auction in December.
The CID on the property, which began in 2008, remains in effect even though a new development agreement has not been approved. A 1-percent sales tax continues to be collected on purchases made at Sappington Square stores, and the proceeds are placed in a special account. A five-member Board of Directors governs the district.
The original development agreement allowed Sappington Square LLC to request up to $2.5 million in CID proceeds to reimburse certain project costs. But while the developer completed some construction on the property, it missed a July 2008 deadline to substantially complete the project and request reimbursement, and none of the CID proceeds have been spent on the project. About $45,000 is in the CID account.
Under the agreement aldermen rejected, Priority Property Holdings would’ve completed the redevelopment. The agreement would’ve given the developer two years from the effective date to begin construction on the project and three years from the effective date to substantially complete it.
King has said the bank wants to fill the vacant lots at Sappington Square as quickly as possible and eventually sell the property to a new owner. A new development agreement would help that effort because the bank could use CID proceeds to “incentivize” prospective Sappington Square tenants with lower rent, King has said.
Aldermen in July approved a conditional-use permit to construct a Fifth-Third Bank at the center.
When asked last week to identify the concerns he had about the agreement, Schlink cited, as he has previously, a provision in the document that would allow the developer to ask the city to use eminent domain to obtain property for cross-access between Sappington Square and the Schnucks grocery store to the east.
Schlink said he didn’t understand why it remained in the agreement when in past discussions both the board and Pulaski Bank indicated they would be fine with removing it. City Attorney Rob Golterman told Schlink the provision remained in place because no motion had been made to remove it.
Schlink also questioned King’s contention that CID proceeds could be used to offer lower rent to prospective tenants. He said doing so could cannibalize other developers in the city.
King replied that using CID money for that purpose would “enhance the project” and is acceptable because the redevelopment, in terms of infrastructure, is largely completed. He added the chances of Crestwood businesses leaving existing developments because of lower rent at Sappington Square are “minimal to none.”
Also at issue for some aldermen is the process for repealing the 1-percent sales tax and dissolving the CID. While some board members believe the action requires only a resolution by the CID Board of Directors, CID special counsel Shannon Creighton of Gilmore & Bell has said in her opinion the matter must go to a vote of the property owners — Pulaski Bank.
Therefore, Creighton has said, dissolving the CID is not an option.
One option, Creighton has said, is for the board to allow the district and sales tax to continue until Oct. 24, 2031, as outlined in the original CID Act. In that scenario, sales tax revenue would continue to be deposited into the CID account, and up to $12,000 could be withdrawn annually to pay for legal and administrative expenses. The CID account is projected to collect $500,000 by 2031, Creighton has said. At that time, the sales tax would sunset and the revenues would be disbursed based on a plan that must be approved by the district, city and Sappington Square owners.
The city’s other option is to forge a new development agreement with Pulaski Bank, Creighton has said. If a new agreement is approved and notes are issued by the end of the year, the sales tax will sunset in December 2030, she has said.
However, Creighton told the committee last week state law is “unclear” as to whether dissolving the CID is a “completely available” option.
Beezley said a new development agreement would be beneficial because there currently are promising businesses in Sappington Square, such as the recently opened Yo My Goodness frozen yogurt store.
And while the forthcoming Fifth Third Bank may not generate sales-tax revenue, it will generate additional foot traffic, she said.
“We don’t want to be considered as obstructionists,” Beezley said of the board.
King questioned why the board wouldn’t reinstate the agreement, considering the CID was part of the reason Pulaski Bank loaned money to the original developer in the first place.
“We’re only going to get reimbursed to the extent the proceeds are collected,” King told the committee, adding, “It seems fair to me that since the bank funded the project you don’t pull the rug out from under us.”
The situation, King said, “cries out for a contractual solution” — not a litigated one.
“It’s stupid,” he said of a court deciding the fate of the CID. “All it’s going to do is cost money.”