Developers fear the power of critics could stall growth in KC area

For developers in the Kansas City area, August was a tough month.

Plans for Mission Gateway got shot down by a Mission City Council reshaped in April by candidates who campaigned against the project.

The Kansas City Council sided with neighborhood opponents and killed two projects near the Country Club Plaza.

Elsewhere, residents in Kansas City’s Westside neighborhood continued their standoff against an apartment and retail proposal there.

And in the East Crossroads, a developer walked away from an apartment project when he couldn’t get enough of a tax abatement.

Across the metro area, neighborhood groups worried about density, alongside policymakers showing more concern about tax subsidies, are increasingly taking on developers.

Is Kansas City beginning to pull in the welcome mat for new investments?

Whitney Kerr Sr., a longstanding area real estate developer, fears an anti-development tide could thwart the city’s momentum. He worries that “people who have no knowledge of real estate economics” have become too empowered.

Kansas City Mayor Sly James counters that it’s appropriate for residents to raise their voices, even while stressing he still wants development.

“I think it’s an indication of how neighborhoods are flexing their muscles,” he said. “I understand sometimes the chilling effect on development that can come about when there is a very controversial ‘No’ given.”

Case studies in rejection

Kristin Inman, a Mission retiree, had never run for office. Her objection to a Wal-Mart store anchoring development at the 16-acre site of the former Mission Mall prompted her to seek a council seat in April. Tax incentives for private developments — the Cameron Group of Syracuse, N.Y., would have sought more than $30 million in public help — also bothered her.

Her opponent was Jennifer Cowdry, an incumbent who supported the proposal and compared plan renderings to well-regarded retail districts like Zona Rosa. Inman defeated Cowdry.

Also joining the new council were two other candidates critical of the Mission Gateway proposal. Their victories stacked the council with opponents of the plan to build apartments, a hotel and other retail around a Wal-Mart superstore. Last month, the council shot down the preliminary site plan.

Another plan that recently came up short was a proposal by Ken Block, with Block Real Estate Services, for a $38 million, 188-unit apartment complex just west of St. Luke’s Hospital.

Block didn’t ask for tax incentives. Neighborhood critics opposed his plan as being too dense and counter to the Midtown/Plaza Area Plan, a development guideline the Kansas City Council approved in January after months of citizen input.

Last month, a council majority agreed with the opponents.

Neighbors wanted the mostly vacant block to be used for single-family houses. But Block said the land has become too valuable, and the cost of the homes would be prohibitive.

“I’m trying to be on the edge of what I can do without asking for incentives,” Block had said.

Another rejected Plaza-area plan came from NorthPoint Development, which sought a zoning change to add floors to a vacant medical building at 4620 J.C. Nichols Parkway to convert it to an assisted-living center. That also ran afoul of the Midtown/Plaza Area Plan’s height guidelines for the Country Club Plaza “bowl.”

Kerr, like many developers, contends that area plans should be guidelines open for case-by-case amendments.

But Kansas City Councilwoman Katheryn Shields and others argue that early exceptions to the area plan set dangerous precedent, although that doesn’t mean plans can’t be tweaked over time.

She lacks sympathy for developers who she says may have paid too much for their land “and then want us to change the zoning or change the area plan so they can be more dense.

“We’re saying we want to be a town that honors our historic neighborhoods and our history, and we don’t want people to come in and build (just) anything,” Shields said. “We go through a planning process, and we expect people to respect it.”

Another recent rejection occurred on the city’s west side. EPC Real Estate met multiple times with residents but couldn’t reach an agreement on a multiuse plan for the southwest corner of 17th Street and Madison Avenue to replace an empty warehouse and bare lot.

The company still intends to build an apartment complex, but it won’t ask for the rezoning or incentives it sought to defray costs of an underground parking garage. The eliminated garage was intended to provide some off-street public parking. Unfortunately gone, too, is the earlier pledge to price one-fourth of the apartments as affordable housing.

“We’ll move forward with a smaller plan, complying with the existing zoning, so we don’t need to request anything further,” said EPC’s Austin Bradley.

Neighborhood strength

“What we’re seeing is that neighborhood visions of their neighborhoods don’t always mesh with the financial reality of development,” said Kansas City Councilman Scott Wagner.

Wagner said the public demands access to information to support the “but for” analyses, the third-party reports used to justify tax incentives on the grounds that developments wouldn’t occur “but for” public help.

“Increasingly, the burden is falling on the developer to show residents that there will be a benefit for the area, that the ‘but for’ clause is real,” Wagner said. “If people don’t believe a financial need exists, it’s easy to fight it.”

Kansas City Councilman Scott Taylor, who chairs the council’s planning and zoning committee, advocates “keeping the city open for investment and job creation” and suggests there really hasn’t been a rise in anti-development activism. Rather, there has been more development to react to.

Taylor said elected officials are sensitive to citizen opposition, especially when tax breaks are involved. And when all sides are heard, he said, plans often are amended.

Some elected representatives say a turning point came last year, a citizens’ initiative petition against a plan to convert a vacant building in Kansas City’s Crossroads Arts District to a new headquarters for the BNIM architecture firm.

The proposal called for tax abatements, angering taxing districts like Kansas City Public Schools, the Kansas City Public Library and Jackson County. Tax abatement on the value of the new improvements would drain tax dollars to ease the finances of a wealthy developer, opponents said.

BNIM has since signed a five-year lease at Crown Center, so the company wasn’t lost to the city as some had feared. Still, the fracas had lasting legacy. EPC, for example, expected a petition drive against its west side project, even if the City Council approved it.

Incentive skeptics increasingly ask when an area’s revival — or its already strong economics — has reached a point where projects should proceed on their free market merits.

“We are making a lot of noise,” acknowledged Crosby Kemper III, director of the Kansas City Library and a leading anti-incentives spokesman. “We are getting people to understand that there’s a cost to these giveaways. People are willing to go to meetings, to stand up and be counted. And then there’s the petition drive. When it takes only 1,700 signatures to get on the ballot, more people are paying attention.”

Kemper’s reference to 1,700 is based the number of signatures now required on initiative petitions, determined as a percentage of voter turnout in a recent Kansas City election. Low turnout makes the number of required signatures a fairly easy hurdle to leap.

Tax incentive arguments

In Kansas City, the tax incentive debate has translated into a proposed ordinance that would set policy on how and where the inducements should be awarded.

An incentive reform measure spearheaded by Councilman Quinton Lucas is drawing varying levels of support. But it also has critics who warn that developers will pursue projects elsewhere.

“We are competing every day for jobs, for investment, for residents with not only our competition across the state line, but also up north,” former Kansas City Council member Ed Ford said at a recent planning committee hearing. “If we have a Ford supplier, we are competing with Liberty. We are competing with Riverside.”

But Kansas City wouldn’t break new ground if it sets new tax break limits. Overland Park last year passed a policy governing its use of tax increment financing, or TIF, which redirects increases in property and economic activity generated by a project to reimburse some development costs.

Overland Park’s policy includes a dictate that TIF should be used for projects where 70 percent or more of the project’s financing comes from private equity or debt. It also discourages the city from guaranteeing debt on development projects, which would put the city on the hook to pay investors if a project underperforms. And it instructs developers to present their plans to taxing jurisdictions like school districts early on.

Overland Park also has grappled with proposed redevelopment of Metcalf South Shopping Center, another plan to convert the former Brookridge Country Club into a mixed-use development, and the massive BluHawk project at the southern reaches of the city.

Each of those projects has encountered scrutiny from residents, but perhaps more so from city officials.

Lane4 Property Group dropped plans last year to build a large, mixed-use development at the Metcalf South site after city planners objected that it didn’t comply with the city’s Vision Metcalf planning document. Some residents, too, reacted against speculation that a Wal-Mart store was in the plan.

Eventually, Lane4 sought a Lowe’s-anchored retail development, which Overland Park approved earlier this year.

Brookridge, meanwhile, received its rezoning request after several attempts. But its developer, Chris Curtin, has not yet formally asked for public incentives. If that happens, Terry Goodman, a longtime city councilman in Overland Park, expects plenty of scrutiny.

Goodman was heavily involved in drafting the Overland Park TIF policy. He said it wasn’t necessarily in response to citizen pressure; he said residents more typically object to rezoning requests. In Overland Park, TIF reform was led by elected leaders.

“The whole thing with these incentives is as long as they are available, as long as they are statutorily allowed, developers are going to ask for them,” Goodman said. “The due diligence that cities have to apply is, is that reasonable? Necessary? Will something else work?”

In Kansas City, Jan Parks has emerged as a key spokeswoman against incentives. A fixture at meetings of Port KC, the Land Clearance for Redevelopment Authority and other agencies that grant tax breaks, she speaks on behalf of the Coalition for Kansas City Economic Development Reform, a group that consists of the Metropolitan Organization for Racial and Economic Equality, the Black Agenda and others.

Parks said her organization supports Lucas’ abatement-limiting ordinance but prefers that the city go further. Rather than limit tax abatements and redirections by one-fourth, as Lucas proposes, Parks wants it cut by half. And where Lucas suggests exceptions to the limits for projects in economically distressed areas or that bring in high-paying jobs, Parks would like no exceptions.

That’s where Spencer Thomson, a development attorney with the Thomson Walker law firm, criticizes the anti-incentives crowd.

“My experience with the anti-development crowd is that they are rarely, if ever, content,” Thomson said. “Give them an inch, they take a mile. If the proposed measures are passed, I have absolutely no illusion that the naysayers will stop opposing development, incented or otherwise.”

Kansas City Councilman Wagner said time will tell if spurned developers will let their properties lie fallow if they encounter opposition and rejection.

“We have a very uncertain environment that is beginning to develop,” Wagner said. “The more uncertainty, the less likelihood you’ll have people willing to invest in the city. At some point, people who have choices between here and another community will choose somewhere else.

“People have to be comfortable with owners of property developing the property they own, and the developer has obligations to make something work within the community. Where does that come together? I don’t know if we’ve figured that out yet.”

This story was originally published September 1, 2016 at 3:36 PM with the headline "Developers fear the power of critics could stall growth in KC area."