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Chalk up a legal victory for developer Paul McKee and his $8.1 billion NorthSide plan to remake 2 square miles northwest of downtown St. Louis.

Cole County Circuit Judge Patricia Joyce has dismissed the suit that challenged the constitutionality of the state’s Distressed Areas Land Assemblage tax credit. On Dec. 31, the state gave McKee $19.6 million of the credit.

Two St. Louis residents, Barbara Manzara and Keith Marquard, had filed a suit claiming that the never-before-used tax credit was unconstitutional.

Joyce ruled Monday that the law passes constitutional muster. She rejected the plaintiffs’ claim that the credit awarded to McKee shifts the risk of loss away from his project and represents improper use of public money. Instead, the sale of the tax credit benefits the redevelopment area, the judge ruled.

McKee’s lawyer Paul Puricelli said Wednesday that Joyce "covered all the issues" in finding the law valid. "The primary basis for her opinion was that the statute makes it explicit that any proceeds from these tax credits have to be used for the underlying redevelopment," he said.

The plaintiffs’ lawyer, Irene Smith, said she will appeal. Smith said that a tax credit intended merely to assemble property for redevelopment falls short of a legitimate use of taxpayer money.

"It’s the use of public money in a reckless way," she said.

State lawmakers designed the land-assemblage credit in 2007 to encourage lending on speculative projects such as NorthSide. The credit allows full reimbursement for money spent on interest and loan fees to buy at least 50 acres of land in low-income neighborhoods and a 50 percent reimbursement for the cost of land itself.

McKee sold his tax credit in January and used the proceeds to pay down much of his debt to the Bank of Washington, Mo., his main lender so far on the NorthSide project.

"The notion of the land assemblage tax credit is to acquire land," Puricelli said. "It’s appropriate to use the credit to pay off land assemblage costs."

Still pending is a suit claiming the Board of Aldermen and St. Louis officials failed to follow procedure in approving NorthSide’s $390 million tax increment financing, the largest ever in the city. The matter awaits a ruling by St. Louis Circuit Judge Robert Dierker, who finished hearing testimony about a month ago.

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