While the Sansone Group is requesting the use of tax tools to redevelop the Holiday Inn-Viking Conference Center in Sunset Hills into an office/retail establishment, Lindbergh School District officials are concerned that approving such assistance could set an alarming precedent.
Board of Education President Mark Rudoff said during a Monday morning meeting with Sansone officials that if the Holiday Inn-Viking Conference Center is demolished as planned to make way for a redevelopment project, the area would lose hotel and banquet accommodations that residents have enjoyed for years. His worry is that if efforts to construct new centers to fill those voids are proposed in the near future, developers would feel entitled to tax-increment financing if Sansone receives the $12 million in assistance they are requesting for the new office/retail center.
“What I’m talking about is you’re starting the domino effect that we’re not going to get any changes or renovations or updates without that (TIF),” Rudoff said. “You guys, you’re smart. You can see that it’s time from the evolution of Sunset Hills. It’s time for the dominoes to start to fall. If they want to be where they want to be, they need to do some redevelopment. My concern is that this starts the first domino …
“The precedent becomes set that the only way we can redevelop and demolish an older structure of 30 to 40 years, which many of these are that they may be looking to redevelop, is to come in and have to ask for a TIF again. And that’s one of my concerns is that we start taking pieces out in order to redevelop to respond to the demand that’s created and we have to end up inadvertently creating a TIF for that, too.”
But Jim Sansone believes that without some form of tax assistance, the Viking site cannot be redeveloped. And without that redevelopment, he said that property would only see “downward trend.”
“You could use all the statements that you (Rudoff) made for the very reasons why you need a TIF,” Jim Sansone said. “Because if you don’t have a redevelopment tool — TIF, CID, whatever you want to call it — you don’t have some form of subsidy, then the same types of folks that are running the (Quality) Inn behind Helen Fitzgerald’s are the ones that can come in and operate the Viking when the people who are currently operating the Viking to a certain standard are saying ‘We’re tired of being in the business. It’s not something we can keep up with. We need to get out of there.’
“Well, do you keep a downward trend in the hotel and then still have a hotel? Or do you have to take it all out and take what’s ordinary costs and make it extraordinary costs and redevelop it? Without the tools, without TIF, there’s no way you’re doing that. You’re not going to be able to redevelop it. So it depends on how you look at it because you raise a great point. That could be a very positive thing, too, because Sunset Hills is loaded with a lot of old buildings. And there’s redevelopment that needs to take place. And if it doesn’t, it’s going to start to deteriorate. And that’s what you don’t want to happen because that is a domino effect in the long run.”
The Sansone Group is seeking more than $12 million of sales-tax assistance at the proposed retail parcels to help fund the $47 million development. As proposed, the Sansone Group would redevelop the 8.18 acres on and around the Viking — near the intersection of Watson Road and South Lindbergh Boulevard — into a combination of office and retail called Sunset Crossing.
If bonds were issued for $12 million of tax assistance, the developers estimate they would be paid off within 15 years after the development opens. The Sansone Group has requested tax assistance of $5 million for construction of retail and parking, $4.5 million for acquisition costs and $2.5 million for site preparation, which includes the Viking’s demolition, site work, landscaping, grading, signage and utilities.
Tim Sansone said Monday the Viking’s current owner, Roger Kreutz, has conveyed that it would be too costly for him to pay for facility improvements required to keep the Holiday Inn franchise tag at the hotel, which the Sansone Group reports has had a “stagnant” occupancy rate. Because of those costs, Kreutz instead offered to sell the property to Sansone.
But Lindbergh Chief Financial Officer Pat Lanane questions if another development could be successful without TIF.
“Tell me why you’re convinced that nothing will happen on that spot over the next 15 years that’s a good development without the use of TIF,” he said. “Because that’s the time frame we’re working with …”
“I don’t know how somebody could really respond to that,” Jim Sansone said. “That’s kind of like when’s the end of the world coming? … In 15 years, are they going to be able to develop that site? We can tell you in two years, he doesn’t have a franchise agreement. We also know that there is no hotel operator that is at the level of the current operator or higher that has any interest in that location.”
He said that any time a developer is faced with the task of demolishing a structure and then constructing a new development on that property, those “extraordinary costs” justify sales-tax assistance.
“I think any time that you’re dealing with a demolition situation of an existing operation, you’re looking at extraordinary costs,” Jim Sansone said. “We can slice it and dice it any way. But the bottom line is when you buy this property, you have to tear it down and then you have to rebuild it and rebuild a development and you’re going for financing for that … What somebody may normally look at as ordinary becomes extraordinary when you have to tear it all down and re-store it. If that was just an open field, we wouldn’t have any extraordinary costs.”
But Lanane said, “Only 4 percent of our revenues come from the state of Missouri. And all these folks here that pay income tax, they don’t get any of it back … That places a burden then on local property tax. We only had $11 million in new construction last year. I have $44 million in TIF that I now have to subtract from my property-tax calculation. And it scares me when I hear this discussion because it’s like just about everything in the future that’s new or big or wonderful — we’ll most likely be looking at a TIF. And so that’s not real good news for the property taxpayers who got their bills the day before yesterday. Some of them actually called me. But just understand a little bit what we see on the other side of this. And then we also have the squeeze from the federal government, who’s saying: ‘You must do this, this, this and this. And you must make these standards.’ And we are making them. But it’s not easy and it’s not inexpensive.”