A $148.5 million plan to convert the former Federal Reserve Bank building to a hotel received narrow approval Wednesday from Kansas City’s Tax Increment Financing Commission.
In a 6-5 vote, with opposition from commissioners representing the Kansas City Public Library, Kansas City Public Schools and Jackson County, the financing plan moves ahead for likely Kansas City Council consideration in January.
The Grand Reserve TIF plan would assist conversion of the vacant 21-story tower at 925 Grand Blvd. to an Embassy Suites hotel. To make the project financially feasible, the developers want about $52 million in public assistance through special city sales taxes on the site, property tax abatements and certain state sales tax exemptions.
The plan includes federal and state historic tax credits, private debt and equity. It seeks a 20-year, 100 percent abatement on real property taxes and a 10-year, 100 percent abatement on personal property taxes.
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The city would commit to 49 percent of the incentive amount, the county would commit 11.5 percent, the state 2.9 percent, and the remaining jurisdictions, which include the school district, the library and the mental health levy, a total of 36 percent.
Debbie Siragusa, TIF commissioner representing the library system, argued that the plan as designed would be a net negative in revenue for the taxing authorities except for the city of Kansas City, which would receive a better long-term return on its investment than the other jurisdictions.
Siragusa said the library district wants developers to make annual payments equal to 50 percent of forgone property tax revenue over the life of TIF agreements.
Kerrie Tyndall, the city’s director of economic development, said no special deal was cut with the city. Tyndall also asked the taxing districts to remember that some old TIF investments in downtown “are beginning to pay off to the taxing jurisdictions. This may not be a quick return on investment (but) the districts are getting the benefit of previous city investments.”
Despite disagreement about the proposed financial plan, the commission unanimously approved Delta Quad Holding LLC as the redeveloper. The company is offering a $200,000 upfront cash payment to the school district to compensate for forgone property tax revenues.
The split vote on the financing plan mirrored the commission’s 6-5 split earlier this month on an agreement to move ahead with a redevelopment plan for a vacant warehouse at 1640 Baltimore. In that instance, the slight approval edge came after Mayor Sly James removed and replaced a commission member who had disagreed with moving ahead on the proposal for a new BNIM headquarters in a Crossroads district building owned by Shirley Helzberg.
In the Federal Reserve case, the majority appeared to agree with Tyndall that “without this investment, there won’t be any new revenue to any taxing district.”
Commission chairwoman Cindy Circo noted that the reuse proposal by Delta Quad Holdings, a Denver-based investor, has been years in the planning and, at this point, the likely alternative might be demolition of the historic structure.
The building, at one time the tallest in the city, was constructed in 1921 and earned a spot on the National Register of Historic Places in 2004. It was sold in 2005 for $12 million to a previous developer who failed to first adapt it to residences and later to a hotel. The current developer acquired the property for $10.9 million.
Douglas Stone, attorney for the developers, said the old building is functionally obsolete, afflicted by vandalism, water leaks, and lack of heating and air conditioning. Based on the traditional “but for” analysis, which indicates whether a revitalization needs public subsidies to provide a reasonable rate of return on investment, Stone said the project “won’t happen but for assistance.”
Susan Bachman, senior development director for Hilton Worldwide Holdings, which owns the Embassy Suites flag, said she has worked on maybe 1,000 hotel projects in the last 17 years, some successful, some not. The 925 Grand conversion, she said, “is my favorite project of all.”
Beyond the proposed 301-suite hotel, the broader redevelopment plan includes renovation of an adjacent and vacant four-story building and an adjacent parking garage. TIF incentives would go only for the hotel part of the project. Other incentives will be sought for the rest of the redevelopment plan.
The proposal is designed for completion in 2018.