City Council should reform tax breaks to benefit the public

A perfect storm of voter unrest, inquisitive new elected officials and outspoken school, county and library officials could lead to a significant event in 2016.

This is the year the City Council should approve major, lasting and fair reforms of how tax breaks are doled out in Kansas City.

The recent threatened public vote over taxpayer subsidies to move BNIM’s headquarters into a renovated building in the Crossroads Arts District has helped put the wheels in motion. That project highlights the fact that many Kansas Citians question whether the overall incentives process is properly handled, and many are paying more attention to the subject.

City Hall also is under tremendous pressure to make big changes from leaders of Jackson County, Kansas City Public Schools and other school districts and the Kansas City Public Library and Mid-Continent Public Library. These taxing jurisdictions are affected every time the City Council diverts future public revenues from them. The jurisdictions have no veto power over the council’s actions.

True, meaningful reform won’t be easy. It has not occurred over the last 30 years, even as these kinds of public assistance programs have spread. They have diverted tens of millions of dollars to private businesses and away from providing crucial public services.

Supporters of incentive-backed deals offer a long-honed argument: If such deals were not on the table, the city would not reap the benefit of the new or renovated buildings or the jobs they would create. Plus, the city’s suburbs would have tried to woo companies with their own tax breaks.

However, this is a simplistic approach to an extremely complicated issue.

In reality, every taxpayer assistance plan should stand on its own merits. Some development proposals should receive no public help. Others should get less than what the law allows. Still others should be changed to give other taxing jurisdictions — especially the libraries and schools — more money.

Real reform could look something like this.

▪ The city and the taxing jurisdictions would work far more collaboratively than they do now toward the best possible outcomes for redevelopment deals.

▪ The schools, libraries, counties and other entities would keep in mind their own financial needs but also strongly pursue the needed goals of creating new jobs, retail sales and structures in Kansas City.

▪ The city and jurisdictions would not privately work out side deals that favor one jurisdiction over the other but instead would award fairer “payments in lieu of taxes” that could be amenable to all.

▪ The city would be more judicious in how it reviews rates of return for developers and their projects. The city would take great pains to evaluate each project separately to decide whether requests for taxpayer assistance were reasonable — or excessive.

And that brings us to the ray of hope offered in recent weeks by Mayor Sly James and new members of the City Council. They seem genuinely interested in discussing and finding a better way to award tax breaks.

Jolie Justus said at a Dec. 17 council meeting she’s “concerned with the process,” just moments before the council unanimously directed City Manager Troy Schulte to pursue a comprehensive economic incentives study. One notable goal is to develop “specific guidelines and policies regulating the use, targeting and management of incentives.”

Heather Hall said she wanted to know “what’s the right level of incentives?” Lee Barnes Jr. expressed his support for an in-depth review of what tax breaks have accomplished the last 25 years. Quinton Lucas said it was time for “a real discussion as a community” about economic development policy.

On Tuesday, James told the council some city officials already were working on a quick, potential change in one part of the city’s package of incentives, partly to satisfy opponents of the BNIM tax increment financing deal. The goal is to avoid a city vote in April on the project, which could prompt the architectural firm to abandon it.

James said the city was discussing the issue with a few taxing jurisdictions; one possible outcome could be something like a 50 percent cap on property tax abatements on some deals in the future.

While the taxing jurisdictions would certainly embrace a discussion leading in that direction, keep in mind the fact that James actually suggested something similar in late 2014. The result? It was criticized by former council members Ed Ford and John Sharp, plus a varied group that included development lawyer Jerry Riffel, Downtown Council president Bill Dietrich and Brad Nicholson, a leading developer in the Crossroads.

In other words, any proposed changes could face a lengthy debate.

The public spends a lot of money on private development in the Kansas City region. Residents have received plenty of benefits, with the heavily subsidized Power & Light District in downtown a leading example.

But Kansas City and other cities have good reasons to find real ways to make the subsidies more reasonable. On with the reforms.

This story was originally published January 6, 2016 at 5:21 PM with the headline "City Council should reform tax breaks to benefit the public."