Judge rules sewer bills not a liability for St. Louis property

ST. LOUIS — A judge ruled Wednesday in favor of a north St. nonprofit. Louis, seeking to remove sewer bills from a property purchased at a tax sale.

A ruling in favor of the Tabernacle Community Development Corporation could open the door for investors across the city to purchase properties from the city’s land bank or at a tax sale unencumbered by outstanding sewer bills, and help return some of the approximately 25,000 vacant, abandoned properties in St. Louis — about 10,000 of which are owned by the city agency — for production use.

“I think it’s the right decision,” the Rev. Andre Alexander, president of the Tabernacle, said outside the courtroom Wednesday. I think it will be beneficial for our entire city.

For decades, city and state lawmakers have struggled to deal with the properties left behind as half a million people moved to the suburbs, passing laws to try to clear the way for redevelopment.

A tax sale in the city is intended to clear the title of a property of any unpaid loans or tax liabilities.

But when a 2021 Missouri Court of Appeals ruling treated unpaid sewer bills as unpaid taxes, Metropolitan St. District. Louis Sewer District has taken a more aggressive approach to tax collection and has stopped allowing tax sellers to cover sewer bills that are placed as liens on real estate.

MSD bills sometimes run into the thousands in homes and businesses whose owners left many years earlier. In distressed neighborhoods, this can mean bills that are higher than the property’s value. The Post-Dispatch uncovered numerous cases where MSD bills exceeded the value of the property by thousands of dollars.

In 2022, free real estate advocates got the state Legislature to change the law to try to clarify that MSD liens would expire when the city sold the land for unpaid taxes.

In October, Tabernacle sued the sewer district over property north of Fairground Park that the nonprofit purchased at a tax sale in St. Louis in 2022

According to Tabernacle representatives, MSD’s bills for the property were three times its value.

MSD, however, argued that the new state law conflicted with the statute, governed by the Missouri Constitution, and was therefore invalid.

The district says it’s a matter of fairness: By allowing sewer bills to be paid, as with other taxes and mortgages, it was asking other customers to pay those bills.

“All of our customers, including those who don’t live in the city, would essentially have to subsidize (tax) sales if we were to write off or reduce these balances,” MSD Chief Financial Officer Marion Gee said earlier this year.

In court Wednesday, Tabernacle’s attorney, Michael Hickey of Lewis Rice, called MSD’s argument that it is exempt from state law “an extreme position.” The state constitution “did not make MSD an entity insulated from any further state regulation.”

Hickey said leaving their arguments in place would “chill” investment in tax sale properties and abandoned properties in St. Louis.

Jonathan Beck, representing MSD, responded that the sewer district has surprisingly broad powers under the state constitution.

“The public policy arguments that Mr. Hickey made, while persuasive and pertinent, are irrelevant,” Beck told the judge.

But Judge Jason Sengheiser was ready to rule immediately and granted Tabernacle’s motion for summary judgment, saying only that he saw no conflict with state statute and the Constitution.

MSD’s attorney said the sewer district has not yet decided whether it will appeal.

Peter Hoffman, a vacant real estate attorney with the nonprofit Legal Services of Eastern Missouri, watched Wednesday’s argument. Organizations like Tabernacle already face many obstacles in purchasing and remediating abandoned properties in distressed neighborhoods, he said.

“At least in this case,” Hoffman said, “it’s one less barrier.”