Development

Should taxpayers foot the bill for a Wendy’s and a Pizza Hut in Kansas City, Kansas?

The Metropolitan tax increment financing district in Kansas City, Kan., which helped with the development of this Save-A-Lot store, was expanded to include a proposed fast-food development. The $3.3 million project would add Pizza Hut and Wendy’s to the Argentine neighborhood.
The Metropolitan tax increment financing district in Kansas City, Kan., which helped with the development of this Save-A-Lot store, was expanded to include a proposed fast-food development. The $3.3 million project would add Pizza Hut and Wendy’s to the Argentine neighborhood. jtoyoshiba@kcstar.com

After simmering with no action for about two years, a proposed fast-food development in Argentine funded almost entirely by government grants or tax breaks might be voted on Monday by a committee of the Unified Government of Wyandotte County/Kansas City, Kan.

A nonprofit agency, Argentine Betterment Corp., is the developer of a proposed Wendy’s and Pizza Hut restaurant at the southeast corner of Metropolitan Avenue and 21st Street in Argentine, near a Save-A-Lot and Dollar General store.

The developer argues that there’s private money involved through an upfront $1 million loan for the $2 million project. But a closer examination shows that most of the project, including the loan, over time is likely paid through public sources.

ABC is using a $600,000 grant from the U.S. Department of Health and Human Services that was originally obtained by the Argentine Neighborhood Development Association, a nonprofit run by UG Commissioner Ann Brandau-Murguia.

On top of that, ABC is also requesting a $400,000 grant from the UG, plus a series of tax incentives and tax breaks that finances most — the Unified Government says all — of the $2 million project over 20 years.

That’s part of why, in a rare move, Unified Government staff is recommending that the UG Economic Development & Finance Committee not approve the project when it meets after the Neighborhood & Community Develoment Committee meeting, which starts at 5 p.m. Monday at City Hall, 701 N. 7th St.

“The big item in this is the public financing for the next 20 years that goes into this project,” said Unified Government administrator Doug Bach.

Unified Government Mayor David Alvey said he had concerns about the city’s investment in the project.

“Again, no private money in this,” Alvey told The Star. “I have a concern about that.”

Korb Maxwell, a Polsinelli lawyer representing ABC, said the federal grant from HHS was equity in the project.

“Projects in the urban core are difficult. We’ve worked for years to move this project forward. We believe it has the appropriate local government ratio,” Maxwell said. “And that the federal government loan is serving as equity in the project and it’s the only way to move forward the fast-food project in Argentine.”

The fast-food project first came up publicly in 2016. At the time, it envisioned three fast-food restaurants: Wendy’s, Pizza Hut and Dunkin’ Donuts. Dunkin’ Donuts eventually walked away from the deal.

The project earlier this year caught the attention of U.S. Sen. Jeff Flake, R-Ariz., who objected to HHS grants funding fast-food restaurants. In a speech on the Senate floor, he lamented HHS subsidizing “fast-food franchises in a Kansas county that year after year ranks as one of the state’s most unhealthy.”

Flake was referring to annual studies by the Robert Wood Johnson Foundation that have found Wyandotte County ranks at or near the bottom of Kansas counties in health outcomes.

Flake called the HHS grants to fast food “really just corporate welfare for three of the top 10 most profitable fast-food franchises in the U.S., each of which earns billions of dollars a year in profits.”

In an email to The Star last year, HHS spokeswoman Monique Richards said the Argentine grant was funded through the Community Economic Development program, which is meant to “create sustainable business development and employment opportunities in low-income communities.”

Former Unified Government Mayor Mark Holland would not place the project on an agenda for a vote, citing concerns with the project.

Alvey, who defeated Holland in an election last year, said the project deserved to have a public discussion.

“It’s not just about this project, it really will help the commission to discern what are our limits in terms of economic incentives,” Alvey said. “How willing we are to stretch and for what kinds of projects.”

Beyond the HHS grant, public incentives in the project includes a $400,000 grant from the Unified Government.

That grant would be reimbursed to the Unified Government over time through other public incentives. The development proposal looks to keep all property and sales taxes generated by the project for the next 20 years.

Those incentives include tax increment financing. TIF typically allows a developer to capture future sales and property taxes to pay for project costs like land acquisition, demolition, parking and site improvements. But TIF can’t pay for what’s referred to as “vertical construction,” such as walls, a roof and interior improvements to a building.

To get around that, ABC asked the Unified Government to pass what’s referred to as “home rule powers” for the local sales tax so that the developer can use sales taxes for project costs not eligible under TIF.

ABC has also asked for a community improvement district, which allows for an additional 1 percent sales tax above the state and local sales tax rate, which the developer can use to pay for other project costs.

All told, the Unified Government anticipates that public financing will account for $1.8 million, which includes the HHS grant.

The project would be built on about three acres of land currently owned by the Kansas Department of Revenue and the Unified Government through its land bank.

Unified Government staff said part of the reason it won’t recommend approval of the ABC project is the developer won’t agree to give the property back if it fails to finish the project 18 months after construction begins or if it fails to start construction 180 days after ABC gets all its permits and approvals.

“That’s typical in development agreement deals for us when we have interest in the ground, meaning ownership in the ground in some part,” Bach, the Unified Government administrator, said. “Our objective is in the end we see the project built and if it’s not, we take it back and try to do something else.”

ABC is expected to argue on Monday that it will have a difficult time getting a loan if it agrees to the Unified Government’s terms on the land.

ABC has also refused to pay a 2 percent administration fee, which the Unified Government has requested in order to have its staff account for and keep track of the sales tax subsidies for the project. ABC has agreed to pay only up to 1 percent, a difference of $7,788 in fees over the life of the project.

“That means I have to have a staff member who looks at that every month in a different way,” Bach said. “In accepting that term to advance, I requested a 2 percent administration fee that’s coming in and they would not agree to that.”

This version updates an earlier version of the story that said the Economic Development & Finance Committee was meeting at 7 p.m. That was the posted time on the Unified Government’s website, but a spokesman said that the meeting would begin after an earlier committee’s meeting, which starts at 5 p.m., ended.

  Comments