UNIVERSITY CITY, MO — The City Council Monday night unanimously approved a $70.5 million taxpayer-funded development in the city's poorest ward that is expected to displace more than 60 predominantly African-American families, a historic Korean Catholic church and dozens of small, minority-owned businesses .

But while officials have had more than a year to assuage residents' concerns about bulldozing the region's (unofficial) Chinatown , obfuscation and miscalculation on the part of the city have ensured more than a few skeptics remain.

"I think there have been plenty of public meetings," said Mayor Terry Crow, adding that after more than a year, it was time to stop talking and take the vote.

"This agreement makes no sense at all," Harris told Patch. "The original plan actually made sense to me. I didn't agree with it, but it made sense. This [new agreement] is just — what's the old fashioned term? — smoke and mirrors."

Local lawyer David Harris is one of them. After another citizen watchdog, Greg Pace, discovered the $27 million error in the city's financial calculations earlier this year, Harris created a corrected version of the city's numbers in his spare time. His detailed list of questions and concerns about the renegotiated development agreement runs for pages.

"The commitments that I make to you in regards to responding to your questions I must be willing to make those same commitments to all roughly 35,000 of our residents," Rose wrote to Harris. "As such, it would not be practical for me to commit to responding to ALL of your questions. That said, I believe it is important for me to respond to SOME of the questions of any resident that takes time out of their day to study a proposed policy document and draft questions; even though I am not required to do so."

He's repeatedly asked the city for answers, both publicly and privately, but says he's seen no public discussion from elected officials about the details of the agreement. All of that's taken place behind closed doors in executive session. In an email shared with Patch, City Manager Gregory Rose refused to directly answer any of Harris' questions.

Patch reached out to Rose, as well as Mayor Crow, to give them the opportunity to respond to similar questions before this story was published. Rose encouraged Patch to re-watch last month's press conference and — as with Harris — promised to answer some of our questions Monday night. (He did not.) Crow never responded.

According to officials, the retail shopping center will offer the city protection against other municipalities dropping out of the county's shared sales tax pool, create 150 to 250 livable-wage jobs and provide money to reinvest in the city's poorest communities.

"[The city] doesn't account for the jobs being lost," Harris said. "And there is absolutely no requirement that any of those [new] jobs go to anyone who lives in U. City."

But the city's promises have shifted significantly over the past year. For example, minority contracting and local hiring requirements, some of the few community demands incorporated into the redevelopment agreement, seem to be almost entirely optional in the final text. According to the agreement, Novus Development must simply request — but not require — businesses give University City residents priority in the hiring process. And the development's largest tenant — likely Costco, but still technically a secret — is exempt from minority contracting requirements.

While Rose originally pledged $15 million for the city's third ward almost immediately if the deal passed, now the majority of that money will come in $200,000 chunks over the next 20 years, depending on future revenues. The developer will backstop slightly less than half that amount should revenues fall short.

Harris said it isn't clear, even now, that the money slated for community improvement projects will ever materialize. According to his analysis, a shortfall is likely for at least the first several years. He's also concerned that some of the revenue might come from sources that are not legally available to the city, further exacerbating the shortfall or forcing the city to make tough budget decisions elsewhere.

"There could be more tax revenue to the City if the TIF subsidy was not so large," Harris wrote to officials. "For more than a year, you had Jonathan Ferry's analysis showing a smaller subsidy could still result in a large rate of return for Novus. ... Why are you willing to provide such a large subsidy and allow the rate of return? Why was the TIF Commission not provided a copy of the rate of return analysis? Do you think the Commission would have made a different decision on the subsidy if it had the rate of return information?"

Harris is referring to a long secret financial analysis by the St. Louis Development Corporation's Jonathan Ferry, an outside expert hired by the city. The city finally released it late last month, along with a half-dozen other financial documents that weren't attributed to Ferry but that metadata shows he created.

According to a memorandum from Ferry to city officials dated April 18 of this year, Ferry recommended a taxpayer-subsidized incentive for the development between $51.6 million and $65.8 million — significantly less than the $70.5 million in public money promised to Novus in the final agreement.

Additionally, Ferry writes that he was tasked with reevaluating the project last month after he said some recent changes could have a "material impact" on his original analysis, including a change in the project's junior anchor. But Novus declined to provide him with the information necessary to update his figures.

Novus was sued in 2011 for misrepresenting the finances of a similar proposed development in Sunset Hills. In that case, a judge stuck down the deal after ruling the city's cost-benefit analysis did not contain sufficient data from the developer to evaluate whether the project was financially viable.

Rose said at a press conference May 20 that the city is confident in its own back-of-the envelope calculations based on "averages" in lieu of those of the professional they hired. But, notably, that confidence does not carry over into the text of the agreement.

"The City and its consultants have generated various financial analyses concerning the performance of the RPA 1 Redevelopment Project," according to section 8.1(f). "These analyses involved many variables and assumptions and, accordingly, the City cannot and will not make any representations such analyses were or are true or accurate."

With a clause like that included in the agreement, Harris said it's hard to trust the city, especially with such a massive mistake already on its record.

"The city doesn't care about these analyses," he said. "[The clause] emphasizes that the city doesn't care what these analyses say. They just don't care. As long as they're close enough, they just don't care."



Indeed, according to an email from Ferry to Rose and other city officials dated May 29, 2018, the project's numbers never added up. In the email, Ferry seemed to indicate he believed the city was being overly-generous with public money and said the development was unlikely to support $15 million of reinvestment into the third ward from the get-go.

For example, to get a 9.5 percent 2-year rate of return on their roughly $61 million investment, Novus assumed an incentive of approximately $75.9 million, according to Ferry.

"In contrast, I estimate that the max that the incentive will support is only $73.3 million," he writes. "([Novus president Jonathan Browne] actually has the incentive generating $83.4 million and then him funding RPAs 2 & 3 $7.5 million to get to the net of $75.9 million. I'm not sure how he got to these numbers, but in my projections, I do not show the TIF generating enough revenue to support a note to provide up front funding to RPA 2 & 3 at the amount of incentive requested)."

Ferry's estimates show a slightly higher level of private investment and slightly lower 2-year rate of return, around 9.05 percent.

"Even still, at 9.05%, at the highest incentive amount which I have calculated, [Browne's] 10 year [Internal Rate of Return] is still above 10.9%, which far exceeds the norm for returns within the market," Ferry says.

In addition, Ferry indicated that Novus may have fudged part of its profits to appear as costs in order to boost its bottom line at the expense of taxpayers. "The result is a lower net investment amount for the developer, which results in a higher rate of return," he says.



Ferry strongly encouraged the city to use this information to negotiate a better deal, but that doesn't appear to have happened. When asked to name something Novus gave up during negotiations, Rose was unable to say.

Interestingly, none of the recently-released emails, memos or financial documents seem to show any information proprietary to Novus, which was the reason Rose said they couldn't be released almost a year ago. A spreadsheet titled "Financial Analysis Inputs" has cells with labels suggesting such information, but their values are all zero. The document was created on April 4, 2018, but the last edits were made by the city's new planning and development director, Clifford Cross, on May 17, 2019.

Harris believes the city is betting big on a long-term payoff and is willing to make short-term sacrifices to get there. But he doesn't share his elected leaders' optimism that the changing retail landscape will support the development over the coming decades.

Luckily for Novus, should the numbers not add up, the agreement ensures the developer has a unilateral right to walk away without penalty. It's not clear how well University City, its residents and business owners would fare should that happen.

Read Jonathan Ferry's email:





Read the Ferry memo:





Read the full redevelopment agreement:

This story has been updated with new information.