Six weeks ago, Mayor Sly James properly proposed taking a look at reducing one of Kansas City’s major tax breaks for private businesses.
Since then, the economic development community has stuffed the reform plan in a casket, buried it six feet underground and then, for good measure, stomped on the mayor in public.
James in October announced he wanted to create a “new normal” of a 50 percent property tax abatement for redevelopment projects in a city where demands from businesses and their lawyers almost always start at 100 percent abatement.
The mayor has been cheered on by entities such as school systems, library districts, county officials and others. Abatement diverts tax revenue from them.
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But at a recent City Hall hearing, City Council members Ed Ford, John Sharp and others sympathetic to the development crowd heard plenty of whining about James’ proposal.
Longtime development lawyer Jerry Riffel warned it was a “simplistic approach” that would lead to the city’s “unilateral disarmament” in the area-wide battle for jobs.
Downtown Council president Bill Dietrich said the plan “sends a strong negative message” about development in the city.
Jim Thomas, founder and managing partner of Cityscape Residential, said it was a “terrible idea.”
Brad Nicholson, a leading developer in the Crossroads Arts District, said of James’ plan “we were blindsided. This was a shock to us.” He added that the city needed “smart leadership” on development.
Ouch. So how does the mayor respond to this beatdown?
He wasn’t available for comment Wednesday. But chief of staff Joni Wickham said the mayor’s proposal had been a “starting point” that eventually could lead to finding “good, common ground” on how aggressive the city should be in awarding public subsidies for private projects.
The taxing districts are in James’ corner.
Steve Potter, director of the Mid-Continent Public Library, made the excellent point in a letter to the council that it was disingenuous for developers to refer to the mayor’s plan as a “one size fits all” approach. Actually, the status quo is just that: “All these (city) tools start with 100 percent property tax abatement, forcing us to fight to retain the support mandated to us by the voters of our districts.”
Ford late last month announced he would hold James’ ordinance off the docket and put together a working panel of people on both sides of this question, with the aim of reaching a conclusion before years end.
Gosh, wonder how this debate is going to turn out?
An educated guess: A nip here, a tuck there, but that’s it. Council members who have passed out billions of dollars worth of incentives in recent years do not have the stomach to tell developers the process is going to be changed in major ways.
Some of that reticence makes sense.
As Nicholson pointed out, projects that get abatement eventually come back on the taxing rolls.
Plus, plenty of places still require heavy incentives to woo private investment — particularly parts of downtown and the East Side.
Terry Ward, treasurer of the North Kansas City School District board of education, has exhaustive figures on how public incentives have drained money from taxing entities. Partly that’s because cities go overboard with tax breaks. But he also wrote to the council he doesn’t “believe that it is all a government give-away.” Some projects are worthwhile.
The real trick is applying the right tests to find the right amount of abatement and other tax breaks the city should award.
James thinks the 100 percent level goes too far as a starting point. Developers disagree.
And — not exactly a bold prediction here — they will win this fight.