Web exclusive: Board rejects new Sappington Square agreement

Ad hoc committee formed to work with bank.

By EVAN YOUNG

An agreement to complete the redevelopment of the Sappington Square retail center recently was rejected by the Crestwood Board of Aldermen.

The board voted 4-3 Sept. 28 to defeat a new development agreement between the city, Pulaski Bank, the Sappington Square Community Improvement District and Priority Property Holdings LLC for the 5.7-acre site on Watson Road.

Ward 1 Alderman Mimi Duncan, Ward 2 Alderman Chris Pickel and Ward 4 Alderman Deborah Beezley voted in favor of the agreement. Ward 1 Alderman Darryl Wallach, Ward 2 Alderman Jeff Schlink and Ward 3 Aldermen Paul Duchild and Jerry Miguel were opposed. Ward 4 Alderman John Foote abstained.

After the vote, Schlink and Beezley were named to an ad hoc committee that will work with Pulaski Bank to iron out the board’s concerns with the agreement. If the city and Pulaski Bank cannot reach an agreement on Sappington Square, officials have said the fate of the CID may have to be decided in court.

The original Sappington Square 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.

It since has sued Sappington Square LLC for repayment of the outstanding balance on the construction loan. The case is pending in St. Louis County Circuit Court.

However, the CID on the property, which took effect in 2008, remains in place. A one-cent 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 request reimbursement, and none of the CID proceeds have been spent on the project. About $47,000 is in the CID account, according to the district’s attorney, Shannon Creighton of Gilmore & Bell.

As proposed in the new agreement, Priority Property Holdings, a wholly owned subsidiary of Pulaski Bank, would complete the redevelopment project. The agreement would give the owner two years from the effective date to begin construction on the project and three years from the effective date to substantially complete it.

The maximum CID reimbursement would remain at $2.5 million with no deadline for the owner to request the funds.

Pulaski Bank attorney Kevin 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.

However, some aldermen said Sept. 28 they still had concerns about the agreement as presented.

Schlink has questioned a provision that would allow the new 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.

“I think if I was the owner of an adjacent property and it was being added to a contract that I didn’t have much say in, the city essentially is allowing language to go in that could potentially give someone the opportunity to do that (eminent domain) against my land …,” Schlink said. “The city is essentially not supporting that type of a move but allowing language to be put in an agreement that really should be sorted out between neighbors.”

City Attorney Rob Golterman has said the bank could request the use of eminent domain from the city only after all reasonable efforts to obtain the property from its current owner failed. The decision to begin eminent domain proceedings ultimately would rest with the Board of Aldermen, he said.

Golterman told the board the provision does not mean aldermen have to consider eminent domain but remains in the agreement to give the current or a future owner “leverage” in efforts to obtain the property amicably.

King added that Pulaski Bank currently believes eminent domain for the cross-access would be too expensive to pursue, even if the board supported it.

Miguel and Duchild brought up the issue of blight, contending the quality of the property has improved greatly since a 2006 study by Peckham Guyton Albers & Viets, Inc. determined the area was blighted.

“If you look at the development, and if you look at the blighting analysis, I don’t know that you could really come to that conclusion, that blight remains,” Miguel said.

Duchild later asked Creighton why CID officials contend the blight on the property has not been fully remediated. The attorney said because the redevelopment project was not completed under the terms of the original agreement, the area is still considered blighted.

“I’m not saying no part of the property has been remediated. It’s a beautiful center,” Creighton said. “But under the law, it hasn’t been fully remediated.”

Duchild responded, “When I look at the site right now … I don’t see blight. My constituents … if I vote for something that says this center is blighted, they’d think I’m crazy. And I just can’t see how you can substantiate that there is still blight on that piece of property.”

Miguel noted the original development agreement required at least 75 percent of Sappington Square to have “sales-tax revenue-producing” retail tenants, a fact City Administrator Jim Eckrich later confirmed.

Miguel previously has questioned whether the maximum reimbursement to Pulaski Bank in the new agreement should remain at $2.5 million.

He contended the bank already owns Sappington Square, which has been substantially developed, and likely will receive millions of dollars in judgments from its lawsuit against the former developer.

“At this point the bank is asking for our kindness to reimburse them up to $2.5 million just simply out of the goodness of our heart,” Miguel said.

He added that Pulaski Bank received more than $30 million in the 2008 federal Troubled Assets Relief Program and suggested it now wants Crestwood to “bail them out” on the CID.

King told Miguel his statements were a “complete mischaracterization” of the issue.

“Suggesting that we are somehow profiting and going to be unjustly enriched by the reinstatement of the reimbursement vehicle of this CID — that is simply not the case,” King said. “For you to suggest that somehow we’re in the black as a result of all this is a complete mischaracterization and in all fairness is not fair to the people that are trying to make a decision, to just let that stand … We are not up here hat in hand asking, begging for this CID to be reinstated. We believe this is a fair resolution to an unfortunate circumstance.

“This development was developed in a manner that was far beyond what most strip centers are developed in large part due to the implementation of this CID. Through a series of events that we had no involvement in, the dispersing vehicle was negated, leaving the city and the CID in limbo … We’re not getting anything more than what’s already in place. What we’re asking for is what was originally intended by this agreement, and what we originally funded through a loan. That’s all we’re simply asking for: to do what was originally intended …

“Hopefully we can agree in an amicable fashion through an agreement which makes sense through mutual understanding to do it the right way, instead of having a court decide it. That makes no sense at all and just costs everyone more money,” King said.

Miguel later said he does not object to a new development agreement but could not approve the one proposed.

“To approve this CID agreement that is in front of us is to look backwards. I have no doubts that invoices for the $2.5 million could be submitted immediately. Having done that, what’s the incentive to move forward and to fill the center with sales-tax revenue-producing tenants? I think as a board we need to take another look at this,” Miguel said.

Foote told the board he abstained on the vote because he was “confused as to what the true issues are.” He asked that the “litany of issues” the board has with the agreement be clearly stated so the city and Pulaski Bank could “sit down and address them fairly.”

“I quite frankly am confused,” Foote said. “We start out here with the idea of taking this development, salvaging it as much as we can for the benefit of the city. Pulaski Bank has come in good faith to work on this. There are certain restrictions. Nobody likes to see anybody get an unfair advantage …

“But the end result is to move our city forward and make that a workable piece of real estate for our city … This is not our job to restrict or confine or to slow down improvement. It’s to build and work on that.”