Research shows that tax incentives are unneeded because developers would have invested their money anyway to do the projects.
Patrick Tuohey, a libertarian anti-tax-incentives guy from Missouri’s Show-Me Institute funded mostly by billionaire Rex Sinquefield in St. Louis, made that fallacious point on a recent television program we were on. I do not want to hear about his research because libertarian think tanks cherry pick their numbers to make a point they had already formulated: namely, that tax incentives are always bad.
On the contrary, they can be vital. Since the Great Recession, credit markets have tightened, and commercial lenders are requiring more collateral for development loans. That’s where the community improvement district comes in. It makes a loan possible and can make a project desirable for developers.
A community improvement district is simple and enticing. A retail developer requests that an additional sales tax be collected within that facility — usually a shopping center. All the money that is collected goes toward investment in that property.
Overland Park has become a showcase for community improvement districts. Since they became Kansas law in 2009, Overland Park has approved 11 districts. Eight were for redevelopment of aging shopping centers with fleeing tenants in the northern part of the city. Three were for new centers out south that met city requirements. Centers that were struggling got a new life. One at 95th Street and Nall Avenue is a prime example. It was almost empty, until the community improvement district allowed the developer to renovate it. It’s now filled with tenants.
An example of a large center constructed out south is the highly successful Corbin Park on 135th Street. This is ironic because Overland Park had been among the stingiest anywhere in offering tax incentives since the city’s inception in 1960.
The districts helped change that. Aging shopping centers were losing good tenants and dragging down nearby neighborhoods. Also, increased competition from other growing suburban communities, both inside and out of Johnson County, caused Overland Park officials to take a second look at incentives.
The benefit of a successful district is that when a shopping center thrives, the value of the center increases. The developer has to pay higher property taxes.
Kansas City residents may find the community improvement district story familiar because one is proposed for the InterContinental Hotel on the Plaza. There is one major difference between the Kansas City proposal and those offered in Kansas. In Kansas City, the facility must be designated as “blighted” to be allowed to raise its own sales tax in a district. The controversy is over whether a premium hotel should be defined as blighted.
In Kansas, blight is irrelevant. No conditions are specified for a district in state law. In Overland Park, the governing body has stated a district must be in the “best interests of the city.” That’s not a high hurdle. So far, nearly all the districts have been successes.
Community improvement districts have helped transform old, dying centers into vibrant hubs.
Tax incentives, overall, get a bum rap. Overland Park has proved good things can happen with tax incentives that probably would never have happened otherwise.
Steve Rose, longtime Johnson County columnist: firstname.lastname@example.org.