Development

‘It will not be built without the TIF’: Luxury hotel project due for vote next month

A $63 million luxury hotel billed as Kansas City’s finest won’t get an initial vote on the substantial package of tax incentives developers want until next month, just days ahead of the mayoral election.

Members of the Tax-Increment Financing Commission Board ran out of time to vote Wednesday after more than three hours of testimony on the 143-room luxury hotel developers Whitney Kerr, Sr., and Eric Holtze hope to build on Wyandotte Street just east of the Kauffman Center for the Performing Arts.

They won’t decide on the proposal until their next meeting, June 12, meaning the subsequent City Council vote on the project is unlikely to come before city elections on June 18.

Kerr and Holtze brought forward their proposal last year, saying Kansas City needs a five-star hotel to compete for high-end travel and convention businesses with markets like Denver, Nashville and Las Vegas.

Kerr, senior director at Cushman & Wakefield, said he asked VisitKC why Kansas City wasn’t able to secure some of the larger organizations that considered hosting conventions here. He said they were told convention planners loved some of Kansas City’s attractions, like the Sprint Center and the Kauffman Center.

“But these 30 top convention planners said, ‘You don’t measure up with the competition in other cities, and until you do, you’re not going to get the high-quality conventions that we want to have here,’” Kerr said.

The hotel they propose would have performance spaces, a restaurant, plentiful concierge services and high-end wood, stone and leather finishes throughout the building.

That luxurious style — intended to attract “the Mercedes audience,” Holtze said this week — creates the need for incentives because the anticipated $230 nightly room rate would not cover construction costs. But they argue it would create a new market for high-end travel in Kansas City, boosting the Kauffman Center and complementing the Loews Kansas City Convention Center Hotel currently under construction.

The project costs $63 million to build, and according to an analysis performed on the TIF Commission’s behalf, the developers are asking for $23 million in incentives. That’s in today’s dollars.

Over the life of the TIF, the construction and financing costs amount to about $132 million, and incentives total $56 million.

To make it work, developers are asking the TIF Commission to redirect 75 percent of the new property taxes generated by project to help pay construction costs.

They’re also looking for a package of other benefits: redirection of 50 percent of personal property taxes; a sales tax exemption on construction materials; a community improvement district to levy a 1 percent sales tax for public improvements related to the project, and a Super TIF, which would reimburse developers for a range of other taxes paid, including for utilities, food and beverage.

In total, the proposal would subsidize nearly 40 percent of the project’s costs.

It comes at a time of increased scrutiny over the city’s use of TIF and other incentive programs, especially for high-end projects in the Crossroads Arts District and other parts of downtown. Developers say they need the incentives to finance the pricey finishes their hotel must have to be a five-star product.

“It will not be built without the TIF,” Kerr said.

Councilman Quinton Lucas, 3rd District at-large, a candidate for mayor and architect of the city ordinance that caps development incentives at 75 percent, was not enamored of the proposal.

“I need to hear a lot more positive about the project before I would be in support,” Lucas said. “Right now, I probably start with a — do we need another hotel? Do we want to make this the sort of thing we’re incentivizing.”

Councilwoman Jolie Justus, 4th District, Lucas’ opponent for mayor, did not immediately return a request for comment.

Crosby Kemper III is director of the public library, one of the local jurisdictions that would share the 25 percent of new tax revenue not diverted to hotel developers. If the project were built without incentives, all of those taxes would flow to the city, library, Kansas City Public Schools and other agencies.

Kemper said “there are certain differences between Kansas City and Nashville, Denver and Las Vegas that aren’t just about high-end hotels.”

“If we could move the Grand Ole Opry here, we might have a shot at something,”he said. “Denver, of course, we could move the mountains. Vegas, we could turn the Plaza into the Strip. I think most of that presentation misses the point of what actually generates economic growth.”

Developers argue that while some TIFs may deserve criticism, theirs is a win-win. The land the hotel would sit on is currently owned by the Muriel McBrien Kauffman Foundation and is not generating any property taxes because of its nonprofit status.

So, they argue, the 25 percent of new taxes those jurisdictions would get is still an increase.

Developers believe it would generate $17 million for city entities, including the taxing jurisdictions, over the 23 years the TIF is in effect. After that, they expect the property will generate $3.6 million annually.

Kerr and Holtze also plan to rehabilitate an existing building at Baltimore Avenue and 16th Street to serve as a rehearsal and staging area for the performing arts center. That project would cost $6.7 million and asks $1.4 million in incentives, according to a report prepared for the commission.

Critics on the commission took issue with the second project, which sits on the other side of the Kauffman Center from the proposed hotel site. They said the two projects on separate sites were being pursued simultaneously to ensure the proposal would qualify for conservation area status, a necessary step to get the TIF approval.

TIFs can only be granted in conservation, blighted or economic development areas.

In a letter included in the board’s meeting packet, William Thornton, chief legal counsel for Kansas City Public Schools, said the district had concerns with a project spread across two separate sites

“in which one of the project areas meets none of the conservation or blight characteristics and the other contains all of the conservation or blight characteristics.”

“While the statute may not preclude such action, KCPS does not believe that this is consistent with the spirit of the statute,” Thornton wrote.

Plans for the rehabilitation project are far more conceptual, and developers don’t anticipate starting construction until 2024. The hotel, Holtze said, could be done within two years following council approval.

An earlier version of this article incorrectly reported the cost of the project and the value of the incentives proposed. It has been updated.

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Allison Kite reports on City Hall and local politics for The Star. She joined the paper in February 2018 and covered Midterm election races on both sides of the state line. She holds a bachelor’s degree in journalism with minors in economics and public policy from the University of Kansas.
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