Highway 40 reconstruction will reduce property values
"Local authorities appear to believe the interference with the traffic pattern will cause a short-term loss and a very positive long-term potential gain. However, the Federal Highway Administration concluded in a recent study that such projects result in "noise, loss of access, loss of parking, diversion of traffic, odors and emissions, loss of business profits and good will, interim construction loss, loss of use and loss of visibility."
Owners of real property in the east-west corridor leading into the core city of St. Louis and the core city itself face a double "whammy" in 2007. First, on January 1, the two-year assessment tax cycle begins in Missouri. Then, in the spring of this year massive $535 millions rebuilding starts on the primary artery into the core city from the west. This reconstruction project on Highway 40 (also known as Interstate 64) is scheduled to close 10-and-a-half miles of this major artery into the city for at least three years. Past experience with highway projects has shown that forecasted completion dates are most often way too optimistic.
With assessors already in the process of reevaluating property for tax purposes and a major reconstruction project beginning in spring, assessors face the task projecting the impact this reconstruction project will have on property values along the Highway 40 corridor and in the core city. Office buildings, service businesses, light manufacturing and residences will suffer from dramatically decreased access, traffic jams, indirect routes extending commuting time and loss of traffic for retail and service outlets.
And all this happens just as the core area of St. Louis is beginning to feel the impact of the dramatic revitalization that has been ongoing over the last several years. One need only look at the new baseball stadium, the approved Ballpark Village with its shops and residences, the dynamic loft developments of shell buildings in the near downtown area and the expansion of Barnes Hospital in the West portion of the city. The revitalization has resulted in rising property values, representing good news for owners and investors. The good news turns bad for property values as the area contemplates the long reconstruction process.
Local authorities appear to believe the interference with the traffic pattern will cause a short-term loss and a very positive long-term potential gain. However, the Federal Highway Administration concluded in a recent study that such projects result in "noise, loss of access, loss of parking, diversion of traffic, odors and emissions, loss of business profits and good will, interim construction loss, loss of use and loss of visibility."
The negative aspects brought about by the reconstruction may well force owners of residential and commercial properties to offer rent abatements in order to hold onto tenants along the Highway 40 corridor and in the core city. Many commercial and residential tenants may just move out because of traffic snarls, noise and the mess of construction. Then, too, commercial tenants may just not be able to tolerate the diminished traffic and attendant loss of revenue and profit. All of this disruption means lower market values, which must result in lower property taxes if taxpayers are to be fairly taxed during the reconstruction period.
Owners should be alert and prepared to react to the new 2007 assessments with an appropriate tax appeal challenging the assessed valuation of a property that may be affected by the reconstruction project. The Missouri Highways and Transportation Commission itself has recognized the decline in business and in occupancy that will result from the project. Comments by public officials demonstrate that various other government agencies know the project will prove bad for business on a short-term basis. Just how bad is an open question. Therefore, taxpayers with property in the Highway 40 area and in the core city must carefully review their assessments to ensure that the assessors have taken into account in their 2007-2008 valuations the negative impact of the reconstruction.
The due date for filling appeals from the assessments is the third Monday in June for St. Louis County and the second Monday in May for St. Louis. Two separate jurisdictions assess properties in the 40 corridor and the core city —- St. Louis County and the city of St. Louis. Taxpayers may find both take the position that the long term effect of a new highway will be beneficial to property values, thus, no interim dip in assessed values are appropriate. The contrary argument, and the one that makes the most sense, holds that in the next two years the market value of most properties in the reconstruction area and the core city will decline. To state it another way, the income stream of commercial properties will not grow until the highway projects is completed.
Since reassessment comes in the odd numbered year of the two-year cycle, the assessors have another shot at determining value as of January 1, 2009. The market at that time will tell the world whether property values have held constant, grown or declined during the reconstruction, which will still be in progress at the end of 2008. Until that time, taxpayers should be on guard and proactive in seeking proper reduction of their tax burden.