St. Louis should be leery of eminent domain as a solution to downtown’s ‘doom loop’
The City of St. Louis is seizing ownership of the downtown Railway Exchange Building away from its current private owners. The iconic building still evokes nostalgic holiday memories of its once-grand Famous-Barr flagship store’s Christmas decorations. The store was reminiscent of A Christmas Story, where Ralphie was mesmerized by the Higbee’s department store’s hypnotic Red Ryder window display.
Built in 1914, the Railway Exchange Building is a colossus. It fills an entire city block, rises 21 stories, and boasts over a million square feet of interior space. It reportedly remains the second-largest building in all of Missouri. Famous-Barr was eventually acquired by and rebranded as a Macy’s department store, and like its sister stores in other urban centers, it finally succumbed to economic trends. Ten years ago, it shuttered. By comparison, Cleveland’s Higbee’s became a Dillard’s. Unlike Higbee’s, which is now a casino, the once-proud home of Famous-Barr has remained vacant.
Nearly a year ago, a Wall Street Journal feature story declared that downtown St. Louis was living a “Real Estate Nightmare” and warned other cities, like Chicago and San Francisco, to avoid the same fate. The story’s centerpiece was the Railway Exchange Building, “a very dangerous place,” which “sits empty, with many of its windows boarded up,” inhabited by squatters and pillaged by copper thieves. Downtown St. Louis, the story lamented, was “trapped” in an urban, downward-spiraling “doom loop” of “deserted sidewalks sprinkled with broken glass….”
A year later, things have only gotten worse. Civic leaders have decided to attack this economic cancer with a typically unoriginal, tried-and-untrue operation, reliant upon eminent domain therapy. The City’s plan goes like this. Offer the property owner the lowest-possible amount to purchase the “blighted” property. When the property owner rejects the offer as economically unviable, simply take the property by eminent domain, using the prior offer as a basis of value, and then sell the property to the highest bidder willing to develop and use the property as dictated by the City.
Sticking to this plan, the City had the property appraised, which derived the market value of the iconic Railway Exchange Building property at $5.3 million. The City offered to purchase the property at that amount. The owner, who had purchased the property in 2017 for $20 million (plus another $30 million of debt for initial renovations and repairs), not unexpectedly rejected the City’s offer.
The owner argued the property was worth at least twice the City’s offer, citing a recent $18 million offer from a developer to purchase the property (the offer was contingent upon the City subsidizing a portion of the purchase price with federal pandemic funds). Preferring to set its own price, the City went to court to take the property through eminent domain. Promptly granting the City’s petition, a panel of three court-appointed real estate commissioners determined that the City should pay $4.75 million for the Railway Exchange Building and another $2.5 million for the adjacent property and parking garage the City also wanted. The lawsuit continues.
By definition, eminent domain is a government-coerced sale of property where the property’s market value is engineered using a set of artificially imposed but unreal assumptions. The City’s plan is another example of government taking property from private-owner A and giving it to private-owner B (to the detriment of A and the profit of B and city government). This just isn’t the kind of “public use” contemplated by the Framers of the Constitution and authors of the Bill of Rights when they wrote, in the Fifth Amendment, that government may only take private property for “public use” upon payment of “just compensation” to the property owner.
Compensating a property owner by paying him slightly over one-third of what the owner himself paid for the property eight years ago will unlikely turn out to be “just compensation.” Moreover, by suing the landowner, the government also condemns the unlucky owner to months, if not years, of litigation with its attendant attorneys’ fees and appraisal and other litigation costs and expenses.
But what’s the harm? The Railway Exchange Building is an awful mess, and it’s possible the City’s plan may actually result in cleaning it up and putting it to productive use. It may even succeed in restoring some of the building’s historic grandeur. But at what cost and risk?
Sadly, St. Louisans know all too well how the government has abused its power of eminent domain to devastating effect. St. Louis is still haunted by the ghost of Pruitt-Igoe – the City’s infamous urban-renewal catastrophe. And, as adeptly explained by Dr. Terry Jones in his classic book, Fragmented by Design, decades of insidious government land-use practices reshaped and restructured St. Louis into a racially segregated, politically fractured city-county region.
An illustrative example is Creve Coeur’s targeted use of eminent domain in 1956 against an African American physician, Dr. H. Phillip Venable, and his wife, Katie. The Venables were forced to move out of their middle-class African American neighborhood in Richmond Heights when Highway 40 was constructed through it. Dr. Venable, who served as the chief of the Ophthalmology Department at Homer G. Phillips Hospital, purchased two one-acre lots in a newly planned upscale neighborhood in Creve Coeur and began building their home. But when City officials discovered the Venables were moving in, officials and neighborhood residents offered to buy them out.
When the Venables refused the offer, the City initiated eminent domain proceedings to turn the Venables’ home and land into a city park. The City won the legal battle and got a new park complete with its own clubhouse—the Venables’ home. At the dedication ceremony, Mayor Beirne stated, “My continual goal is effective, sound zoning practices to maintain an extremely desirable community with preservation of property values…..” In 2019, the City officially apologized for what it had done to the Venables and rededicated the park in their name.
St. Louis’ present scheme is not unlike what led to the infamous Kelo v. New London U.S. Supreme Court decision. The City of New London, Connecticut, condemned and razed an entire residential neighborhood, including Susette Kelo’s modest home, to redevelop the land into hotel and restaurant properties to entice the Pfizer pharmaceutical corporation to build a major new research and office complex nearby. New London took private homes, evicted their owners (even charging Kelo and her neighbors back-rent for temporarily remaining in their homes), and repurposed the land to transfer it to a new private owner.
The City argued it was putting the land to better, more-tax-revenue-producing use for the benefit of the community. New London won the case—which means that St. Louis can pull off the same scheme. Although Missouri tightened its eminent domain laws in the wake of Kelo, those reforms don’t stop governments from taking property for economic development where the City enacts an ordinance finding the specific property is blighted.
Like the Pruitt-Igoe urban renewal plan, New London’s economic revitalization scheme was an abject and total failure. Pfizer pulled out, neither the pharmaceutical plant nor the supporting commercial properties were ever built, and the land upon which Susette Kelo’s obliterated neighborhood stood still lies fallow two decades later, home only to feral cats.
St. Louis City officials are as fixated on eminent domain as Ralphie was on a Red Ryder Daisy Bolt-Action Carbine Air Rifle. We can hope that the former homes of Famous-Barr and Susette Kelo won’t share the same fate.
