Funding A Project & Northside Development Plan Critique

There were several things on my plate this week.

1) I needed to investigate the TIF proposal from McKee to develop the Northside area. I feel like this investigation is worthwhile in that I can pull out what I think is successful and what I believe will fail, or has little basis for success.

2) I want to start to look at the TIF process in general, some cities have been extremely successful with it, (Chicago, Baltimore), while St. Louis from my first glance seems to use it as the only means of getting development done.

3) A presentation by an alumnus of NDSU, Nick Bigelow, made me start to think about the funding of large scale projects like mine. What is stopping the city from just incrementally funding the project? It seems as though civic bodies would be in a much better state if they either incrementally funded based on performance of the development rather than put all of the money up front and say 'well you have reached the requirement for TIF funding, Good luck with our money'.

4) What funding mechanisms exist beyond the TIF that allow for more civic control, and less risk to the taxpayer? Is there a European, slightly more social model for this type and scale of development.


So as you can tell I have spent most of my week dealing with an underlying issue-

How does a project like this get funded?

The TIF district is obviously the favored public private partnership funding mechanism in the US. It allows municipalities to forward fund projects using the assumed increase in property values after development.

It is important to know, and this I found out in my early research this week, that not all TIF's are created equal.

There are basically three ways that municipalities can fund TIF's

1) By bonds

Municipalities issue bonds to cover the costs of the improvements with the hope that as the project starts to succeed they can pay off these bonds and be clear of any debt. The risk here being that if the project doesnt make the expected amount of money, the bondholders won't get paid and the TIF will default. This is rare but does happen, and there are several cases of TIF's coming close to default. The chances of defaulting are much greater in difficult economies.

2) Pay as you go

Municipalities make the developers fund initial development costs, and as the project starts to show at least signs of viability the developer is reimbursed. Developers HATE this because the risk lies with the developer rather than the municipality.

3) Municipalities provide short term notes

In this method the municipality issues bonds to the developer to sell to the highest bidder. This displaces the risk for both the developer and the municipality. This is the method the city of Chicago uses in many of its projects. it is important to note that Chicago has used TIF very effectively, while retaining a lot of power as to how things are built- i.e. green roofs, etc. which I think is an important aspect of how that city runs TIFs.


European Models-

I researched a few funding mechanisms from the British Property Federation:

There are a few funding mechanisms that they use, explained below, I am skeptical as to their application in the US. Oddly in looking for a more progressive model to follow in Europe I found that many municipalities are looking to use a mechanism that is similar to the TIF called ADZ or an Accelerated Development Zones.

CIL- Community Infrastructure Levy- Basically taxes areas of affluence to fund areas that need redevelopment.

RIF- Regional Infrastructure Fund- Allows regions to forward fund projects through special tax districts as well as private funding.

BRS- Businesss Rate Supplements are essentially a tax on businesses and their revenues to fund redevelopment areas.


Notice they don't ever call it a tax...





I set out on my research of funding mechanisms to find other ways to fund projects, in particular residential projects, which cannot be funded directly through a TIF. I had a negative view of TIFs when I first started looking at them, but then realized that the area is practically a poster child for what a TIF district is supposed to be. It is already blighted, needs regeneration, and has failing infrastructure. But my problem with the development proposal set forth by the Northside Regeneration company is that the city would have little control as to what the design properties of the neighborhood would be, and even beyond that- it doesn't matter what the design looks like if the underlying social issues that are present aren't at least considered.

Northside TIF District Development Critique-

I have huge fundamental issues with this proposal. The part that I take most issue with is the phasing of the project. As it stands the first two phases of development, which the plan calls "employment centers" are the only phases with actual financial backing beyond the TIF district, which is to say they are the only areas that have been financially backed by a lending institution. The last two phases which are largely residential have no financial guarantee and the plan seems to have been formulated in the area to appease the TIF committee.

I have a few questions regarding the first two phases:

1) What makes the development of these new job centers viable? There is a wealth of commercial and retail space that remains vacant, even a large amount in the CBD which is not very far away.

2) Even if this space is viable due to tax incentives, is it actually a good thing for the city of St. Louis at this time? The way I see it is if I am an existing business and I move my business from the CBD to the new "employment hubs" the city is actually losing out.

I would be taking a business that is already paying property taxes in the city at the actual value of the land and instead allowing the business to go to these new areas and pay less property tax, all while adding vacancy in the CBD or wherever that business came from. It is essentially robbing peter to pay paul, only it is actually much worse for the city.

The only way i see this model working is if the business moving into the "employment hubs" is new to the area or is a startup business.

Which leads to the chicken and egg scenario of how development occurs- is it the jobs and retail commercial that comes first or the availability of a safe residential area that can provide those employment hubs and commercial retail developments with the rooftops they need for viability?

I would argue that the phasing of the project should not be focused on putting commercial development next to the freeways, but rather creating the infrastructure to support that commercial development, namely residential development. I am not advocating that the developer only focus on residential development, because that would breed the exact opposite of what he is proposing, a too much housing stock nothing to do scenario.


While I find issue with the phasing and the macro scale reasoning of this proposal, the individual details of the site development plan are very interesting. The transportation development section particularly intrigued me, but yet again there would need to be a population to support such a transportation system investment.

I also admire the developers desire to implement green streets and a smart grid into the new infrastructure. But I cant help but thinking when it comes to residential development, what could the community groups, churches, and other people that are already trying to improve the Northside do with the amount of money that is being put towards this project? Or even half of those funds?

What would happen some funds were used to train unemployed persons in the neighborhood to rehabilitate, or at least gut the houses so rehabbers could come in? This would provide a win win situation for the area, curbing unemployment as well as laying the groundwork for future population.