Big tax breaks for Burns & McDonnell have low points and high points

04/30/2014 3:45 PM

04/30/2014 7:00 PM

Greg Graves gets it.

The CEO of Burns McDonnell and longtime civic leader realizes some people oppose his highly successful company’s request for tens of millions of dollars in tax breaks to expand its world headquarters in south Kansas City.

Many of the criticisms are legitimate — but so are a few answers from Graves and supporters of his engineering firm.

In a nutshell, this is a positive economic development project for Kansas City, just at too high a cost to taxpayers and entities such as schools and libraries.

Let Graves go first, in an email response he sent Tuesday from an out-of-town board meeting: “We love it here in Kansas City and I have no intention of using Border War tactics for this or any of our future space needs. In this case, our partners at VanTrust along with my team believe this site is blighted and deserves the development options that TIF offers. Our commitment to the city, school district and state is that this project will be not just a win for my employee owners but a big win for them. I think we’re a pretty darn good bet at this point.”

The border war mention is notable because Graves properly has led the charge to end the inane use of corporate welfare to get companies to cross the state line. Pitting Missouri and Kansas against each other for this project would have been a big black eye for Graves and his firm.

However, tug at the threads of the taxpayer subsidy aspect, and concerns emerge.

• Even going for “bare bones” incentives, Burns McDonnell’s $42 million tax increment financing plan for a $232 million project would require the public to pour more than $13.5 million into parking garages and support $19 million of financing costs, plus help with other expenses a developer normally would pay.

• The Center School District would gain students and tax revenues from the project, but still would give up millions because of the lengthy real estate tax abatement requested.

• An independent study concluded that the Mid-Continent Public Library would actually be a net

loser

— by $2 million — over 30 years. Director Steve Potter opposes the deal, but hopes to find a way it can benefit his system.

• Burns McDonnell wouldn’t pay $3 million in sales taxes on construction materials for the two office buildings.

Remember, this is all for a company predicting average pay of $126,000 a year for employees in the subsidized structures.

Now for more of the counter-punch from Burns McDonnell supporters.

Development lawyer David Frantze, well-known for going all-in for public subsidies, says this is a “reasonable deal” for taxpayers. He said the charge from Graves and others “was to make the deal feasible.” That meant getting enough taxpayer assistance to support rental rates that consultants claim are necessary to finance it.

It’s also a huge victory for Kansas City when a hometown company with a reputation as a great place to work plans to add 2,100 more highly compensated professionals. Projections show 25 percent of the firm’s new employees could live in Kansas City. This is far better than the absurd moving of jobs from one state to another, with little net new hiring.

One more thing: Kansas City politicians have approved far more expensive public subsidies — guaranteed by the city and gobbling up 100 percent of TIF revenues. Burns McDonnell’s project is not city-backed, and it’s a 50 percent TIF.

Still, in the end, Burns McDonnell could leave more money on the table to finance public services, especially for Center’s schools and the Mid-Continent system.

Mayor Sly James and the City Council are eager to approve this project. But they should take the opportunity to strike a better deal for other taxing entities, with help from Graves and his team.

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