With the Right Strategy, STL’s New Developer in Chief Could Move City Forward Quickly

The Post-Dispatch reports that Barbara Geisman is stepping down from her post as Saint Louis’ deputy mayor for development. Geisman has held that post since Mayor Francis Slay appointed her in 2001.

Already, people are speculating about who will fill the vacant spot, and with good reason. The position of deputy mayor for development is a powerful role. Whoever fills it will have significant input on how the city encourages and attempts to attract growth, and that person will help oversee the operations of the Land Reutilization Authority (LRA). With more than 9,000 properties, the LRA is the city’s largest landowner.

I look forward to seeing who will end up filling Geisman’s post. Saint Louis has the opportunity to take a new, more successful approach to promoting economic development. As Thomas Duda has pointed out on this blog, the city has the unfortunate habit of subsidizing, and re-subsidizing the creation of vacant commercial and residential space that no one wants. Those attempts to encourage new development within city boundaries are an extremely expensive betting game that Saint Louis frequently loses.

I hope that the new deputy mayor for development will take a more organic approach to development, by making it easier for private individuals to develop real estate in the city (although not with tax dollars). Revamping the administration of the LRA is one way that the city could promote economic development at little to no cost.

Once per month, the LRA meets to accept, reject, or defer offers from individuals who wish to purchase LRA property. So far during 2010, there have been more than 400 offers to purchase LRA property. Some of these properties have remained vacant for decades, yet only about 140 properties were sold. The rest of the offers were either countered (the LRA frequently asks for higher offers), deferred (the LRA may delay its decision), or rejected. I should note that counteroffers and deferrals can operate effectively as a rejection — the potential purchaser may not have enough money to meet the agency’s counteroffer, or the deferral may be indefinite.

The chart below shows roughly the result of all of the offers that the LRA received this year from people wanting to purchase property. As you can see, a minority of offers have been accepted this year.

I want to focus only on the number of times that the LRA has rejected offers to buy its property. This year, offers to purchase roughly 80 different LRA properties were rejected, some several times.

For example, we can look to 2925 Union Blvd., a property that three different people have attempted to purchase in recent months — but every offer was rejected. Two of those people bid the LRA’s asking price of $2,000 and still were rejected. The third bid $1,500, a price that the LRA could choose to accept, but didn’t. The reason for these rejections — where people are asking to pay to purchase vacant property that costs the city money to maintain — is unclear. Furthermore, by rejecting these offers, the LRA also rejected revenues of at least $100,000 in property sales revenue. Had the properties been sold, the city would receive property tax revenue from the new owners, and the city would no longer have to pay to maintain the properties.

One reason the LRA may reject offers today is that the agency hopes it can attract a developer to remake the entire area if it first amasses a large amount of property. Instead of waiting for a hoped-for developer of the future who may have a chance at redeveloping entire blocks of the city (even if the hypothetical developer shows up, the proposed development will likely cost the city millions and perhaps never even materialize), a better strategy for Saint Louis would be to let private individuals who want to purchase LRA property do so.

The city actually tried the strategy of freeing up LRA property in 1989, by reducing the price of side lots (smaller than 40 feet wide) to a maximum of $135. The pilot side lot program was limited to just a 16-block area within the city. During a two-month period, six side lots were purchased. Throughout the rest of the city, which has an area of more than 60 square miles and encompasses thousands of city blocks, only 17 side lots were sold during the same time period. The LRA executive director at the time, Michelle Duffe, called these numbers inconclusive. I’d say they were evidence of a small-scale success.

The new deputy mayor for development should free up LRA property to potential buyers. City revenues would increase, and we’d see more local development. If he or she wants to take a small but significant step forward, one way would be to push the LRA to implement a side lot program similar to the one tried in 1989. The city has everything to gain, and little to lose.