Kansas City Council approves new tax on shoppers at popular Waldo retail center
The Kansas City Council approved a controversial new sales tax Thursday for shoppers at a popular Waldo retail center, intended to help its owner pay for renovations.
The council voted 7-5 to establish a special 1 cent sales tax on goods and services at the Romanelli Shops at Wornall Road and Gregory Boulevard, which house such popular destinations as Louie’s Wine Dive and Betty Rae’s Ice Cream.
The divided vote reflected misgivings among council members about establishing a so-called Community Improvement District (CID)—which requires a declaration that the area in question suffers from blight—for the benefit of a single owner.
Councilman Brandon Ellington called the special tax for a single owner “a slippery slope.” Councilwoman Heather Hall recalled the approval of a similar 1-cent sales tax in 2016 for renovations at the luxury InterContinental Hotel on the Country Club Plaza before voting against the Waldo project.
They joined Council members Eric Bunch, Kevin O’Neill and Ryana Parks-Shaw in opposing the measure.
The owner of the Romanelli Shops, David Palen, said he needed the funds because of problems with the 1.3-acre shopping center’s roof, wiring and HVAC systems.
But the request raised eyebrows in Waldo, which is already home to a wider CID that officials say benefits a variety of businesses in the area.
“I feel like a community improvement district is designed to improve the community for all, not just a single owner of property,” said Becky Beck, the chairwoman of the board that oversees the existing Waldo CID.
CIDs across the city
The half-cent CID currently in place funds security officers and crews that clean up trash in Waldo’s retail core. It also pays for business promotions and disperses grants for storefront rehabilitation. Beck said taxpayers shouldn’t have to pitch in to help a single property owner.
“What I’m concerned about is this notion that single owners of a property can create their own community improvement district for their own benefit to fund their own renovations, construction, maintenance or whatever,” said Beck, who noted she was not speaking on behalf of the Waldo CID organization. “If you’re a property owner, you’re supposed to do that anyway.”
The Romanelli Shops, which takes up nearly the entire block, also includes a dentist office, a hair salon, District Pour House + Kitchen and The Classic Cookie.
Reached by phone this week, Palen declined to comment on the project.
“I don’t do interviews,” he said. “It’s just not me.”
To win council approval, Palen commissioned a blight study on the property. It concluded that Romanelli has “insanitary or unsafe conditions” and “conditions which endanger life or property.”
He expects the CID to bring in $70,000 to $78,000 per year over the first five years. In a report to the city, he projected costs of needed repairs at about $2.5 million.
Kansas City got its first CID in 2002. Since then dozens have been from Zona Rosa to downtown to the Red Bridge Shopping Center. City officials said there were 63 CIDs in Kansas City as of this week.
Auditor wants more accountability
Yet they are sometimes criticized for lack of transparency. Taxpayers may not know when they enter or leave a special taxing zone. And with a patchwork of CIDs across the city, the exact sales tax rates can vary.
In August of last year, Missouri State Auditor Nicole Galloway issued a report showing that the state’s 400-plus CIDs had burdened taxpayers with an additional $2.2 billion in costs. Galloway said the current framework lacks accountability: cities approve CID requests, but state law does not require local governments to evaluate whether a district is in the best interest of the public.
She said districts can “form with vague purposes and time frames and can change their purpose after being established.”
Steph Deidrick, spokeswoman for Galloway, did not want to comment on the proposed CID in Waldo, but he did reiterate the auditor’s position that the regulations for CIDs need a legislative “overhaul” next year.
“While she recognizes CIDs can serve a useful purpose for economic development, she also believes the current state laws governing CIDs need to be improved,” Deidrick said. “Specifically, changes need to be put in place so that conflicts of interest and self-dealing can be avoided while allowing for greater oversight and enhanced transparency.”
That lack of transparency is what bothers Felix Milman, co-owner of Romanelli Optix, a luxury eyewear store that has operated at the center for more than 15 years. Once established, tenants and taxpayers will have no say in how the collected funds are used.
“Is he actually going to use it to make improvements?” he said. “That’s what I’m more concerned about.”
A year and a half into new ownership, Milman said his building is plagued by a leaky roof, sewer smells, and heating and cooling malfunctions. In the parking lot out back, he frequently sees rats and trash.
‘An investment in the neighborhood’
But Dan McCall, a partner in District Pour House, said Palen has already made some improvements to his restaurant. And he said the new owners have supported the business.
“They are local people. I see their faces. They come in to eat,” Milman said. “It’s been uplifting.”
But businesses here already charge sales tax of 11.1% on goods and services, said Leslie Stockard, who purchased The Classic Cookie cafe at the north end of the center in 1998. And she’s worried about adding an additional 1-cent tax on customers even if the building needs work.
“I think it definitely needs improvement,” she said. “But I’m not sure why I should pay for it. I pay good rent to occupy the space, and I don’t quibble about it.”
In an Oct. 23 committee meeting, Ellington elaborated on his skepticism of the new tax.
“It sounds like you guys are just trying to pass a CID to rehab a building that wasn’t maintained,” Ellington said. “I think you all are actually stretching the intent of what CIDs were meant for.”
Palen told that committee that he negotiated the price down on the shopping center based on its condition. But he said he didn’t know the depth of the problems until after his March 2018 purchase. He described the previous owner’s maintenance fixes as “Band-Aid solutions.”
“We knew it was going to be an investment,” he said. “We didn’t imagine ... that the mountain would be so high.”
He said that he has lived in the Waldo area for 13 years and is committed to keeping local businesses at the retail center.
“This is an investment in the neighborhood,” he said. “And that’s our value system that’s driving every decision we make here.”
Councilwoman Andrea Bough, who represents the area, said she voted to approve the CID out of committee because she believes the new tax will help maintain the shopping center. She said the Romanelli Shops offer “iconic if not historic value,” and she doesn’t want to see it torn down and replaced with a modern development.
“This new owner did not create the blighting conditions,” she said. “He did not let the property go into disrepair, and the tenants are supportive of this, so I will vote in favor of it.”
She said she does want to see more analysis of the city’s CIDs. Bough is working on a policy that would “would put some parameters” on the special taxing zones.
“What is more concerning to me is the layering of the CID sales tax because there’s an existing ½-cent sales tax and there’s going to be another 1-cent sales tax,” Bough said. “I think what is really important is that we develop a policy as a city that includes maybe a cooperative agreement with the CID so that there’s more control in the way that the CIDs operate and are used.”
The Star’s Alison Kite contributed to this story.
This story was originally published December 19, 2019 at 6:56 PM.
