Business

Kansas City passes a cap on development incentives

BNIM was hoping to move its headquarters to the Crossroads if it could get tax incentives to renovate the site, but a fight over those incentives prompted the firm to abandon its plans.
BNIM was hoping to move its headquarters to the Crossroads if it could get tax incentives to renovate the site, but a fight over those incentives prompted the firm to abandon its plans. jsleezer@kcstar.com

A much-debated proposal to limit economic development incentives in Kansas City was passed by the City Council 9-4 on Thursday over strong objections by Mayor Sly James.

“If we get this wrong, we could once again put up a sign that says Kansas City is closed for business,” James said. “We don’t want development to come to a screeching halt.”

The council didn’t see it that way and gave the ordinance a veto-proof majority.

Approval of the ordinance reflects growing sentiment from the area’s taxing jurisdictions and some members of the public that too many tax dollars are being redirected from education and public services to assist private developers.

Council members two weeks ago would have reached a 6-6 deadlock on the ordinance. Instead of voting then, members decided to consider it again this week.

The ordinance, primarily sponsored by Councilman Quinton Lucas, caps the level of tax abatements or other tax redirections at 75 percent, with two exceptions. Those would be for projects in distressed census tracts and those that get “high impact” scores on the AdvanceKC scorecard, which evaluates projects for incentive-worthiness based on job creation and total investment.

Developers have been able to obtain up to 100 percent property tax abatement on the added value of their developments for specific time periods.

Opposition to incentives reached a flashpoint last year when a proposal to assist redevelopment of a Crossroads Arts District building for a new headquarters of the BNIM architectural firm was scuttled.

Developers and other supporters of incentives have long argued that financially risky projects would not go forward without public assistance.

After the previous council meeting, representatives of Kansas City taxing districts — Jackson County, Kansas City Public Schools, Kansas City Public Library — submitted letters of mostly qualified support for the proposed incentives cap.

Several other constituencies, such as a citizen tax watchdog group and a community development agency also offered letters of support.

A letter signed by representatives of Kansas City’s development industry, including development attorneys, building trades, construction, engineering and architectural companies, said their support of the incentives ordinance was conditioned on such letters of support or resolutions from the school district, public library and county. Their full support remains in doubt.

A major sticking point that divided the council was inclusion in the ordinance of the Shared Success Fund, a plan in which a percentage of developers’ payments in lieu of taxes will be directed to fund projects in economically distressed areas of the city.

Passage of the ordinance establishes the fund that previously had been proposed separately by the mayor.

James unsuccessfully argued Thursday that the Shared Success Fund had no relevance to the incentives-cap ordinance and needed far more discussion as an “unresolved issue.” He said he had no objection to the 75 percent cap.

Council members Scott Wagner and Jolie Justus also spoke against the ordinance because of unresolved questions about the Shared Success Fund or the AdvanceKC scorecard. They were joined by Councilman Dan Fowler in voting against the incentives ordinance.

Fowler didn’t speak at the meeting but previously said he wanted to wait for data from an ongoing study that is expected to show whether projects that got tax breaks have, overall, helped or hurt tax receipts.

Lucas said there had been enough “robust conversation” on the ordinance and that it had achieved an important step by getting so many disparate groups to agree it had merit. Council members two weeks ago had debated the ordinance for about two hours, and the ordinance had been the subject of four hearings in committees.

Councilwoman Katheryn Shields acknowledged that the ordinance wasn’t perfect but said, “It’s important to take a first step towards trust” that the taxing jurisdictions will continue their support. If development withers, she said, “we can have other conversations in a year.”

In addition to Lucas and Shields, council members who voted for the ordinance were Alissia Canady, Scott Taylor, Heather Hall, Teresa Loar, Lee Barnes, Jermaine Reed and Kevin McManus.

The mayor, in an impassioned delivery, said he had serious reservations about passing an ordinance that “was only half agreed to” and that has appeared to thwart introduction of new development proposals in the last few weeks. He also said support from the taxing districts seemed ambiguous and fell short of the “level needed for accountability.”

A majority of the council apparently agreed that unresolved issues or ambiguities in the taxing districts’ support could be handled at a later time.

The ordinance applies to development projects that request tax incentives through the Tax Increment Finance Commission of Kansas City, the city’s Planned Industrial Expansion Authority, the Land Clearance for Redevelopment Authority, and the Kansas City Chapter 353 Advisory Board.

The Star’s Lynn Horsley and Steve Vockrodt contributed to this story.

Diane Stafford: 816-234-4359, @kcstarstafford

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