Why Not Sell City-Owned Vacant Property?

I appeared on the McGraw Milhaven show on KTRS AM this morning, discussing my research on the city of Saint Louis’ Land Reutilization Authority (LRA). The LRA owns more than 9,000 parcels, and its purpose, according to state statute, is to get that vacant land back into private hands so that it can be developed into new homes and businesses. Yet the city’s largest landholder isn’t selling much of its property. According to my research, the LRA has rejected offers to purchase more than 2,250 different properties from 2003 through 2010.

KMOV reporter Craig Cheatham has also looked into this issue and you can watch his investigation tonight at 10 p.m.

Ultimately, this research leads to the question of whether holding property is really the best development policy for Saint Louis. It isn’t the case that all of the LRA’s rejections involve people who try to buy properties without sufficient funds — only about a quarter of the LRA’s rejections cite “insufficient financial resources” as the reason for rejection. Instead, the most frequent reason for rejection is that the property in question is “being held for future development.” Yet, in its rejection letters to would-be buyers, and in its minutes, the LRA does not state what that future development is or when it will take place.

From 2003 through 2010, the LRA has rejected roughly one out of every two offers it has considered. This doesn’t mean that the agency has accepted the other offers. In fact, the LRA has accepted fewer than 25 percent of the offers it has considered, meaning that the agency rejects two offers for every offer it accepts. The rest are counter-offers, which frequently do not result in a sale.

So, why not let more people who are trying to buy LRA property purchase it?

Moving properties off of the LRA’s rolls will, at minimum, mean that the city will spend less in taxpayer funds maintaining these properties, and can collect more property tax revenue. Furthermore, rejecting an offer today in favor of a hoped-for offer in the future entails taking on a great deal of risk. It is likely that the hoped-for development will take years, if not decades, to materialize … or may never come about at all.

Otis Williams, deputy director of development at the Saint Louis Development Corporation (which oversees the LRA), made a revealing comment when talking to Milhaven today (after my appearance). Milhaven asked what was so bad about selling LRA property, even if it isn’t developed. After all, LRA properties are vacant. In the case of a privately held vacant property, at least the city would no longer be paying to maintain it (cutting the grass on these properties alone costs about $1 million per year). Williams responded:

When we sell it, it is a real estate transaction, at that point, and they own it. Unless they don’t pay the taxes, or we pursue them in court through right of reentry … once you sell it, you’ve pretty much lost control.

If the city were to focus on encouraging all development, not just development that matched its overarching plan, there wouldn’t be concern about losing control of a particular property. However, Williams’ statement makes sense in light of the fact that the city focuses on encouraging only its notion of the right kinds of development.

Does this top-down development approach work? It doesn’t seem to. The LRA owns more property today than it has in the past, and is still trying to control exactly who can buy property and what they can do with it. Perhaps it is time to take a different approach.