Petition could spur good discussion on future of large KC tax break program

The redevelopment plans for BNIM’s new headquarters in the Crossroads Arts District in Kansas City are promising. They call for reusing an old building in environmentally friendly ways while retaining an architecture firm and its employees in the urban core.

But the proposed tax increment financing incentives for the project at 1640 Baltimore also could lead to a seismic shift in how elected officials pass out tens of millions of dollars in TIF subsidies in the future.

A group that opposes the incentives for the BNIM project is gathering signatures designed to force a referendum on this deal. Organizers have to collect about 3,400 signatures of registered voters by early December. The goal is to force the council to either repeal the tax breaks for the BNIM redevelopment or hold a public election next year on whether they should be granted.

Specifically, leaders of the effort question the need to allow the developer to keep property tax revenues that would normally flow to Kansas City Public Schools if the project were approved without public assistance.

As a result, this could give Kansas City voters in 2016 a chance to indicate whether they think City Hall has gone far enough in doling out this kind of public assistance for private projects in up-and-coming parts of the city — such as the Crossroads, the larger downtown area and the Country Club Plaza.

(The City Council earlier this year approved an extended property tax abatement, not TIF assistance, for The Star’s downtown print press. Kansas City Public Schools officials also objected in that case, saying the district wanted more tax revenue than had been worked out in an agreement with taxing entities.)

Critics of the BNIM deal are raising points about tax increment financing that the Star’s editorial board has delved into for years. A productive discussion about future TIF plans could be ahead.

At some point, we have argued, the City Council needs to be more restrictive in using tax increment financing to divert future revenues from school districts, counties, libraries and other taxing jurisdictions. The city basically allows developers to keep the monies to make their projects possible.

Too often, City Hall has granted TIF assistance for 23 years, allowing developers to retain from half to the full amount of public revenues created by their projects. Development lawyers have successfully argued time after time that an old building or piece of property will go wasted unless the tax breaks are granted.

In some cases, deals are cut with taxing entities to get them a partial amount of the tax revenues they would have received. But those deals often are worked out under rules set by state laws that give almost all the power to city officials and private developers seeking the incentives.

The schools affected by these diversions —especially the Kansas City Public Schools and the North Kansas City School District — today do not receive millions of dollars from subsidized developments inside their boundaries. Jackson County officials recently estimated they lose millions a year, too, while the Kansas City Public Library and Mid-Continent Public Library in the past have pointed to similar losses.

The proposed referendum could prompt big changes.

If the BNIM issue makes it to the ballot, supporters of public assistance would try to mount a compelling case that TIF makes sense in their case.

But detractors could mount a campaign that catches the attention of voters willing to send the message that assistance needs to stop flowing to, say, the Crossroads and downtown. By giving full tax breaks to most developers in downtown, on the Plaza and in the Northland, the city has reduced the need for some businesses to even look at locating on the more forlorn East Side.

If voters sink the BNIM tax breaks, that could send a message to other developers in the future: Be very careful in how much assistance you request.

It appears some members of the City Council are at least talking about that very message. Newcomer Quinton Lucas and second-termer Scott Wagner brought up the general topic on Thursday while discussing public help for the new downtown convention hotel. Lucas pointed out that elected officials need to do a better job of listening to Kansas Citians when they question projects that seek incentives from taxpayers.

But in a move that could help critics who complain about City Hall’s power in these matters, Mayor Sly James on Friday removed the only member of the TIF Commission who had opposed the BNIM project.

Of course, there’s another possible outcome of a public vote in 2016: Kansas Citians could approve the BNIM incentives, which developers could take as sign that residents want to continue the current ways of using taxpayer subsidies.

In fact, citizen petitions led to public votes on a Plaza-area development in the 1980s and a downtown entertainment district in the late 1990s. In both cases, voters endorsed the incentives.

Both issues occurred a long time ago. If the BNIM case is on the ballot next year, Kansas Citians will cast votes indicating whether they want to keep the TIF spigot turned on fully — or whether it’s time to close the tap a bit.

This story was originally published November 14, 2015 at 7:00 AM with the headline "Petition could spur good discussion on future of large KC tax break program."