After receiving $62 million in government subsidies from Missouri to move across the state line, Overland Park financial services firm Waddell & Reed is asking for more taxpayer assistance — this time from Kansas City.
The company is seeking a major property tax abatement to move into a new office tower in downtown Kansas City, according to economic development documents posted online.
Developers are already pushing two speculative office projects downtown: the 25-story Strata at 13th and Main, and a 14-story tower at 13th and Wynadotte, developed by Platform Ventures.
But it appears Waddell & Reed will look to occupy a third, entirely separate structure.
The agenda for Wednesday’s meeting of the Enhanced Enterprise Zone Board, which is under the umbrella of the Kansas City Economic Development Corporation, (EDC) shows Waddell & Reed plans to occupy a build-to-suit high-rise that will “add to the skyline in Kansas City.” The company plans to make a nearly $90 million capital investment, which includes about $80 million in lease and improvement costs and about $10 million in personal property investment.
Kansas City is home to three designated enterprise zones. That program was designed by the state to help spur private investment in targeted areas.
Roger Hoadley, spokesman for Waddell & Reed, said the company continues to evaluate “multiple location options” for its move from Overland Park to Kansas City.
Local officials argue the city center lacks the stock of high-quality office space necessary to recruit new employers to town. That’s a major argument behind the $132 million Strata, which could require as much as $63 million in public subsidies. The Kansas City Council in late September gave developers of that project 30 days to address financing concerns.
For making its own investment downtown, Waddell & Reed is asking the enterprise zone board for a 75 % property tax abatement over its 15-year lease term, along with sales and property tax exemptions under Missouri’s Chapter 100 provision. The company also seeks a 50 percent tax redirection agreement with the city, the agenda documents show.
Those incentives would come after Missouri awarded $62 million to help lure the firm away from Kansas.
That was among the last — and most controversial — projects in the years-long economic border war between Kansas and Missouri. In August, governors of both states celebrated an end to the much-criticized practice of using of tax breaks to shuffle jobs across the state line with little economic benefit to the Kansas City region.
The Hall Family Foundation estimates Missouri and Kansas taxpayers lost a combined $335 million as officials helped shuffle some 12,000 jobs across the state line between 2011 and 2018.
State leaders have said Waddell & Reed’s move was already in the pipeline before the border war ceasefire.
The border war
The company is identified only as “Project Decoy” in the economic development document. But it is described as a Kansas financial services company bringing up to 1,039 jobs to the city — the same number of jobs the state cited when it awarded Waddell & Reed the incentives.
In recommending approval of the tax breaks, EDC staffers acknowledged that it was doing so despite the border war ceasefire.
“We are sensitive to and recognized the timing of this project relative to the border war legislation, but this was a grandfathered project by the state of Missouri and as such, Staff feels we should view this the same way locally,” they wrote.
Kansas City’s Enhanced Enterprise Zones generally offer 50 % tax abatements over 10 years. But the project could actually qualify for deeper abatement. With 1,039 jobs created, it could secure a 100 % abatement for 20 years. EDC officials went on to say that the incentives help “finalize the deal using the minimum amount of public benefit necessary.”
Amounts beyond the standard abatement require a financial analysis as well as approval from the Enhanced Enterprise Zone Board and the Kansas City Council.
Waddell & Reed has committed to bringing 919 full-time jobs to Kansas City and adding 120 new positions over six years — creating $172.8 million in net new payroll.
In late July, the company informed Kansas regulators of plans to cut 158 jobs. The company had previously told investors about plans to outsource some operations jobs
Demand drives other office towers
It doesn’t look like Waddell & Reed plans to occupy either of the already-announced office tower projects.
Kansas City Manager Troy Schulte said the proposed incentive structure for Strata would not allow Waddell & Reed to lease space there because the company already has received state incentives. Strata’s current financing plan includes redirecting withholding taxes through Missouri’s Advanced Industrial Manufacturing Zone program.
Likewise, the financial services firm has had no discussions with developers planning a new tower at 13th and Wyandotte, said Brian Douglas, senior vice president at Platform Ventures.
That company plans to bring about 150,000 square feet of new office space to downtown.
Douglas said the company has talked to several interested employers — some already in downtown, others who want to move in — about occupying as much as half the building. But no leases have been inked yet.
“We’re pursuing a large-tenant strategy,” he said. “We don’t know if it’s one large tenant for the entire building or it could potentially be five to 10 tenants.”
Developers hope to break ground in January and open the office building by December 2021.
The Land Clearance for Redevelopment Authority recently awarded a 25-year property tax abatement on the office tower. It will receive a 75 % abatement for 10 years and a 37.5 % for 15 years.
Even with Strata potentially bringing 250,000 square feet of new space on board, Douglas said there’s plenty of demand for new work space downtown.
Since originally proposing the idea, Platform Ventures has more than doubled the size of its office development. The building will include a 407-spot parking garage, which will also serve the company’s nearby hotel and apartment development projects.
Much of downtown’s office space has been pushed offline as developers have renovated spaces into apartments and lofts. And Douglas said much of the current office stock dates back to the 1980s or earlier and lacks the modern, open floor plan employers desire today.
“Our feeling is there’s a significant amount of pent-up demand that currently exists in the marketplace,” he said.