Commission rejects subsidies for luxury arts hotel in downtown Kansas City

A rendering shows the proposed luxury hotel planned on Wyandotte Street near the Kauffman Center for the Performing Arts.
A rendering shows the proposed luxury hotel planned on Wyandotte Street near the Kauffman Center for the Performing Arts.

A city board that decides whether developers should be granted public subsidies for their projects recommended Thursday against support for a luxury hotel targeted to “the Mercedes audience.”

Members of the Kansas City Tax Increment Financing Commission Board voted 8-3 against a 23-year TIF agreement for a high-end hotel projected to cost $63 million to build. The board is only a recommending body, but its negative vote means the project now needs a supermajority of nine votes to win final approval from the 13-member Kansas City Council.

Developers Whitney Kerr, Sr., and Eric Holtze hope to build a 145-room hotel on Wyandotte Street just east of the Kauffman Center for the Performing Arts. They said Kansas City needs a top-of-the-line hotel to compete with other major American cities for the best conventions and events. The performing arts focus of the hotel is designed to complement the adjacent Kauffman Center.

“We’re trying to create a segment of the hotel industry that does not exist in Kansas City at the moment,” Kerr told the board Thursday.

The vote reflects a growing skepticism about the value local economic development subsidies. During his campaign earlier this year, new Mayor Quinton Lucas was frequently critical of incentives for new development, particularly for luxury projects or those in prospering areas like downtown.

Last week, Lucas announced a new slate of appointees to the TIF commission who he expects will approach development deals judiciously.

Developers of the hotel have sought significant public support for their project.

All told, the hotel is expected to cost more than $121 million, a figure that includes financing and interest costs. The team has sought about $45 million in TIF and Super TIF revenues to offset the cost of development.

TIF subsidies work by directing all or parts of future property tax increases back to developers to help cover the project costs.

They’ve also sought $1.8 million in community improvement district funds, along with redirection of personal property taxes and a sales tax exemption on construction materials.

Developers have previously said the project would not be built without the TIF funding. On Thursday, they handed out a prepared press release after the board’s vote. It noted that the project will still proceed to council for a final vote. The press release also said “extraordinary benefits would be lost” if the project is rejected.

Developers offer more tax revenue

The project requires no upfront investment of cash or financial guarantee from the city. Approval would yield an estimated $26 million in revenues for schools, libraries, and county and city government over the life of the 23-year agreement.

“We are very much looking forward to proceeding to the City Council, where we hope the mutual benefits of this exceptional public-private partnership will be recognized,” the press release read.

In addition to the hotel, developers plan to rehabilitate an existing building at 1616 Broadway to serve as a rehearsal and staging area for the performing arts center. The board sought assurances that this segment would actually be completed as the rehearsal hall is the piece of the proposal that qualifies it for TIF approval. TIFs can only be granted in conservation, blighted or identified economic development areas.

On Thursday, the development team presented plans to provide increased revenue to the schools, county and library taxing jurisdictions. They changed their initial proposal by offering to route new parking revenues generated by guests and employees to local taxing jurisdictions.

But city officials said they could not confirm the parking revenue projections provided by developers, said Kerrie Tyndall, Kansas City’s assistant city manager for economic development and a member of the TIF board.

Shannon Jaax, director of planning and real estate for Kansas City Public Schools, said the public subsidy was still too high.

“This still is not at a level were comfortable with,” she said before voting no.

The board also heard concerns from Visit KC, the city’s visitor’s and convention bureau. It unveiled a study earlier this year showing that the local supply of hotel rooms is outpacing demand.

Caleb Clifford, the chief of staff for Jackson County Executive Frank White, said the hotel developers sought an “almost if not completely unprecedented amount of public investment.”

“I really think that if you look at this project and say we’re going to be supportive of it, I question what do we not support,” he said.

Estella Morales prefaced her vote in favor of the project by saying she believed “that investment makes our city better.”

Troy Nash, chairman of the board, noted that the adjacent Kauffman Center was completed with public support. He said the developers were “pioneers of sorts” as they were pursuing the city’s first 5-star hotel.

Nash acknowledged that the hotel was aimed at an elite audience but said that such a development would keep Kansas City competitive with other places like Omaha and Denver.

“The reality is that we want people with a lot of money coming to our city and leaving a portion of it behind,” he said.

Editor’s Note: An earlier version of this story included the wrong address of a planned rehearsal hall. It has been updated to reflect the correct address of 1616 Broadway Boulevard.

Related stories from Kansas City Star

Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas