The second phase of the Prairiefire development in south Overland Park will be redrawn so that developers will not be asking for new public financing to help pay for it.
Citing a lackluster response from Overland Park City Council members, developer Fred Merrill Jr. has withdrawn his previous application for tax increment financing with future property tax revenue as its basis.
The issue was supposed to have been discussed at Monday evening’s City Council meeting. But Merrill said in an email that the council’s lukewarm reception to the idea a month ago caused him to reconsider.
“In our initial conversations with the Overland Park City Council, there was significant concern for the creation of a Prairiefire TIF. A new Phase 2 plan will be submitted, maintaining the integrity and success of the Prairiefire master plan, without some of the development costs which required the TIF financing tool,” he wrote.
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Merrill did not give specifics on the plan or its cost, but said construction is expected to begin in spring 2017.
Prairiefire, on 135th Street between Lamar and Nall avenues, is a mixed-use development that includes residential, retail and office space. It is the home of the Museum at Prairiefire, REI outdoor gear store and Cinetopia movie theater.
The $350 million project was one of Overland Park’s biggest developments on 60 acres along 135th Street when it opened in 2014.
The first phase involved mostly retail use. Because the museum is considered a regional draw, it was eligible for Sales Tax Revenue bonds, known as STAR bonds. Those bonds use a portion of sales tax revenue to pay some development costs.
City Council members were less than enthusiastic last month when Merrill proposed the property tax TIF rather than the tourism-oriented (STAR) bonds for the next phase.
The project was supported by STAR bonds and community improvement district bonds, the latter of which get repaid by a 1.5-cent addition to state and local sales taxes. Prairiefire has had to dip into a bond reserve, similar to a savings account, to make interest payments because the project did not generate enough revenue to cover the obligations.
That underperformance took the STAR bonds for Phase 2 off the table.
At a council committee meeting last month, Merrill and attorney Curt Petersen cited several reasons for the underperformance, especially movie booking policies that prevented big releases from showing at Cinetopia. Also, attendance at the museum did not meet expectations and a couple of key tenants closed.
They said the tide has since turned. A change in leadership at the museum and plans for a new tenant for an anchor store are also expected to improve sales, they said. Theaters have mostly stopped using the booking policy that limits competition for big releases.
Merrill proposed a tax increment financing district based on future property tax revenue increases. He and Petersen argued that property-tax based financing would be more predictable and secure than a financing tool based on sales.
However City Council members still were skeptical. Some made reference to the recently adopted city policy guidelines on taxing districts, saying the policy discouraged TIF use on undeveloped areas like the land around Prairiefire. Others questioned whether the new special taxing district would be considered a corporate bailout by voters. In the end a split council decided 7-5 to schedule the public hearing for Monday, if only to get the conversation started.
The Star’s Steve Vockrodt contributed to this story.