ST. LOUIS -- For Mayor Vincent Schoemehl Jr., the choice was simple when he came to office a decade ago: Rebuild downtown into a revenue-making center or govern a dying city.

"The tough decision was to invest versus conserve, and we made the decision to invest," the third-term mayor said during a 90-minute interview. "We took some major risks. If we hadn't, I'd probably have been a one-term mayor."

But after 10 years, the city budget has yet to show a major return from the $1.6 billion of private and public money invested to modernize the St. Louis skyline.

Critics say new revenues have been elusive because the city granted too much in tax breaks that will not begin to phase out until late 1996, when St. Louis expects to gain about $2 million a year in new tax revenues.

"Virtually nothing was built in the central part of the city without full tax abatements," said Charles Leven, a professor at the Public Policy Research Centers of the University of Missouri at St. Louis. "I think they gave away too much."

The mayor disagrees, saying the real payback will come in the 1990s. "I think the city has given what is necessary to drive the development," he said.

J. Christopher Grace, executive director of the St. Louis Development Corp., added, "There's no city in the country that is making the kinds of investments for the '90s that we are."

More recently, that investment has included the $265 million bond-financed expansion of the city's Cervantes Convenction Center. The expansion includes a 70,000-seat domed stadium -- a plan many cities are undertaking.

Next year, the city hopes to begin a $1.5 billion revenue bond expansion of Lambert-St. Louis International Airport. Meanwhile, construction of a federally funded light rail system into downtown is already under way.

Wall Street analysts, economists, and city officials say downtown redevelopment began in the 1970s as part of an effort to change the St. Louis economy to service oriented from industrial oriented.

"Although substantial private and public investment in the city's downtown has arrested the previous rapid decline of the city's economic base," Moody's Investors Service noted in an April report, "broad gains have yet to be realized."

Mayor Schoemehl said, however, that St. Louis is already seeing the impact of downtown redevelopment in the budget, as taxes from the central business district have increasingly accounted for a larger share of revenues.

"In 1980, about 28% of our general fund came from downtown [taxes]. Now it's about 40%," the mayor said. "By the end of the century, downtown will finance about 60% of our budget.'"

Perhaps unlike any other major city, St. Louis depends on property taxes for only about 8% of its annual budget. The rest of the funding comes from economically sensitive sources like the city earnings tax, which was implemented in the 1950s.

"Revenue is our biggest issue," said St. Louis Comptroller Virvus Jones. "I think we need more money."

In recent years, St. Louis has seen revenues shrink about 4% a year. Coupled with voters who have refused to approve tax increases, the city has been forced to cut hundreds from its payroll and find other cost-saving measures.

"Our budgets have gotten smaller, but they have been balanced for nine years," said JoAnne LaSala, the city's budget director, "I think the rating agencies believe we can manage well."

Wall Street analysts agree, but say the immediate outlook is that St. Louis will have less less revenue.

"They underwent tremendous negative economic changes," said Ann Z. Lowenthal, vice president and manager of the Plain States ratings for Moody's. "They are managing their resources, but their resources during the last couple of decades have been declining."

Phil Edwards, senior vice president at Standard & Poor's Corp., said the city's unreserved fund is at $6.2 million, or 2% of its 1990 operating expenditures. He said that leaves little flexibility to deal with future revenue declines.

"I don't think they can continue to go on for three or four years at 5% a year without cutting services," he said.

Beyond the city's operating budget, analysts cite major capital needs continue to be postponed. In fact, the last capital bond program approved by voters was in 1955.

"Getting a voter authorization there is very difficult," said Richard Raphael, senior vice president at Fitch Investors Service.

City officials differ on how great St. Louis's capital needs are. The mayor estimates that $100 million or less would be needed, but the comptroller says a $250 million proposal might be necessary.

According to Mayor Schoemehl, "The tradition here is not to do great big bond issues."

St. Louis has $31.9 million of outstanding general obligation debt and a total net direct debt of $225.2 million, said Moody's.

Both Fitch and Standard & Poor's give the city a triple-B rating on GO debt, while Moody's rates it Baa.

The city's ratings were first downgraded because of a shift in population that began four decades ago. In fact, the city lost 12.5% of its population in the last decade, according to Moody's.

"I think we got a bad rap about the loss of population," said Mr. Jones. "I think we suffer from an image problem. Because we are landlocked, the growth we see is usually in the metropolitan area.

"Even though we may be the straw that stirs the milk shake, we don't get credit for that," he said. "They [rating agencies] look at the St. Louis region and give St. Louis County a double-A, but they saddle us with all the problems."

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