Is Crestwood Screwed?

Recently, the Post-Dispatch and Don Corrigan's community paper, the Webster-Kirkwood Times, and the less well-regarded Call Newspapers of South County have spent a fair amount of ink belaboring the point that the City of Crestwood MO seems to be in the throes of a severe fiscal crisis.

But perhaps I'm being too sensationalistic. What's happening, according to the June 30th P-D, the July 6th Call and today's Political Fix (the Jo Mannies blog - although Phil Sutin contributed this item), Crestwood is considering "defeasing" a 2002 issue of almost $10 million in bonds intended to finance the expansion and remodeling of its City Hall and Police Department complex. (About a year ago, they dropped an earlier plan to build a completely new Police building, because of dramatic cost overruns in the design phase.)

This topic will be discussed at tomorrow's Crestwood Board of Aldermen meeting. This follows closely on the heels of the Board's unanimous June 28 decision to cancel a temporary lease planned with Crestwood Plaza for the City to occupy space in the mall during the remodeling of the government center. They did this because over 2,000 signatures were gathered to force a referendum on the lease proposal.

Jim Murphy, the former Republican state representative from Crestwood who was a harsh critic of the Busch Stadium public financing proposal, was among the leaders of that petition drive, under the auspices of a group called Crestwood Citizens For Fiscal Responsibility.

Defeasance is not necessarily a bad thing; it pretty much means paying off bonds early. In this case, however, it's being done because the project is apparently being scrapped, and will cost Crestwood several hundred thousand dollars in fees and charges to, among others, their financial advisor, WM Financial Strategies of Creve Coeur.

The lowest bid on the renovation project was about $1 million over the amount of funds available to complete the project. So it seems likely the project will be canceled.

What's happening in Crestwood is a bit surprising, given that it certainly is not an impoverished community. According to 2000 US Census data, Crestwood has:

median household income of $54,185

median housing value of $130,800

unemployment rate 2.8%

This doesn't seem like a prime candidate for fiscal crisis. However, Crestwood has historically provided a lot of expensive municipal services, including:

Police Department

Fire Department (does not serve the far eastern part of the city, annexed in the 1990s and located in the Affton Fire Protection District)

Parks and Recreation Department including the historic 1808 Federal style Thomas Sappington House, a large Aquatic Center located in 85 acre Whitecliff Park, several smaller parks, and its own Animal Control division.

Solid Waste pickup service including a pretty affordable Curbside Recycling program.

For a city of less than 12,000 residents, that's very extensive services. They don't run a library, because they're part of St. Louis County Library district, which has a branch nearby in Oakland. They also have four wards, with eight aldermen total. That suggests each alderman represents about 1,500 people.

So, how is this financed?

Traditionally, by sales taxes. And therein lies the rub.

Most of Crestwood (except for the mentioned late 1990s annexation area east of Grant Road), is a "point-of-sale" city, which means sales tax revenues collected there (through the 1.00% St. Louis County sales tax), stay there. The annexation area is a "pool" city, which means it gets a share of St. Louis County-wide sales tax revenues, based on population.

Also, Crestwood levies several additional sales tax rates: the "local option" for general revenue (0.25%); fire tax (0.25%); parks and storm water (0.50%); and capital improvements (another 0.50%). As a result, with the state and other regional sales taxes added in, the total sales tax rate charged in Crestwood is 7.575%, tied with several other retail-heavy towns for the highest rate in St. Louis County. About 54% of Crestwood's general revenues come from sales tax. Crestwood also levies a relatively small $0.25 per $100 assessed valuation real estate tax on residential, commercial and personal property.

What's happened in the past five years or so is that Crestwood has continued with their traditional ways of getting revenue, but thost revenue sources have started to decline. Crestwood Plaza, among the best malls in town through the early 1990s (remember "The Ultra Mall"?), known now as Westfield Crestwood, has lost a number of prime tenants over the past two years like California Pizza Kitchen, Banana Republic and B. Dalton. The recent mergers and acquisitions involving Sears and Famous-Barr, two of its three anchors, raise further concerns.

(I would note that my grandmother years ago worked in the cafeteria at the Crestwood Stix, Baer & Fuller, retiring about the time it was bought out by Dillard's in the mid-1980s). Further, the AMC Crestwood 10 cinema complex in the mall has an uncertain future given the recent merger of AMC with Lowes cinemas.

Outside the mall, the surrounding strip centers have suffered. A former Service Merchandise store less than one mile west of the mall still sits vacant. Likewise, about 1 1/2 miles east, near the border with Webster Groves, Crestwood Square strip mall is mostly vacant, with a sporting goods store and an office supply store having vacated a couple years ago. And, most ominously, the former Circuit City directly across from the mall is now partly occupied by Aldi, the deep-discount grocery chain.

While a new Kohl's department store was built in 2003, it was a controversial project, because it required demolishing the high-rise Crestwood Office Center, a drive-thru bank branch at the base of the office tower, and a former Schnucks grocery store on Sappington Road; as well as the relocation of the private Crestwood Swim Club. This required the use of Tax Increment Financing, which means the City of Crestwood is sacrificing most of its potential sales tax revenues from the project.

Overall, the Crestwood saga suggests that the typical suburban development patterns and heavy reliance by municipal governments on sales taxes, are unsustainable. Crestwood now needs to seriously consider what its future will be. Will the 1960s ranch houses that dominate the landscape really continue to be marketable in, say, 20 years? What will happen to the mall if Famous-Barr / Macy's, Sears / K-Mart, and AMC / Lowes abandon it, like some of the smaller chains already have? Likewise, what about the proposed mega-development on the site of the Sunset Manor subdivision (and Bob Evans) in Sunset Hills at I-44 and Lindbergh. Karl Bissinger's chocolates, one of the few places that still is a draw (for me, anyway) at Crestwood, has signed on for a larger operation there. A large cinemaplex is also planned there. Will that kill any potential for Crestwood retail revival?

Perhaps Crestwood should consider remaking the mall into something reflecting New Urbanism, which seems to be getting popular in St. Charles and Richmond Heights. It's already well-served by public transit (buses, anyway).

In the immediate future, maybe service cuts will be necessary - i.e., making the Sappington House and the Animal Shelter independent non-profits, or convincing St. Louis County to take them over. And contracting with St. Louis County for police services, and/or merging the fire department with Kirkwood, Webster Groves, Affton FPD, or Mehlville FPD, should be seriously considered. The City of Crestwood can regain its financial footing, but only by making tough choices.