A Missouri law that allows developers the right of eminent domain in certain redevelopment projects is increasingly being used to amass land for big inner-city projects, raising concerns among preservationists and tenant groups that localities are going too far in turning over to developers their powers to take land for the public good.
The law, known as Chapter 353, allows local governing bodies that have approved a developer's plan for a site to pass on to the developer the government's power to take the properties for just compensation. It also allows cities to exempt developers from taxes on improvements to the land for the first 10 years and to grant additional tax abatement for the next 15 years.
Real estate sources in Washington said they did not know of any other state that passed on to developers the governmental power of eminent domain.
Two historic buildings in St. Louis were demolished in late August after preservationists lost a fight against a local corporation that acquires redevelopment sites for developers. Carolyn Toft, of the St. Louis Landmarks Association, said that the St. Louis Board of Aldermen justified granting eminent domain to the developer on the basis that the buildings were blighted.
In a project that has triggered an angry debate in Kansas City, Mo., Property Co. of America has proposed a plan to acquire and demolish four apartment buildings in a low- and moderate-income neighborhood and build two 12-story office buildings on the site.
Preservationists and tenants argue that the four apartment buildings, which house nearly 100 tenant families, are not physically blighted. The City Plan Commission, a city-appointed group that oversees redevelopment in Kansas City, has approved the proposal, however, on the basis that they are functionally blighted because they do not have enough parking spaces and are economically blighted because they bring far less revenue than the office buildings would.
"The original tenet of the law was that it provided tools cities could use to encourage redevelopment of truly blighted neighborhoods," said Mark Shapiro, executive director of the Historic Kansas City Foundation. "But over the years the projects have been less and less speculative and more and more economically feasible without the provisions of eminent domain and tax abatement in the law; and that what we find now is that almost every development in Kansas City in the last couple of years has taken advantage of 353."
Most of the redevelopment in Kansas City is occurring around the 60-year-old Country Club Plaza, believed to be the first suburban shopping center in the nation. The center is regarded as an elegant example of Spanish-style architecture and is a source of pride to Kansas City residents.
Shapiro said there are at least five projects proposed for the plaza area, an intensity of activity characterized locally as the biggest Kansas City building boom since the 1930s. The project sparking the most controversy, however, is not the Property Co. of America project but that of local builder R. H. Sailors Co.
Sailors has proposed a plan to tear out a group of older, low-rise apartment buildings and replace them with high-rise luxury apartments and offices. The tallest building in the group would be 43 stories high, more than 30 stories higher than anything else in the area. The project, now before the City Plan Commission, would displace families living in more than 300 units of low- and moderate-income housing if approved by the City Council.
"The controversy is what will happen to the plaza, this little architectural gem that is widely accepted as the real economic magnet of the city, if you ring it with a forest of tall buildings," said Shapiro. "Even members of the City Plan Commission think that what is proposed is out of scale."
Shapiro also said that although the existing apartment units are 50 years old, they are not physically blighted. Tenants' concerns have helped generate debate in city circles over whether Chapter 353 is being used too liberally, he said. One member of the City Council has proposed legislation that would include more generous displacement benefits for tenants in the local 353 ordinance and possibly even scale back the amount of tax abatement the city could give developers.
In another related issue, preservationists are concerned that a new law allowing cities to float bonds to help fund redevelopment projects has opened up the statewide definition of "blighted areas" in a way that could threaten historic properties from Kansas City to St. Louis.
A new law enacted by the state legislature late last year now allows cities to fund private redevelopment projects with what is called tax increment financing, a system in which the city issues bonds backed by the tax increases expected to result from the redevelopment project.
The tax increment financing law, in defining redevelopment projects, broadens the definition of blighted to include any area where at least half of the buildings are at least 35 years old, a move that preservationists fear will open the doors to wide-ranging redevelopment in the older sections of Missouri's cities.
The first project in the state proposed under the part of the law that allows tax increment financing, a project of the J. C. Nichols Co. in Kansas City, has triggered a challenge to the legality of the law and the validity of delegating eminent domain to a developer for an area that may only have the potential of becoming blighted. The case is expected to be heard this fall.
Developers across the state defend both 353 and the new law, saying that the financing provisions, tax incentives and power of eminent domain have combined to allow extensive redevelopment and rehabilitation of historically significant neighborhoods.
Last year St. Louis garnered one-tenth of the entire nation's historic investment tax credits for commercial and mixed-use rehabilitation projects. Developers cite as a defense of Chapter 353 the success of Laclede's Landing in St. Louis, a riverfront warehouse and commercial area brought from the brink of desolation back to a thriving tourist and business attraction over the last several years.
"The law is a significant incentive, particularly the tax abatement aspects," said Tom Purcell, president of the Laclede's Landing Redevelopment Corp. "It also provides a discipline to the planning process and political stability between the municipality and the developer. It provides a vision for a neighborhood that needs to be revitalized long before the economics may be there to support the vision."
Purcell said that in the case of Laclede's Landing there had been no new capital investment in the area since before the Spanish-American War.
"That was over 90 years ago," said Purcell. "For an area like that, you really needed incentives to get investors interested."
But state preservationists say that the new provision allowing developers the power to "take" buildings for redevelopment projects just because they are over 35 years old could spell the end of Missouri's remarkable record of rehabilitating older buildings.
"We are concerned that this has gone too far," said Steve Sorkin, organizer of a group that fought to keep the two recently demolished historic buildings in St. Louis. "Now cities could take a perfectly good building and grant redevelopment rights. It could be the end of a lot of rehabilitation."