IN THE CIRCUIT COURT FOR THE CITY OF ST.

LOUIS
STATE OF MISSOURI

BONZELLA SMITH, et al. )

)
) Cause No.: 0922-CC-09379
v. )
) Division 18
CITY OF ST. LOUIS, MISSOURI, et al. )
)
Defendants. )

INTERVENORS NELSON AND McINTOSH’S

POST TRIAL BRIEF

Come now Intervenors Cheryl Nelson and Elke McIntosh, by and through counsel, Eric

E. Vickers, W. Bevis Schock and James W. Schottel, Jr., and state for their Post Trial Brief:

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 TABLE OF CONTENTS
TABLE OF AUTHORITIES........................................................................................................3
INTRODUCTION..........................................................................................................................6
INTERVENORS NELSON AND MCINTOSH’S CLAIMS.....................................................6
PROCEDURAL POSTURE.........................................................................................................9
STATUTORY SCHEME..............................................................................................................9
FACTS..........................................................................................................................................10
PARTIES – INTERVENORS’ STANDING.............................................................................11
JUSTICIABILITY OF CONTROVERSY................................................................................12
STANDARD OF REVIEW.........................................................................................................13
BURDEN OF PROOF.................................................................................................................16
DISCUSSION...............................................................................................................................16
A. The Ordinances violate RSMo. 99.805(12) as they (1) create a Redevelopment
Area that does not only include parcels benefited by a Redevelopment
Project and (2) lack findings of a predominance of blight within the
approved project areas. (Also the Ordinances cannot be severed and still
reflect legislative intent.).....................................................................................16
B. Even if taken at face value, each of the Board’s findings is not based on
substantial evidence and is arbitrary.................................................................20
1. Evidence of Financing Commitment......................................................20
2. Conclusion of Blight.................................................................................23
3. Growth by Private Enterprise – But For Test Part I...........................26
4. Development With and Without TIF – But For Test Part II...............28
5. Compliance with Comprehensive Plan of The City..............................31
6. Cost Benefit Analysis – Built or Not Built.............................................36
7. Cost Benefit Analysis - Inadequate Fiscal Impact Study.....................38
8. Cost Benefit Analysis - Financial Feasibility.........................................39
ATTORNEY’S FEES..................................................................................................................41
PRAYER........................................................................................................................................45

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 TABLE OF AUTHORITIES

Cases

Akin v. Dir. of Revenue, 934 S.W.2d 295, 300-301 (Mo. 1996).................................................19

Allright Missouri, Inc. v. Civic Plaza Redevelopment Corp., 538 S.W.2d 320, 324-325 (Mo.,
1976)..................................................................................................................................23
Allstate Insurance Company v. Estes, 118 F.Supp.2d 968 (E.D.Mo. 2000)..............................43
Alumax Foils, Inc. v. City of St. Louis, 939 S.W.2d 907, 911 (Mo. banc 1997)........................43
Assoc. Industries of Mo. v. Dir. of Revenue, 918 S.W.2d 780, 783-784 (Mo. 1996).................19
Bernheimer v. First National Bank of Kansas City, 225 S.W.2d 745 (Mo. 1949).....................42
Centene Plaza Redevelopment Corp. v. Mint Props., 225 S.W.3d 431, 433 (Mo. banc 2007)..16
City of St. Charles v. DeVault Management, 959 S.W.2d 815, 822 (Mo.App. 1997)................36
City of St. Joseph v. Hankinson, 312 S.W.2d 4, 8 (Mo.1958)....................................................15
Consolidated Public Water Supply Dist. v. Kreuter, 929 S.W.2d 314, 316 (Mo.App. 1996)....43
David Ranken, Jr. Technical Institute v. Boykins, 816 S.W.2d 189, 193 (Mo. banc 1991)......43
Eastern Missouri Laborers District Council v. St. Louis County, 781 S.W.2d 43, 47 (Mo. banc
1989)..................................................................................................................................12
Employers Mutual Casualty v. Tavernaro, 21 F.Supp.2d 1039 (E.D.Mo.1998).......................43
Goellner v. Goellner Printing, 226 S.W.3d 176 (Mo.App. 2007)...............................................43
Goellner v. Goellner Printing, 226 S.W.3d 176, 179 (Mo.App. 2007).......................................42
Goralnik v. United Fire and Cas. Co., 240 S.W.3d 203, 211 (Mo.App. 2007)..........................43
Great Rivers Habitat Alliance v. City of St. Peters, 246 S.W.3d 556, 561 (Mo.App. 2008)......24
Great Rivers Habitat Alliance v. City of St. Peters, 246 S.W.3d 556, 561-2 (Mo.App. 2008). .15
Grewell v. State Farm Mutual Auto. Insurance Co., 162 S.W.3d 503 (Mo.App.2005)............43
JF St. Louis West v. City of Des Peres, 41 S.W.3d 513 (Mo.App. 2001)...................................17
JG St. Louis West LLC v. City of Des Peres, 41 S.W.3d 513, 519 (Mo.App. 2001)..................16
Kelly v. Golden, 352 F.3d 344 (8th Cir. 2003)............................................................................43
LCRA v. Inserra, 284 S.W.3d 641, 644 (Mo. App. 2009)...........................................................16
Maryland Plaza Redevelopment Corp. v. Greenberg, 594 S.W.2d 284, 290 (Mo. App. E.D.
1979)..................................................................................................................................23

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Meramec Valley R-III School Dist. v. City of Eureka, 281 S.W.3d 827, 835 -836 (Mo.App.
2009)..................................................................................................................................15
Parking Sys. Inc. v. Kansas City Downtown Redevelopment Corp., 518 S.W.2d 11, 16 (Mo.
1974)..................................................................................................................................16
Simpson v. Kilcher, 749 S.W.2d 386, 393 (Mo. banc 1988).......................................................19
Spradlin v. City of Fulton, 924 S.W.2d 259, 263 (Mo. banc 1996)............................................16
State ex rel. Casey's General Stores, Inc. v. City Council of Salem, 699 S.W.2d 775 (Mo. App.
1985)..................................................................................................................................36
State ex rel. Chiavola v. Village of Oakwood, 886 S.W.2d 74 (Mo. App.W.D., 1994).......33, 35
Ste. Genevieve School District R II v. Board of Aldermen of City of Ste. Genevieve, 66 S.W.3d
6, 10 (Mo. 2002)................................................................................................................12
Temple Stephens Co. v. Westenhaver, 776 S.W.2d 438, 443 (Mo.App.1989)...........................43
Volk Const. Co. v. Wilmescherr Drusch Roofing Co., 58 S.W.3d 897, 901 (Mo.App. 2001)...43
Washington University v. Royal Crown Bottling Co. of St. Louis, 801 S.W.2d 458, 468-9
(Mo.App. 1990).................................................................................................................42
Wiles v. Capitol Indemnity Corp., 204 F.Supp.2d 1207 (E.D.Mo. 2002)...................................43
Statutes

RSMo. 1.140.................................................................................................................................18
RSMo. 523.261.......................................................................................................................13, 15
RSMo. 527.100.............................................................................................................................41
RSMo. 89.340.........................................................................................................................32, 34
RSMo. 99.1205.......................................................................................................................12, 30
RSMo. 99.800........................................................................................................................passim
RSMo. 99.810........................................................................................................................passim
Other Authorities

City Ordinance 68484 passim

City Ordinance 68485 6, 10, 11, 45
City Ordinance 64687 33
Rules

4
Rule 87.09.....................................................................................................................................41
Constitutional Provisions

section 21, article VI, Constitution of Missouri........................................................................13

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 INTRODUCTION

Developer Paul McKee, through various entities, purchased many parcels of land in the

northern portion of the City of St. Louis. In December 2009, the Board of Alderman passed and

the Mayor signed into law Ordinances 68484 and 68485 that (a) blighted a large area and (b)

granted a TIF to Mr. McKee’s entity, Northside Regeneration, LLC as a financial incentive for

development in a portion of those areas, and (c) provided access to tax credits under the

Distressed Areas Land Assemblage Tax Credit Act. This action challenges those Ordinances.

INTERVENORS NELSON AND MCINTOSH’S CLAIMS

Intervenors Nelson and McIntosh assert that the court should declare that Ordinances are

invalid for the following reasons:

A. The Ordinances are facially invalid because they authorize TIF for project areas A

and B based on findings of a predominance of blight for the entire Redevelopment

Area (A B C and D). The Board does not have the power to blight property

beyond the limits of the project areas. Nor is there substantial evidence to support

the Board’s findings of a predominance of blight for areas A and B alone.

Further, the Ordinances cannot be severed as a matter of law because if severed

they cannot reflect legislative intent.

B. For each of the Board of Aldermen’s findings, there is (a) a lack of substantial

evidence and (b) they are arbitrary under RSMo. 99.810.1.

The following items are discussed in the order that they appear in the statute.

1. Evidence of Financing Commitment. The conclusion that there is

“evidence of the commitments to finance the project costs” fails to comply

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 with RSMo. 99.810.1 because the evidence of such financing consists only

of empty promises, and there is no detailed documentation.

2. Conclusion of Blight. The finding that the “redevelopment area on the

whole is a blighted area”, fails to comply with RSMo. 99.810.1(1) because

the Redevelopment Area as a whole is not an economic or social liability

and so the finding is arbitrary. There is no predominance of blight, as

required by the statute. Particularly, the evidence shows that only 25

percent of the buildings are in dilapidated condition. 75 percent are fair,

good or excellent. Thus no finding of “predominance” can apply to the

buildings. Nor can vacant property, by definition, be blighted. Isolated

instances of blight do not a predominance make. Further, it is impossible

to discern whether the blight findings are based on substantial evidence

since the Blight Study analysis impermissibly commingles statutory and

extra-statutory factors. The conclusions are not supported by substantial

evidence and so the finding is arbitrary.

3. Growth by Private Enterprise – But For Test Part I. The finding that the

redevelopment area has not been subject to economic growth and

development by private enterprise fails to comply with RSMo. 99.810.1(1)

because the area has been subject to growth and development by private

enterprise. The conclusions are not supported by substantial evidence and

so the finding is arbitrary.

4. Development With and Without TIF – But For Test Part II. The finding

that the redevelopment area would not reasonably be anticipated to be

7
 developed without the adoption of tax increment financing fails to comply

with RSMo. 99.810.1(1) because the area would be developed without the

adoption of tax increment financing. The conclusions are not supported

by substantial evidence and so the finding is arbitrary.

5. Compliance with Comprehensive Plan of The City. The finding that the

Redevelopment Area conforms with the City’s Comprehensive Plan fails

to comply with RSMo. 99.810.1(2) because the city has no comprehensive

plan. The conclusion is not supported by substantial evidence and so the

finding is arbitrary.

6. Cost Benefit Analysis – Built or Not Built. The finding that the Cost

Benefit Analysis shows the impact on the economy shows the “impact of

the economy if the project is not built and is built pursuant to the

Redevelopment Plan” fails to comply with RSMo. 99.810.1(5) because the

numbers in the Cost Benefit Analysis are “pie in the sky.” The

conclusions are not supported by substantial evidence and so the finding is

arbitrary.

7. Cost Benefit Analysis - Inadequate Fiscal Impact Study. The

documentation lacks an adequate fiscal impact study for every political

subdivision buttressed by actual data and assumptions, which is required

by RSMo. 99.810.1(5). This statutory requirement is inadequate and

insufficient, and so the finding of compliance lacks substantial evidence

and is arbitrary.

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 8. Cost Benefit Analysis - Financial Feasibility. The conclusion that the Cost

Benefit Analysis has “sufficient information from the Developer for the

[TIF Commission] to evaluate whether the project as proposed is

financially feasible” fails to comply with RSMo. 99.810.1(5) because first,

there is insufficient information in the Cost Benefit Analysis for the TIF

commission to have evaluated whether the Redevelopment Plan is

financially feasible, and, second, the numbers fail to comply with

reasonable customs and standards of accounting. For both of these

reasons, the conclusion is not supported by substantial evidence and is

arbitrary.

PROCEDURAL POSTURE

Plaintiffs Bonzella Smith and Isaiah Hair and Intervenors Cheryl Nelson and Elke

McIntosh filed suit seeking declaratory relief invalidating the two City Ordinances.

Plaintiffs moved for a Preliminary Injunction. The court denied their Motion for

Preliminary Injunction and set the case for trial.

The parties conducted discovery. The court heard a 5 day bench trial. The parties now

file post trial briefs.

STATUTORY SCHEME

The Real Property Tax Increment Allocation Redevelopment Act, RSMo. 99.800, et seq.,

RSMo. 2000 & Supp., (the Act), allows Missouri cities to enact ordinances that grant Tax

Increment Financing (TIF) to developers. The statutory scheme, in briefest form, allows the use

of eminent domain by a private developer, and offers financial incentives in the form of TIF

bonds to the developer. The developer first brings a proposal for development to an entity called

9
the “TIF Commission”. The TIF Commission then makes a recommendation to the City’s Board

of Aldermen. The Board of Aldermen then may pass an ordinance granting a TIF to the

Developer.

RSMo. 99.810 states the requirements for the TIF application, and provides a specific list

of what the Board of Aldermen must find in order to pass a TIF.

FACTS

Several years ago certain entities which were created by and/or controlled by one Paul

McKee began acquiring properties in North St. Louis City. These acquiring entities are known

collectively as “Northside Regeneration”.

Defendant Northside Regeneration, LLC eventually brought a proposal, “The

Redevelopment Plan”, Intervenors Nelson and McIntosh’s Ex. 4, to the City’s TIF Commission.

The Plan proposes redevelopment of well over 1,000 acres, (the Redevelopment Area) and an

investment of $8 billion over 23 years.

Attached to the plan, as considered first by the TIF commission and as ultimately

considered and approved by the Board of Aldermen, are a Blight Study, Intervenors Nelson and

McIntosh’s Ex. 6, and a Cost Benefit Analysis, Intervenors Nelson and McIntosh’s Ex. 8.

Approximately 85 percent of the area falls into the 5th Ward of the City of St. Louis.

The Board of Alderman approved the plan by passing Ordinances 68484 and 68485,

Intervenors Nelson and McIntosh’s Exs. 1-2, (the Ordinances or the TIF Ordinances), the City

thereby formally entered into a Redevelopment Agreement with Northside Regeneration, LLC.

The Redevelopment Plan divides the Redevelopment Area into four areas, known as A B

C and D. Area A is just north of the western end of downtown St. Louis, and is shaped like a

funnel. Area B is just north of downtown St. Louis near the site of a proposed bridge over the

10
Mississippi. The other two areas, C and D, are toward the north, on the eastern and westernmost

sides, respectively.

Ordinance 68484 finds that the entire Redevelopment Area is blighted but then approves

TIF financing only for areas A and B. (Ordinance 68485 is primarily mechanical but is

necessary to the implementation of Ordinance 68484).

There are additional Ordinances which must be enacted for the project to go forward, but

Northside Regeneration has already received over $20 million under the Land Assemblage Act,

and the entire Redevelopment Area has been blighted.

Site work is underway and further work is scheduled to begin in April 2010.

PARTIES – INTERVENORS’ STANDING

Intervenors Cheryl Nelson and Elke McIntosh are residents of the City of St. Louis who

own property in the Redevelopment Area. They assert that McKee’s plan adversely affects the

value of their real property due to (a) the designation of blight and (b) the threat of eminent

domain. They also assert that City funds are being improperly expended in connection with the

plan.

A taxpayer has standing to challenge an alleged illegal expenditure of public

funds, absent fraud or compelling circumstances, if the taxpayer can show either a
direct expenditure of funds generated through taxation, an increased levy in taxes,
or a pecuniary loss attributable to the challenged action of the municipality. Ste.
Genevieve School District R II v. Board of Aldermen of City of Ste. Genevieve,
66 S.W.3d 6, 10 (Mo. 2002), citing Eastern Missouri Laborers District Council
v. St. Louis County, 781 S.W.2d 43, 47 (Mo. banc 1989).

Under this standard the allegations of Intervenors Nelson and McIntosh are sufficient to

gain them taxpayer standing.

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 Defendants are Northside Regeneration, LLC which is a properly formed limited liability

company in the State of Missouri, the Tax Increment Financing Commission, the Board of

Aldermen, the Mayor, the Comptroller and the City itself.

JUSTICIABILITY OF CONTROVERSY

The court, as in all cases, faces the question whether this cause is justiciable. Intervenors

Nelson and McIntosh suggest the case is a live controversy and justiciable for the following three

reasons:

1. The ordinance has formally blighted the entire area, which has affected

Intervenors’ property values.

2. As the evidence showed, during the pendency of this matter Defendant Northside

received almost $20 million through RSMo. 99.1205, the Distressed Areas Land

Assemblage Tax Credit Act, and to get that money the entire area had to be (a)

blighted and (b) subject to an economic incentive law, which in this case are the

ordinances at issue. The applicant is defined in part as follows:

Been appointed or selected, pursuant to a redevelopment agreement by a

municipal authority, as a redeveloper or similar designation, under an
economic incentive law, to redevelop an urban renewal area or a
redevelopment area that includes all of an eligible project area. RSMo.
99.1205.2(2)(b)

The definition confirms that the Ordinances are such an “economic incentive

law.” Further, the Land Assemblage Act money is part of the financing scheme in

this case. Cost Benefit Analysis, Intervenors Nelson and McIntosh’s Ex. 8. Also,

the receipt of the Land Assemblage Act moneys is an alternative condition

precedent in the Redevelopment Agreement, Ex. 3 at 3.3 (pp.9-10), for the

developer’s payment of the TIF Application fee (which has been paid).

12
 3. The Ordinances have formally authorized the TIF for Areas A and B (even though

additional Ordinances will be required for actual appropriation).

Plaintiffs also note that the case is justiciable under RSMo. 523.261:

Solely with regard to condemnation actions pursuant to the authority granted by

section 21, article VI, Constitution of Missouri and laws enacted pursuant thereto,
any legislative determination that an area is blighted, substandard, or unsanitary
shall not be arbitrary or capricious or induced by fraud, collusion, or bad faith and
shall be supported by substantial evidence. A condemning authority or the
affected property owner may seek a determination as to whether these standards
have been met by a court of competent jurisdiction in any condemnation action
filed to acquire the owner's property or in an action seeking a declaratory
judgment.

While the court expressed doubt during the trial that this statute applied to Intervenors’

case, in fact, the TIF statute is directly related to the blighting of property and so is surely

enacted pursuant to section 21, article VI, Constitution of Missouri, the blight section of the

Missouri constitution. RSMo. 523.261 is thus relevant because it gives blighted Intervenors a

remedy in this court.

STANDARD OF REVIEW

In one sentence, the court’s job is to determine whether the Ordinances are within the

scope of the authority conferred on the City’s Board of Aldermen by the Real Property Tax

Increment Allocation Redevelopment Act, RSMo. 99.800, et seq.1 If the Ordinances are not

within such authority, the court shall declare the Ordinances invalid.

A subtle aspect of the process of review involves the difference between the standard for

the requirement of the adequacy of financing in the first paragraph of RSMo. 99.810.1, for which

1
How TIF bonds actually issue to private investors is an issue on which all of the parties show
some confusion. It is also irrelevant to the question of strict compliance with the statutory
procedures for a TIF. Similarly, while the use of eminent domain, campaign donations, the
greasing of the legislative process, and other juicy details behind the Northside Redevelopment
Plan are political hot potatoes that excite the parties, these issues are also irrelevant to the
question before the court, and indeed to the function of the judicial branch of government.
13
the statute does not require specific findings, and the standard for the items listed in subsections

(1)-(6) of RSMo. 99.810.1, for which the statute does require specific findings.

The court stated in its December 10, 2009 preliminary order that the financing assurances

are not sufficient unless they are “more than mere empty promises”.

The law as to the adequacy of the itemized factors in RSMo. 99.810.1(1)-(6) is that the

findings are sufficient if they are not “arbitrary or induced by fraud, collusion or bad faith”. That

is the standard in Meramec Valley R-III School Dist. v. City of Eureka, 281 S.W.3d 827, 835

-836 (Mo.App. 2009):

In determining whether an area is blighted, and in approving a

Redevelopment Plan, the Board acts in its legislative capacity. Judicial review of
a legislative determination is limited to whether it was arbitrary or induced by
fraud, collusion or bad faith or whether the Board exceeded its powers. The issue
of whether a legislative determination is arbitrary rests on the facts of each case.
In determining whether the burden is met, it must be kept in mind that courts
cannot interfere with a discretionary exercise of judgment in determining a
condition of blight in a given area. Unless it appears that the conclusion of the
Board is clearly arbitrary, we cannot substitute our opinion for that of the Board.
If the Board's action is reasonably doubtful or even fairly debatable we cannot
substitute our opinion for that of the Board. (Citation omitted).

Intervenors Nelson and McIntosh note that they believe the test for blight as stated in

Meramec Valley should apply to all the listed items in RSMo. 99.810.1.

In Great Rivers Habitat Alliance v. City of St. Peters, 246 S.W.3d 556, 561-2 (Mo.App.

2008) the court further discussed the standard of review:

It has long been the rule in Missouri that disputes over the propriety of a
municipality's legislative findings are to be resolved by application of the “fairly
debatable” test. See City of St. Joseph v. Hankinson, 312 S.W.2d 4, 8
(Mo.1958). Under that test, we will not substitute our discretion for that of a
legislative body, and review of the reasonableness of legislative action “is
confined to a determination of whether there exists a sufficient showing of
reasonableness to make that question, at the least, a fairly debatable one; if there
is such, then the discretion of the legislative body is conclusive.” Id. Our
Supreme Court has explained the policy underlying this rule:

14
 Out of proper respect for the role of co-equal branches of government, this Court
has consistently refused to second-guess local government legislative factual
determinations that a statutory condition is met unless there is a claim that the
city's decision is the product of fraud, coercion, or bad faith, or is arbitrary and
without support in reason or law.

Spradlin v. City of Fulton, 924 S.W.2d 259, 263 (Mo. banc 1996). The “fairly
debatable” test may also be justified as flowing naturally from a well-recognized
presumption: because the validity of legislative enactments is presumed,
uncertainties about their reasonableness “must be resolved in the government's
favor.” (Some citations omitted).

Great Rivers further stated at 562-563:

When assessing municipal legislative determinations, “[t]he issue of

reasonableness or arbitrariness must turn upon the particular facts of each case,”
Parking Sys. Inc. v. Kansas City Downtown Redevelopment Corp., 518 S.W.2d
11, 16 (Mo. 1974), and judicial review of that issue focuses on “whether there is
substantial evidence to support the legislative decision.” Centene Plaza
Redevelopment Corp. v. Mint Props., 225 S.W.3d 431, 433 (Mo. banc 2007).
Thus, the issue to be decided in the instant case is whether substantial evidence
exists that would support the City's legislative findings of blight, but/for, and
conformity.

The absence of such evidence would suggest that the City's actions were
unreasonable, arbitrary, or capricious. Id. at 434-35. Conversely, the existence
of such evidence would suggest that the City's actions are, at least, fairly
debatable. See JG St. Louis West LLC v. City of Des Peres, 41 S.W.3d 513, 519
(Mo.App. 2001).

Intervenors Nelson and McIntosh note that these cases reconcile the words and phrases:

“arbitrary”, “substantial evidence”, and “fairly debatable”. The bottom line is that if there is no

substantial evidence in support of a proposition, or if the evidence is not credible, then the

conclusion based on that evidence is arbitrary and is not “fairly debatable”.

(The requirement of substantial evidence is equivalent in both the Act and RSMo.

523.261, passed in 2006 when the legislature undertook eminent-domain reform. The Court of

Appeals held in LCRA v. Inserra, 284 S.W.3d 641, 644 (Mo. App. 2009) that 523.261’s

15
language that the city’s findings have to be “supported by substantial evidence” is just another

codification of the “not arbitrary or capricious” standard.)

Additionally, however, the requirements in RSMo. 99.810 are not in the disjunctive.

Thus, even while Intervenors assert they should win on any of several different grounds, in fact,

to prevail they only have to convince the court on one ground.

Nevertheless, Intervenors Nelson and McIntosh acknowledge that they only win this case

if their proof beats the “fairly debatable” test.

BURDEN OF PROOF

Plaintiffs carry the burden of proof. JF St. Louis West v. City of Des Peres, 41 S.W.3d

513 (Mo.App. 2001).

DISCUSSION

A. The Ordinances violate RSMo. 99.805(12) as they (1) create a Redevelopment Area
that does not only include parcels benefited by a Redevelopment Project and (2)
lack findings of a predominance of blight within the approved project areas. (Also
the Ordinances cannot be severed and still reflect legislative intent.)

The Court, in its December 10, 2009 Order, detected a fundamental and fatal flaw in the

Ordinances. Namely, the inherent conflict in approving a subdivided redevelopment area – and,

hence, blight designation for the whole area – when redevelopment projects have only been

authorized in two of the subdivided areas. This is the precise purpose of 900.805 (12) – to guard

against arbitrarily configured redevelopment areas – and the Court discerned such in its order by

placing an emphasis on a critical word in 900.805 (12): “project.” The Court, in analyzing the

language of the statue, observed at 10 of its December Order:

Because a redevelopment area is not to exceed in scope ‘those parcels of

real property directly and substantially benefited by the proposed redevelopment
project’ (emphasis added), the Court considers that the authority to approve a
redevelopment plan, and the concomitant authority to find or declare an area is

16
 blighted,” is limited to areas that are subject to redevelopment projects defined
within the plan.

There was no evidence adduced at trial that in any way altered the subdivided scenario.

Indeed, the testimony about the Redevelopment Area being subdivided renders the City unable to

meet the TIF statutory requirement that there be a predominance of blight.

The Blighting Study, Ex. 6, considers the entire Redevelopment Area (A B C and D), and

Defendants’ expert Larry Marks admitted that he did not analyze and cannot demonstrate a

predominance of blight in project areas A or B (the TIF authorized areas). The Board adopted

Mr. Marks’ Blight Study as the record for its findings in the Ordinances. But the record is for

the wrong geographic area. There is no substantial evidence to support a predominance of blight

finding for the redevelopment project areas.

Intervenors called their expert Professor Michele Boldrin, chairman of the economics

department at Washington University in St. Louis, and a fellow of the St. Louis Federal Reserve

Bank. Professor Boldrin testified that the Redevelopment Area as a whole is heterogeneous.

Areas A and B are commercial and downtown; areas C and D are residential and on the north

side, and bear the scars of such previous government interventions as Pruitt Igoe. RSMo. 99.805

(12) requires a homogeneous redevelopment area so that the parcels can directly and

substantially benefit from the TIF. Professor Boldrin testified credibly that such a

heterogeneous area does not meet the homogeneity requirement of the statute.

By exceeding its authority and not relying on substantial evidence, the Board has passed

two Ordinances that are facially invalid. The severability clause in the Ordinance does not save

this fatal legislative flaw.

First, a literal application of the severability clause in Ordinance 68484 would prove fatal

to its validity. If the Board of Aldermen’s authorization in the Ordinance of the Redevelopment
17
Area is severed from the rest of the Ordinance, then what is left is the Board’s bare authorization

of Redevelopment Projects A and B. A and B would thus stand naked, not having on their own

met the other TIF procedural requirements, such as the blight and but for requirements.

On the other hand, if the Ordinance’s provisions authorizing Redevelopment Projects A

and B are severed, then what remains is the Board’s authorization of a Redevelopment Area that

has no redevelopment “project” to be tied to, which 900.805 (12) requires.

Second, the Ordinances would fail because the severability doctrine requires that what

remains of the Ordinances reflect legislative intent. If severed, the Ordinances would no longer

do so.

The severability clause in both Ordinances is boilerplate. The clause is substantially the

same as the severability rule in RSMo. 1.140 and the Supreme Court’s holding in Assoc.

Industries of Mo. v. Dir. of Revenue, 918 S.W.2d 780, 783-784 (Mo. 1996) : that a statute is

severable unless the valid portions standing alone are “incomplete and are incapable of being

executed in accord with the legislative intent.”

There is a presumption that the legislature intended the Court to give effect to the part of

the statute not invalidated. Akin v. Dir. of Revenue, 934 S.W.2d 295, 300-301 (Mo. 1996),

relying on Simpson v. Kilcher, 749 S.W.2d 386, 393 (Mo. banc 1988).

Intervenors assert, however, that they can rebut the presumption of validity because the

Ordinances, if severed, do not reflect legislative intent. Ordinance 68484, Ex. 1, sets out the

legislation’s purpose in language at 3:12-19:

[T]he Board of Aldermen has determined that completion of the

Redevelopment Projects is of economic significance to the City, will serve to
benefit the general welfare, qualifies for the use of tax increment allocation
financing to alleviate the conditions that qualify it as a “blighted area” as provided
in the TIF Act, and further, that redevelopment of the Redevelopment Area in

18
 accordance with the Redevelopment Plan is not financially feasible without the
adoption of tax increment allocation financing and would not otherwise be
completed.

If the lawful blight findings are severed from the Ordinances, whatever the legal theory,

there is no finding of blight. Lacking that lawful finding, no TIF can be authorized under RSMo.

99.810.1. Therefore, the Ordinances must fail as they do not comport to the statutory

requirements.

Nor can the blight findings be severed only to apply to areas A and B, even if the Court

restricts the Redevelopment Area to “those parcels directly and substantially benefitted from the

proposed redevelopment projects” (emphasis added). RSMo. 99.805(12). The Blight Study, Ex.

6, determined a preponderance of blight for the entire Redevelopment Area. As Defendants’

expert Marks testified, the findings of blight cannot be broken down into project areas. There is

no finding of blight for projects areas A and B alone.

Nor is it possible that Ordinances can remain valid if the Court severs areas C and D from

the Redevelopment Area. The legislative intent of the Board of Aldermen was based on a

finding that the predominance of the blight was in the Redevelopment Area as a whole.

Testimony from Aldermen Starr-Triplett, Reed, Bosley, Sr. and Ford-Griffin indicated that the

Board’s intent was to redevelop not the downtown areas A and B, but rather residential

neighborhoods in areas C and D, places still haunted by the ghosts of Pruitt-Igoe and other failed

housing developments. Although the court observed in its Order that the Board’s approach was

“lackadaisical,” the testimony of individual Aldermen shows their intent in approving the TIF.

19
B. Even if taken at face value, each of the Board’s findings is not based on substantial
evidence and is arbitrary.

Evidence of Financing Commitment.

The evidence of a financing commitment in this case consists of a November

2009 letter from Louis Eckelkamp, Vice-President of the Bank of Washington, indicating

that the Bank of Washington is “excited” about the prospect of financing Areas A and B

of the project, subject to passage of the TIF Ordinances, Plaintiff’s Ex. 4.

The court’s inquiry should rightly be limited to what the Board of Aldermen had

before it at the time it passed the ordinance, which was the letter only. But even if the

court goes further and considers the promises in the testimony of Mr. Eckelkamp, the

financing commitment is still so flimsy as to be only an empty promise.

Mr. Eckelkamp testified credibly that the financial muscle behind this project is

Paul McKee, and that the Bank of Washington has loaned Mr. McKee tens of millions of

dollars. Mr. Eckelkamp further credibly testified, however, that the property Mr. McKee

has purchased in the Redevelopment Area is only “secondary collateral” for the money

he has borrowed from the bank. Therefore the thought in the court’s December order that

Mr. McKee’s investment in the Redevelopment Area is a financial buttress to the project

was misplaced. If it were otherwise the Bank would not be using these properties as only

“secondary collateral.”

Mr. Eckelkamp’s letter shows no information indicating (a) the level of capital his

bank could finance, (b) information on other banks which might participate, (c) the worth

of Mr. McKee, (d) an amount of maximum capital which will be required for the

20
 development of A & B at any one time, and (e) specifics on how the bank has the

capacity to make a loan in any relevant amount, based on government mandated ratios.2

Intervenors Nelson and McIntosh called their expert Professor Boldrin, who was a

credible witness and has expertise in the area of banking and the ability of banks to

finance projects. (Professor Boldrin relied on numbers for the bank size which he

obtained from public information on the Federal Reserve Bank’s website. Those

numbers are consistent with the numbers testified to by Mr. Eckelkamp, that is, that the

bank’s capitalization is approximately $70 million, and its total assets are approximately

$780 million).

Professor Boldrin testified that a bank of such a small size would be completely

unable to finance a project of this scope. He observed that Washington Bank cannot

issue or assemble a loan equal to three times it current entire portfolio, and 30 times its

capital. This bank cannot come close to meeting the financial needs of this project. Nor

is there any evidence of efforts by the bank to lead a syndicate of lenders (or any

evidence that the bank has the experience and competence to do so).

Russell Capelin, an employee of Defendant, admitted as much in his testimony.

The bank’s inability to finance the project implies that the financing letter is

nothing more than an empty promise: first because the letter itself is not a commitment of

any kind and is instead merely an expression of “excitement”, and second because the

public information available about the bank proves that it is utterly unable to fulfill the

financing needs of this project.

2
Interestingly, the documents nowhere state the amount of Mr. McKee’s own investment.
21
 A financing commitment must contain a “detailed statement” that goes beyond

“vague, general comments.” Maryland Plaza Redevelopment Corp. v. Greenberg, 594

S.W.2d 284, 290 (Mo. App. E.D. 1979). In Maryland Plaza, the project did not have a

“rudimental, much less detailed” financing commitment, and thus the Board’s

determination “was without a factual determination, and, thus, arbitrary.” Id. at 290-291.

As this Court noted in its Order of December 10, 2009, the financing commitments for

the Northside project could well be “flimsy.” Order at 10.

Mr. Eckelkamp’s letter lacks detail and is facially vague, general and

rudimentary. It also stands alone. Accordingly it lacks the sufficiency and heft of

detailed financial documentation to make a commitment for financing “fairly debatable.”

Cf. Allright Missouri, Inc. v. Civic Plaza Redevelopment Corp., 538 S.W.2d 320, 324-

325 (Mo., 1976). In Allright Missouri, the Supreme Court held that the proposed method

of financing was adequate and that sufficient funds were available immediately for use as

needed for normal equity financing of the project – but they did so based on detailed

evidence of the sort which is lacking in the instant case.3

3
Detailed documentation in Allright Missouri included a packet containing (1) a letter of
commitment by Civic Plaza and its principals of certain stock and equities owned by them to
guarantee acquisition of the necessary properties; (2) a resolution adopted by the board of
Building Leasing Corporation committing itself to lend several million dollars to Civic Plaza for
use in this project; (3) a consolidated financial statement of Building Leasing Corporation and
Metropolitan Construction Company; (4) a letter from City Bond and Mortgage Company
expressing its interest in development of the project and its intent and purpose to secure
commitments from its institutional investors for long-term financing of the proposed
improvements if the project should be approved by the City; (5) the report of the Committee of
the results of its investigation of the financial condition of Civic Plaza and its principals and their
ability to make available immediately sufficient funds or securities for normal equity financing
of the project proposed. Allright Missouri, 538 S.W.2d at 325.
22
 On another note, the president of the Board of Aldermen, Lewis Green testified

credibly that his understanding at the vote was there is no financing commitment

whatsoever to finance Areas C and D. This is consistent with Mr. Eckelkamp’s letter.

(It is also significant that the Redevelopment Agreement calls for the funds from

the Land Assemblage Act to be used in the development, but Mr. Eckelkamp testified

that Mr. McKee has already used the money to pay down loans which are not directly

related to the Redevelopment Area, and for which, as stated above, his purchases in the

Redevelopment Area are only secondary collateral).

The financing commitment from the Bank of Washington is an “empty promise”,

and the court should therefore conclude that the Ordinances are not within the scope of

the authority conferred on the City’s Board of Aldermen by RSMo. 99.800, et seq., and

particularly within RSMo. 99.810.1.

Conclusion of Blight

The finding of blight in this case requires statutory interpretation. Particularly,

RSMo. 99.810 requires a finding that the “area as a whole is a blighted area.” The

definition of a blighted area for purposes of the act appears in RSMo. 99.805(1):

“Blighted Area”, an area which by reason of a predominance of defective

or inadequate street layout, unsanitary or unsafe conditions, deterioration
site improvements, improper subdivision or obsolete platting, or the
existence of conditions which endanger life or property by fire and other
causes, or any combination of such factors, retards the provision of
housing accommodations or constitutes an economic or social liability or a
menace to the public health, safety, morals, or welfare in its present
condition and use.

This definition was discussed in great detail in Great Rivers Habitat Alliance v.

City of St. Peters, 246 S.W.3d 556, 561 (Mo.App. 2008). After extensive review,

23
including a finding that the definition is not a model of clarity, the court concluded at

561:

An area is blighted if the “predominance of” an enumerated factor or

factors leads to any of the enumerated resulting circumstances, all of
which must be considered in light of the area's “present condition and
use.”

While it is obvious to anyone who drives around the Redevelopment Area that

significant parts of the area are vacant and/or burdened with occasional dilapidated

buildings, the conclusion of blight is subject to the specifics in the statute, and the test

before this court is whether the finding of blight, under that definition, was “arbitrary”.

Defendants’ expert Marks conceded that some findings in his Blight Study, Ex. 6,

were not based on actual inspection of the areas in question. For example, asbestos is

listed as a blighting factor. Yet the determination that buildings were blighted by

asbestos was made only from an estimate as to their age, and a generalized assumption

that older buildings have asbestos. (Further, even if present, asbestos does not pose a

health risk unless it is exposed to the air. If the presence of asbestos constituted per se

blight, virtually all St. Louisans would logically be either living, working or studying in

blighted buildings.) Similarly, the rating of roof conditions was not made by proper

inspection of the roofs. Rather, the data was gathered from casual observation from

behind a car wheel, or – in the case of flat roofs – from a cursory use of satellite

photographs.

Nor does the area lack a grid pattern, one of the statutory factors for blight under

RSMo. 99.805. The grid exists and functions, with the exception of the former Pruitt

Igoe development (which is not in the project areas A and B that are authorized for TIF).

24
 The Blight Study, Intervenors’ Ex. 6 at p. 20, also finds that 70 percent of the

Redevelopment Area’s sidewalks are blighted. There is a lack of credible evidence to

support a finding that there is a predominance of deteriorated sidewalks. The map

showing deteriorated sidewalks is false and inaccurate on its face. Intervenors produced

public comment, Ex. 30, from Mrs. Druhe, a local resident who objected to the

characterization of blight as to sidewalks that her family uses daily.

Intervenors also produced and showed a video, Ex. 32, which showed that

sidewalks were in good condition and that Defendants’ demonstrative photographs in the

Blight Study were at best misleading. In that video they framed in their video camera

several of the photos in Appendix C of the Blight Study. For each such picture they then

twirled in a full 360 degree circle to show the areas around the area shown in the photo.

The video is an accurate depiction of the areas shown. The videos rebut the evidence in

the photos in the Blight Study. The Defendants photos are non-representative. In fact, it

appears that the Defendants’ photos are so non-representative as to be deceptive.

Further, the data collection method for the sidewalk findings was arbitrary

because it used extra-statutory factors (as discussed infra). Nor was the data collected in

a reliable manner. Defendants’ expert Marks testified that Development Strategies

employees or contractors drove around the neighborhood and made observations. This is

too casual to be considered a reliable and scientific methodology to gather evidence for a

finding.

Nor does the Blight Study analysis follow strictly the statutorily prescribed factors

for blight. Instead, the blight analysis improperly commingles statutory and extra-

statutory factors. For example, there is nothing in the statute that says vacant property is

25
 a blight. RSMo. 99.805(1). Yet the Blight Study, Ex. 6, considers vacant property to be

a blight, and Defendants’ expert Marks admitted as much in his testimony. Vacant

property that is not being used for any purpose cannot be inadequate for its current use

(or non use). To declare it a blight would be to breach the legal standard set in Great

Rivers, where the court held that adequacy findings were to be based on current uses and

not contemplated future uses. Great Rivers, 246 S.W.3d at 564.

It is impossible, then, for the findings to be based strictly on statutory factors. It

is also impossible to make findings from the Blight Study only using statutory factors.

The findings in the Ordinances are based on a defective record – and the Board did not

consider any other evidence.

The Board of Alderman’s conclusion that the Redevelopment Area as a whole is a

blighted area as defined in RSMo. 99.810.1 is not based on substantial evidence and is

arbitrary, and the Court should therefore conclude that the Ordinances are not within the

scope of the authority conferred on the City’s Board of Aldermen by RSMo. 99.800, et

seq., and particularly with RSMo. 99.810.1.(1).

1. Growth by Private Enterprise – But For Test Part I.

The question in the first part of the But For Test is whether the area as a whole

has been subject to growth by private enterprise.

The best way to characterize the City’s evidence of its adherence to the TIF

Statute’s essential and well-known But For requirement is how the Maryland Plaza

court, cited in this Court’s Order, characterized the submittal by the developer in that

case: “desolate.” Maryland Plaza, 594 S.W.2d at 289.

26
 If ever there was an instance in which there was an “absence of evidence” to

support a necessary TIF finding, then the City’s addressing the But For requirement is it.

The totality of the City’s evidence that it made a determination about the area being

subject to private development amounts to just two paragraphs – one on p. 6 and a

repetition of it on p. 10 of the Redevelopment Plan, Ex. 4.

Not a single witness representing the City could point to any study, report, or even

expert consultation that addressed the but /for requirement - other than those two

paragraphs.

In fact, the uncontroverted evidence is that the City ignored evidence essential

and pertinent to the But For analysis that even Ray Charles could have seen. Ex. 13 – the

multiple pictures of the Redevelopment Area - depict an area virtually booming with

private development. The pictures show a brand new mall on the corner of Cass and 14th

Street; a new pre-owned car lot up the street; a new construction office site (Midwestern

Construction); another well-kept and relatively new mall (Doll’s Plaza); and vacant lots

for homes costing more than $100,000 to be sold (Choate Construction). All are private

developments, and were so acknowledged in all the testimony.

The above mentioned video from Intervenors Nelson and McIntosh showed

substantial evidence of growth in the Redevelopment Area by private enterprise. Such

growth has also happened in the area as a whole. Intervenor Nelson testified regarding

the substantial private development around her home in area B, and showed the photos in

Ex. 13 which the court should find to be representative of her area. Plaintiff Hair, who

owns property in area B, testified credibly that there has been substantial private

27
 development in his neighborhood, including new housing development by Richard

Baron.

Professor Boldrin testified credibly that there is substantial growth by private

enterprise in areas A and B, which are in the downtown of the city and not in the

residential areas of the north side. He observed that these commercial areas are prime

areas for growth in the city, relative to other areas, and particularly in relation to areas C

and D.

In their testimony, City officials seemed oblivious to the importance of meeting

the TIF but/for requirement. The City treated this requirement - which essentially

intended to prevent public funding from displacing or competitively disadvantaging

private developers - as just boilerplate.

Thus, the evidence to support the City’s finding that it complied with the first part

of the TIF But For test – i.e., that the area has not been subject to development by private

investment – is both desolate and conclusively contradicted.

The court should conclude that the Board of Alderman’s conclusion that growth

by private enterprise is not occurring is not supported by substantial evidence and is

arbitrary, and the Court should therefore conclude that the Ordinances are not within the

scope of the authority conferred on the City’s Board of Aldermen by RSMo. 99.800, et

seq., and particularly with RSMo. 99.810(1).

2. Development With and Without TIF – But For Test Part II

The second part of the But For test is whether the area would not reasonably be

anticipated to be developed without the adoption of TIF.

28
 (A problem with this test, as Professor Boldrin testified, is that it has perverse

incentives for the developer as he applies for TIF. The more grand and more costly the

plan, the more the project needs public subsidy in the form of TIF as it would otherwise

be unfeasible.)

Professor Boldrin testified credibly that an issue in economic development in a

city using TIF’s is that once one developer gets a TIF that developer has a cost advantage

over other developers. This is the “beggar thy neighbor” argument. The Professor

further testified that economic development is occurring organically in the area.

Barbara Geisman, the City’s deputy mayor for development, admitted in her

testimony that Mr. McKee would not develop the area without a TIF. But just because

Mr. McKee will not proceed without a TIF does not show that other developers are not

already proceeding, albeit on a smaller and organic scale, to develop the area.

Defendants’ expert Larry Marks testified that St. Louis is a “slow growth”

community, based on demographic and economic trends extrapolated into the future. Yet

according to Professor Boldrin’s credible testimony, the Blight Study, Ex. 6, the Cost-

Benefit Analysis, Ex. 8, and other documents project the most rapid growth in the history

of the American Midwest, other than Chicago at the end of the 19th century. Mr.

McKee’s financial analyst, Russell Capelin, admitted in his testimony that the growth

projections were 20 to 25 percent per year for the first few years of the redevelopment.

The court can determine that these projections are not credible, and are in fact absurd.

They have no foundation in any reality and actual market data. As Professor Boldrin

testified, the numbers are reminiscent of Mussolini’s “miracle cities,” an ambitious civic

engineering dream that turned out to be no miracle for the people who paid for them.

29
 Defendants’ expert Mr. Marks further testified as to a market study that he relied

on in his Blight Study analysis. That market study was prepared before December 2008,

when the global financial crisis began, with its freezing of credit markets, and the related

economic downtown that has battered St. Louis. The study is meaningless in the current

economy; even when performed, in the economic hey day, it neglected to analyze Pruitt

Igoe. Yet that market study is still the only market data that support Messrs. Marks and

Capelin’s analyses.

(Mr. Marks also testified that the Land Assemblage Tax Credits will be used in

the development. Those funds were disbursed to an “eligible project area” of at least 75

acres that includes 50 acres of distressed property owned by McKee entities. RSMo.

99.1205. Essentially, those funds were granted for property acquisition in areas C and D,

but are being used to pay down Bank of Washington loan costs as secondary collateral

for the development project set in TIF-authorized project areas A and B. The funds will

not go to support economic development in C and D.)

Mr. Capelin also testified that his Build and No Build analysis shows why

development will not happen without a TIF. His assumptions do not disclose the actual

amount of the developer’s investment, and show no rate of return. Professor Boldrin

credibly testified – and Defendants’ expert Mr. Capelin admitted – that Return on Cost is

an improper method of determining the rate of return. Investors look to Return on

Equities, or Return on Investment, which show the amount of investment and the return it

receives. No reasonable investor would rely on a Return on Cost, as it is analytically

meaningless and not comparable to returns on other investments unless a financing

30
 structure, inclusive of a leverage ratio, is added. The TIF analysis is spurious and

inappropriate.4

The Built analysis, therefore, is not based on proper accounting and analytical

standards. In other words, it is a trick. (Professor Boldrin testified to this over

Defendants’ objection, but the reason that Professor Boldrin did not testify to it in his

deposition was that he did not catch the error until he was on the stand. Further,

Defendants later opened the door to that line of questioning by asking their witnesses

Messrs. Marks and Capelin about the Professor’s opinions on the accounting deficiencies

of the Cost Benefit Analysis.)

The court should therefore conclude that the Board of Alderman’s conclusion that

development would not occur without the TIF is not supported by substantial evidence

and is arbitrary, and the Court should therefore conclude that the Ordinances are not

within the scope of the authority conferred on the City’s Board of Aldermen by RSMo.

99.800, et seq., and particularly with RSMo. 99.810.1(1).

3. Compliance with Comprehensive Plan of The City

RSMo. 99.805.1(2) requires that the municipality make findings that the

Redevelopment Plan “conforms to the Comprehensive Plan for the development of the

municipality as a whole.”

The term “Comprehensive Plan” is not defined in the Act. The court should

therefore look to the definition of “city plan” as that term in Chapter 89, the Zoning

Chapter, which enumerates the City's police power as to Planning and Zoning.

RSMo. 89.340 states:

4
Also, it is unclear whether TIF credits were improperly used as developer revenues in the
analysis.
31
 The commission shall make and adopt a city plan for the physical
development of the municipality. The city plan, with the accompanying
maps, plats, charts and descriptive and explanatory matter, shall show the
commission's recommendations for the physical development and uses of
land, and may include, among other things, the general location, character
and extent of streets and other public ways, grounds, places and spaces;
the general location and extent of public utilities and terminals, whether
publicly or privately owned, the acceptance, widening, removal,
extension, relocation, narrowing, vacation, abandonment or change of use
of any of the foregoing; the general character, extent and layout of the
replanning of blighted districts and slum areas. The commission may also
prepare a zoning plan for the regulation of the height, area, bulk, location
and use of private, nonprofit and public structures and premises, and of
population density, but the adoption, enforcement and administration of
the zoning plan shall conform to the provisions of sections 89.010 to
89.250.

This definition is discussed State ex rel. Chiavola v. Village of Oakwood, 886

S.W.2d 74 (Mo. App.W.D., 1994), where the appeals court held that while RSMo.

89.340 does not create an “exact definition” for a comprehensive plan, “it can be said that

a 'plan' connotes an integrated product of a rational process and ‘comprehensive’ requires

something beyond a piecemeal approach, both to be revealed by the ordinance in relation

to the physical facts and the purposes authorized” by statute. Of great significance

regarding this case, the Chiavola court specifically stated at 82: “This opinion does not

stand for the proposition that a municipality, no matter what its size, does not have to

adopt a comprehensive plan separate from the zoning ordinance … Without a

comprehensive plan, courts in situations such (as the case at bar), will have to determine

on an ad hoc basis whether their efforts meet the requirement of creating a ‘general plan

to control and direct the use and development of property in a municipality.’”

The City also has procedures, created pursuant to Missouri statute, by which it

evaluates the conformity of a proposed Redevelopment Plan to the Comprehensive Plan.

City Ordinance 64687, Ex. 34, creates the City Planning Commission and prescribes
32
certain procedures for the approval of a Redevelopment Plan by the City Planning

Commission before the Board of Aldermen reviews the plan. Particularly, the Ordinance

at Section 8.6 requires that the City Planning Commission evaluate whether there is

conformity:

Any blighting study and redevelopment plan under Chapters 99,

100 and 353 RSMO shall be submitted to the Planning Commission for its
recommendation as to its conformity with the Comprehensive Plan.

In this matter at bar, there is no record of the City Planning Commission

evaluating the Northside plan – despite the Ordinance’s procedural requirements. Barb

Geisman and several Aldermen credibly testified that the City Planning Commission did

not review the Northside Plan. It follows that the City did not follow its own procedures

for determining conformity. This procedural irregularity undermines the validity of the

finding.

A more fundamental question, however, is whether there exists a Comprehensive

Plan for the City under any definition. It turns out there are two candidates:

 The City’s 1947 Comprehensive Plan, Ex. 35.

 A two sided large piece of paper, including a multicolored city map, Ex.

K, and

As confirmed by testimony of Barbara Geisman and as admitted by the City’s

own website, the last time the City created a Comprehensive Plan was in 1947. The

website states:

Priorities changed however, and while there have been lots of

redevelopment plans, functional plans and neighborhood plans during the
intervening years, a new overall comprehensive plan remains to be
prepared.

Ex. 35, http://stlouis.missouri.org/government/docs/1947plan/

33
 The court surely should conclude that a 65 year old Comprehensive Plan, which

predates all interstate highways and reflects a time when the population was three times

what it is today, cannot credibly be considered a Comprehensive Plan relevant to the

Ordinances. The 1947 Plan is functionally obsolete, and so a legal nullity.

The one page map, Exhibit K, falls far short of the definition in RSMo. 89.340

and Chiavola, and is thus not “comprehensive” by any reasonable definition of that word.

Alderwoman Starr-Triplett testified that the map was not the City’s Comprehensive Plan,

even as Defendants’ expert Mr. Marks testified that he relied on the map to determine

conformity with the comprehensive plan.

President of the Board of Alderman Lewis Reed hedged that he could not pinpoint

the existence of a comprehensive plan. Alderman Antonio French testified that he “has

heard of a comprehensive plan, but has never seen it.” Alderman Freeman Bosley, Sr.

testified that no one ever explained to him what a comprehensive plan is.

Finally, the testimony of various Aldermen reveals what is also obvious to anyone

with any knowledge of the goings-on in the City of St. Louis – each Ward is a balkanized

unit, run by its Alderman in a feudal manner. While plans for individual Wards may not

be “comprehensive,” such plans are the only plans officially reviewed and adopted by the

City Planning Commission. Mr. Marks testified that his firm, Development Strategies,

was part of the team that developed the 5th Ward Plan. Mr. Marks also admitted that his

firm did not even examine the 5th Ward Plan before submitting the Development Plan.

The court can only conclude that there is no existing Comprehensive Plan.

The next logical step in the analysis is whether the existence of a Comprehensive

Plan is a condition precedent to adoption of a TIF ordinance.

34
 Intervenors Nelson and McIntosh suggest that no other conclusion is possible.

The case law has addressed the conclusion one must reach when there is no

comprehensive plan.

In State ex rel. Casey's General Stores, Inc. v. City Council of Salem, 699

S.W.2d 775 (Mo. App. 1985), the appeals court held that an ordinance that restricted

liquor stores to "business areas" was too indefinite to be valid because the city lacked a

comprehensive plan, and that therefore any decision to issue a permit would be arbitrary.

In City of St. Charles v. DeVault Management, 959 S.W.2d 815, 822 (Mo.App.

1997), a condemnation case, the court rejected conformance with the plan and rejected

the condemnation. Specifically, the court found the non-conformance fatal: “City's

determination that the Redevelopment Plan conforms to the comprehensive plan was

arbitrary… The lack of conformity is not reasonably doubtful or even fairly debatable.”

Here, there is no comprehensive plan. If there is no comprehensive plan, then the

Redevelopment Plan has nothing with which to conform.

(The court should also note that the a portion of the southern end of the eastern

boundary of the Redevelopment Area proceeds south on Hadley Street, but then carves

out the building where the St. Louis Post Dispatch is located. That is clearly an arbitrary

carve out. Regardless of whether the carve out is in place for some sort of media benefit,

the shape of that carve out does not conform to any Comprehensive Plan which may

exist, and is arbitrary).

Therefore the city’s findings here that the Redevelopment Plan conforms to the

City’s Comprehensive Plan is not supported by substantial evidence and is arbitrary. The

court should therefore conclude that the Ordinances are not within the scope of the

35
 authority conferred on the City’s Board of Aldermen by RSMo. 99.800, et seq., and

particularly with RSMo. 99.810.1(2).

4. Cost Benefit Analysis – Built or Not Built

The Redevelopment Plan must also show a cost-benefit analysis reflecting Built

and Non Built scenarios, and sufficient information from the developer to show that the

project as proposed is financially feasible. RSMo. 99.810.1(5).

As to his evaluation of the Built scenario, Defendants’ expert Mr. Marks testified

regarding the expected growth of tax revenues resulting from the development projected

in Redevelopment Plan, for both PILOT (real estate taxes) and EATS (sales taxes, City

employment taxes, utility taxes). These tax revenue projections gird the Defendants’ case

for TIF. By this test, the tax revenues in the Built scenario are not based on substantial

evidence. The tax projections are credible only if their assumptions are based on

substantial evidence; instead they are based on the “pie in the sky” projections of the

developer. That is not substantial evidence and so the tax projections are arbitrary.

The Cost Benefit Analysis does not factor in the displacement costs for existing

development (commercial, residential and otherwise). Defendants’ expert Mr. Marks

admitted this in his testimony. Yet, normally the Fiscal Note accompanying the issuance

of TIF bonds to investors considers the displacement costs. Mr. Marks gave no reason

why displacement costs were not included in his analysis.

The assumptions used for the Built scenario also include a large medical campus.

To be sure, “eds and meds” – landed and often wealthy universities and hospital centers –

are unique developments that significantly alter development economics for the

immediate surrounding area. As Mr. Marks testified, Barnes Jewish Hospital is an

36
example of such a “game changer” for the Central West End. But, both Messrs. Marks

and Capelin admitted there are no commitments from – or even discussions with – any

hospital or medical institution for the Redevelopment Area. It is completely arbitrary for

the Built scenario to include a medical campus if there is no institution even to have

considered such an idea.

Mr. Marks testified that the absorption numbers are based on an “enhanced

absorption” assumption. Normally, he admitted, absorption is based on an extrapolation

of historical market data. Here, Marks decided that McKee’s development would be so

unique and “transformative” that “enhanced” assumptions – pulled from thin air – were

used for the analysis rather than any actual data related to the northside of the City of St.

Louis. Professor Boldrin testified that the analysis shows several thousand $500,000

homes lived in by professionals earning $80,000 per year. He testified credibly that there

is no basis in reality for belief in such projections, and that no reasonable investor would

rely on such numbers. While it is certainly true that the Board of Aldermen is not an

investor, it is certainly also true that a reliance on these numbers by Board was arbitrary

because the numbers are not substantial evidence.

Most significantly, Professor Boldrin testified that the Build v. No Build numbers

in Tables A-1 and A-2 on p. 4 of the Cost-Benefit Analysis are arbitrary because they do

not show the number and type of retail, the inflow of customers, or the difference

between inflation and real growth. The rest of the Cost Benefit Analysis, some 39 pages

of tables in Ex. 8, is not supported by any foundation. Professor Boldrin testified that the

numbers in the analysis had no actual and meaningful supporting data.

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 Alderman Freeman Bosley, Sr. testified – and wrote in an e-mail, Ex. 15 – that he

supported the development because it is a “pipe dream.” That description is apt not only

to the Redevelopment Plan generally, but particularly as to the Cost Benefit Analysis’s

assumptions.

Given the absurdity of these assumptions, the Built analysis cannot be considered

credible. There is scant actual data or commitments to support the analysis.

Accordingly, the Built analysis is not based on substantial evidence and is arbitrary. The

court should therefore conclude that the Ordinances are not within the scope of the

authority conferred on the City’s Board of Aldermen by RSMo. 99.800, et seq., and

particularly with RSMo. 99.810.1(5).

5. Cost Benefit Analysis - Inadequate Fiscal Impact Study

RSMo. 99.810.1(5) requires, inter alia, a Fiscal Impact Study on every affected

political subdivision. The only documents which may be a termed a “Fiscal Impact

Study” are the tables in the Cost Benefit Analysis, Ex. 8, pp. 4-11. The tables contain

only unsupported projections for various political entities, with no stated assumptions or

foundation. Further, they are based on the absurd assumptions of the developer regarding

the market: “enhanced” absorption and “transformative” economics. It is a material

omission for Defendant Northside to rely on outdated, pre-recession assumptions whose

foundation is either not disclosed, or does not exist.

The analysis is thus deficient of required substantial evidence and is arbitrary.

The court should therefore conclude that the Ordinances are not within the scope of the

authority conferred on the City’s Board of Aldermen by RSMo. 99.800, et seq., and

particularly with RSMo. 99.810.1(5).

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6. Cost Benefit Analysis - Financial Feasibility

A finding regarding the financial feasibility of the Cost Benefit Analysis is also

required by RSMo. 99.810.1(5). The statute requires that “sufficient information” be

provided by the developer so the TIF commission can “evaluate whether the project is as

proposed in financially feasible.” Id.

The Northside Cost Benefit Analysis is found in Appendix B to Ex. 8, and was

prepared substantially by Russell Capelin, an employee of Mr. McKee’s. Upon cross

examination, Mr. Capelin denied that he backed into the revenue numbers by

extrapolating from his costs. Nevertheless, it appears that this is exactly how he created

the analysis, for there is no other plausible explanation for the projected revenues. Such

an analysis is arbitrary unless supported by actual market data, rather than allusions to

rents which may be made be possible by a development’s “transformative” nature.

Similarly, Mr. Capelin made up the absorption rates, as discussion supra in section 6, out

of thin air. Critically, the analysis relies on a 2008 market study that ignores the global

financial crisis and the great recession that has affected the City of St. Louis and the

nation. As Professor Boldrin observed, no reasonable person would rely on a market

analysis from the economic boom to support an investment in today’s recession. Since

the numbers and assumptions lack foundation, there is therefore not “sufficient

information” for the TIF commission to evaluate financial feasibility.

Capelin testified that his analysis was prepared pursuant to the TIF statute for

private market investors. But Capelin admitted that his analysis does not follow

Generally Accepted Accounting Principles (GAAP) of the sort relied upon by reasonable

investors. Indeed, Capelin testified that he is not an accountant and instead is a real estate

39
analyst with a business degree. (It is unclear whether Capelin’s analysis is also flawed by

counting TIF as a “negative expenditure,” essentially treating TIF reimbursements as

revenue.)

Most significantly, Professor Boldrin credibly observed that the project does not

show a Return on Investment or a Return on Equity. The Return on Cost analysis shown

is analytically meaningless, since the actual return depends on the amount of the

developer’s investment - which is not disclosed. Unless a financing structure, inclusive

of a leverage ratio, is added, no reasonable investor could evaluate this proposed

redevelopment based on the information disclosed. To compare a Return on Cost to

returns on the stock market or other investments would be misleading, spurious and

inappropriate. They are not comparable. The analysis is deceptive and improper on its

face. Return in cost is not sufficient information from which the TIF commission and the

Board can evaluate the financial feasibility of the development.

Capelin further testified that his analysis was based on his experience in Florida,

but that he used as a chief comparison the redevelopment of Stapleton Airport in Denver,

Colorado. He admitted, however, that the Stapleton development is one-third of the size

of the Redevelopment Plan in the instant case, and was developed starting in 2001.

Further, it was the redevelopment of an airport – that is, mostly vacant land – that sits

adjacent to an affluent Denver suburb. There is no comparison to projects in the City of

St. Louis, although Capelin did reference in his testimony an Express Scripts drug

shipping facility being developed in St. Louis County adjacent to Lambert International

Airport and the University of Missouri at St. Louis (which of course was not part of the

evidence considered by the Aldermen). The Stapleton Denver is an inapposite

40
 comparison on which to model Northside. Further, there is not sufficient information on

either Northside or Stapleton to evaluate the comparison.

Based on the foregoing, the Cost-Benefit analysis is not financially feasible

because it lacks “sufficient evidence,” has no foundation in substantive evidence – as

opposed to ballyhoo about “transformative” economics – and thus must be considered

arbitrary under RSMo. 99.810.1(5).

ATTORNEY’S FEES

This section presumes Plaintiffs and Intervenors Prevail

The other Plaintiffs and Intervenors Nelson and McIntosh have sought a declaratory

judgment. In the context of declaratory judgment cases Rule 87.09 and RSMo. 527.100 state,

respectively, (with the only difference in italics):

The court may make such award of costs as may be equitable and just.

The court may make such award of costs as may seem equitable and just.

In Goellner v. Goellner Printing, 226 S.W.3d 176, 179 (Mo.App. 2007) the court stated

the law interpreting that Rule and statute regarding attorney’s fees:

“[C]osts” do not automatically include attorney's fees. Washington

University v. Royal Crown Bottling Co. of St. Louis, 801 S.W.2d 458, 468-9
(Mo.App. 1990). In Bernheimer v. First National Bank of Kansas City, 225
S.W.2d 745 (Mo. 1949), the Court held that attorney's fees may be awarded in a
declaratory judgment action when there are special circumstances. This exception
is narrow, strictly applied, and does not apply every time two litigants maintain
inconsistent positions.

The trial court has discretion on this subject. Consolidated Public Water Supply Dist. v.

Kreuter, 929 S.W.2d 314, 316 (Mo.App. 1996).

In Goralnik v. United Fire and Cas. Co., 240 S.W.3d 203, 211 (Mo.App. 2007) the

court listed cases in which attorney’s fees were upheld and found a common thread to be

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“intentional misconduct directly damaged the party seeking attorneys' fees and resulted in

litigation expenses”. See Kelly v. Golden, 352 F.3d 344 (8th Cir. 2003); Wiles v. Capitol

Indemnity Corp., 204 F.Supp.2d 1207 (E.D.Mo. 2002); Allstate Insurance Company v. Estes,

118 F.Supp.2d 968 (E.D.Mo. 2000); Employers Mutual Casualty v. Tavernaro, 21 F.Supp.2d

1039 (E.D.Mo.1998); Goellner v. Goellner Printing, 226 S.W.3d 176 (Mo.App. 2007); Volk

Const. Co. v. Wilmescherr Drusch Roofing Co., 58 S.W.3d 897, 901 (Mo.App. 2001); Temple

Stephens Co. v. Westenhaver, 776 S.W.2d 438, 443 (Mo.App.1989).

The Goralnik court also cited, with some question, Grewell v. State Farm Mutual Auto.

Insurance Co., 162 S.W.3d 503 (Mo.App.2005), for the proposition that “special

circumstances” can arise in a variety of circumstances, including where a party's conduct is

“frivolous, without substantial legal grounds, reckless or punitive.” citing David Ranken, Jr.

Technical Institute v. Boykins, 816 S.W.2d 189, 193 (Mo. banc 1991) overruled on other

grounds, Alumax Foils, Inc. v. City of St. Louis, 939 S.W.2d 907, 911 (Mo. banc 1997)).

The question here is thus whether “special circumstances” apply to this case because of

intentional misconduct, or because the Defendants’ conduct was frivolous, without substantial

legal grounds, reckless or punitive.

Even if the findings are taken at face value, Defendants prepared and submitted them in

bad faith in the following ways:

 The conclusion of blight of the area as a whole is wholly inconsistent with

the ordinance’s granting of TIF to only Areas A and B.

 The conclusion of blight does not follow the statutory factors, and is based

on deceptive photos, unscientific methodology and false characterizations.

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 The submission of a letter showing “excitement” about financing the

project is so far from a detailed commitment as to be flimsy at best, and

not worth the paper it is written at worst.

 The Cost Benefit Analysis fails to follow generally accepted accounting

principles, and is not the sort on which a reasonable private investor would

rely, much less an Alderman. Further, the Cost Benefit Analysis is

deceptive because instead of showing a Return on Equity or a Return on

Investment, with a financing structure inclusive of a leverage ratio, it

shows a Return on Cost. A cost analysis is analytically meaningless, hides

the actual amount of investment by the McKee entities, and is not properly

comparable as a “return” because no reasonable investor would rely on it.

 Representing that eminent domain was not a part of the Redevelopment

Plan.

 Making misleading statements that churches and owner-occupied

residences would specifically not be subject to eminent domain. Ex. 29 at

21.

 Providing to the City materially misleading information about the

economic and financial feasibility of the project, Ex. M (Northside market

study, Dec. 2008).

 Making misleading statements that Pruitt Igoe was the “heart” of the

Redevelopment Plan. Exs. 4 and 6.

 Making misleading statements that this was a “Northside” Redevelopment

project, rather than a downtown development project. Ex. 28 (map).

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  The ballyhoo about “transformative economics” driving absorption and

growth in the Redevelopment Area is supported only by pure speculation

and is more Barnum than Burnham.

Intervenors Nelson and McIntosh suggest that the documents submitted by Northside

Regeneration in this case meet the standards of intentional misconduct. Whether Defendants’

actions reach the level of being a “scam” will perhaps be settled best by historians. From where

we sit in the midst of it, however, Defendants’ actions have been neither forthright nor

straightforward toward the people of the city of St. Louis

Also, Defendants’ misconduct has caused harm to Plaintiffs and Intervenors including

their loss of property value. The misconduct, particularly by Northside Regeneration, thus

forced Intervenors Nelson and McIntosh to challenge Defendants’ conduct, and so caused

litigation expense.

At a minimum the Northside documents are without substantial legal grounds and

reckless.

The nature of the TIF application by Defendants thus constitutes special circumstances so

as to make it “equitable and just” to award attorney’s fees.

As the parties discussed with the court at the conclusion of the trial, if the court approves

attorney’s fees for Intervenors the court should allow Plaintiff’s attorneys a reasonable time to

make fee applications.

PRAYER

WHEREFORE, Intervenors Nelson and McIntosh pray the court to declare Ordinances

68484 and 68485 invalid, to award Intervenors Nelson and McIntosh attorney’s fees and costs,

and for such other relief as the court finds to be just, meet and reasonable.

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 RESPECTFULLY SUBMITTED,

_______________________
Eric E. Vickers #31784
7800 Forsyth Blvd. Suite 700
St. Louis, Mo. 63105
(314) 420-8700
(314) 875-0447 fax

_______________________
W. Bevis Schock #32551
7777 Bonhomme Ave. Ste. 1300
St. Louis, Mo. 63105
(314) 726-2322
(314) 721-1698 fax

_________________________
James W. Schottel, Jr., #51285
906 Olive Ste. PH
St. Louis, Mo. 63101
(314) 421-0350
(314) 421-4060 fax

Attorneys for Intervenors

Elke McIntosh and Cheryl Nelson

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 Certificate of Service

I the undersigned counsel for plaintiffs Elke McIntosh and Cheryl Nelson hereby certify
that a copy of the foregoing was emailed and snail mailed this March 16, 2010 to:

D. B. Amon, Esq.
201 Washington Ave.
St. Louis, Mo. 63103
(314) 531-3368

Daniel J. Emerson, Esq.

Brent Dulle, Esq.
Assistant City Counselors
City Hall, Room 314
1200 Market Street
St. Louis, Mo. 63103
Fax: (314) 622-4956

Paul J. Puricelli, Esq.

7733 Forsyth Blvd. Suite 500
St. Louis, Mo. 63105
(314) 721-7011
(314) 721-8600 fax

_____________________
Eric E. Vickers

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