Development

Neighbors, schools say Cerner deal hasn’t met promise to revitalize south Kansas City

When LaCurtise Smith moved to south Kansas City’s Fairlane neighborhood in 1985 the area was booming. The nearby Bannister Mall supported big box stores, restaurants and movie theaters.

But since the mall’s downfall and its 2009 demolition, the area has experienced mostly decline. So much so that going shopping or enjoying a sit-down meal at a restaurant with forks and knives requires a trek to Lee’s Summit or Grandview.

“You’ve got to pack up. It’s like going on an outing,” said Smith, president of the Fairlane Homes Association. “You’ve got to take a bottle of water and everything just to go to the store.”

The story of declining neighborhoods, businesses and schools in south Kansas City is not new. But government officials promised revival before Cerner Corp. broke ground in 2014 on its massive new office complex over the former Bannister Mall site.

The healthcare IT company won a $1.63 billion incentive package for its $4.3 billion campus — one of the nation’s largest incentive awards and the state’s largest ever economic development commitment.

More than 3,000 Cerner employees work on the campus already, but their presence has brought little in the way of outside development — a new QuikTrip across the street from an employee entrance on East 87th Street is the most visible sign of new development. The lack of growth in the area contradicts one of the most frequent arguments in favor of economic development subsidies: the promise that development begets more development.

Cerner’s expanding modern office complex is certainly a welcome improvement from the ruins of the old mall. But the lack of outside development has created a rift between the company and some in the surrounding community, which is poorer and more racially diverse than other parts of Kansas City. And while Kansas City’s largest private employer builds shiny new towers with the aid of a massive tax subsidy, the surrounding Hickman Mills School District continues its fight for survival.

The school system lost out on millions in potential new revenue because of the company’s major property tax breaks. School officials say Cerner could have helped the beleaguered district, but that it has done little to help turn around decades of enrollment decline and shrinking budgets.

But Cerner appears to be meeting its financial obligations under the incentive program — a small pool of tax money is being diverted to the schools and neighborhood as part of the deal. And the company highlighted multiple educational programs that support students from kindergarten to 12th grade.

“Cerner has had a long, positive relationship with the Hickman Mills School District that stems from Cerner’s presence in south Kansas City for many years with work that began prior” to the tax incentives, spokeswoman Misti Preston told The Star.

Some of the tension between the company and the community boiled over when a Cerner employee gave a construction update during a recent community meeting. Residents complained that the area had been neglected for too long and that Cerner’s promises of development growth had so far failed to materialize.

Cerner officials say they are committed to continue growing the south Kansas City campus. And they’re still early in the building spree: the company doesn’t plan to finish construction of the wider campus until 2025. And it recently announced that long-awaited commercial development is finally coming to its campus.

Councilwoman Ryana Parks-Shaw, who represents the area, said she expects to see more development as Cerner expands its employee base in the area.

“I’ll just say I’m excited about what’s to come,” she said. “I think we’re off to a good start.”

Hickman Mills and Cerner

Between 1986 and 2017, enrollment in the Hickman Mills school district dropped by nearly 30 percent, according to a recent study on enrollment trends. The decline cost the school system an average of 72 kids per year.

Enrollment is the primary way the state determines school funding. Under Missouri’s per-pupil funding formula, a loss of 72 students costs about $347,250 a year.

School officials believed Cerner could provide a badly needed boost. But the 2018 enrollment study concluded there was “no relationship between Cerner’s employment expansion and whether the district’s enrollment could increase.”

The school system has gone deep into its reserve funds to help compensate. Its reserves have now sunk dangerously below the levels recommended by the state department of education.

All the while, Cerner has enjoyed big tax breaks that the schools say cost them $2.7 million in revenues this year had the company been obligated to pay its full property taxes. Collectively, the district expects the 23-year incentive plan to deprive it of $67 million in funding.

Cerner did agree to pay $6 million to the schools over the life of the agreement: Hickman Mills officials said they have received about $136,000 of those funds and have asked for an additional $299,500 so far.

“Under the current tax increment financing plan, the District has seen little benefit from the existing Cerner Development,” Wakisha Briggs, president of the Hickman Mills School Board, said in a statement to The Star. “Since the construction of the multi-office complex our district has experienced a decline in student enrollment and our community has become less stable.”

Despite missing out on increased tax money from Cerner, a third-party analysis of the incentive package in 2014 projected the school system would be a winner because of growth the project would bring.

The analysis said the district could gain $10.4 million over the first decade of the TIF agreement and $154.3 million over 30 years. That study expected the school system to receive nearly $1 million in new funding this year from an influx of more than 100 new students.

School officials also expected Cerner would bring more people and development to the district. But that hasn’t happened, and Briggs said the company has not forged much of a relationship with the schools.

Cerner told The Star that its First Hand Foundation has worked in the district since 2012. The foundation offers free wellness screenings for elementary students and high school health curriculum and programs in area districts. And the foundation has provided backpacks full of supplies for needy students among other efforts.

Additionally, Cerner programs provide summer internships, year-round apprenticeships and work-based learning experiences for students in multiple area school districts. The company’s partnership with PrepKC targets urban districts, including Grandview, Hickman Mills, Center and Kansas City Public Schools.

But the school system expected a deeper relationship.

Cerner could have offered specific scholarships to Hickman Mills graduates, Briggs said. She also thinks Hickman Mills’ efforts to build high-tech maker spaces provide an obvious opportunity for partnership.

“Such makerspaces create spaces for making, learning, exploring and sharing using high-tech tools,” Briggs said in her statement. “Cerner’s support in creating such spaces would be a good faith effort to creating the kind of collaboration necessary.”

Greg LeRoy, executive director of Good Jobs First, said targeted incentives can help with redeveloping distressed areas. But bringing jobs alone usually is not enough.

He said the savviest economic development professionals look more holistically at placemaking: it takes schools, parks, transportation, housing and amenities to provide a meaningful economic boost. Had Cerner’s incentive package paid more attention to those issues, LeRoy said, it could have helped the surrounding community capture more workers and businesses.

“If you’re really expecting to revitalize an area you can’t think about just one thing,” he said.

LeRoy’s organization tracks major subsidies across the country and was skeptical of Cerner’s big award from early on. But he said the tension in the south Kansas City community is somewhat predictable as TIFs frequently bleed schools and governments of financial resources.

“When you allow that much of your revenue to get diverted you’re underfunding the goods and services that all employers need to make it a good place to live and grow,” he said. “That’s the tension.”

Cerner’s Innovations Campus

Cerner founders Cliff Illig and Neal Patterson originally planned to put a new soccer stadium at the old Bannister Mall site after they acquired land there. But those plans fizzled after Wyandotte County lured the Kansas City Wizards — now Sporting Kansas City — to a different site at Village West in 2009. Before Patterson’s death in 2017, both men were part owners of Kansas City’s Major League Soccer franchise.

The healthcare IT firm, known for pioneering electronic health records, later targeted the site for a major office complex that promised to employ as many as 16,000 people. With as much as 4.7 million square feet of new construction, initial plans called for the campus to grow larger than even the 4 million-square-foot Sprint campus in Overland Park.

In 2013, the Kansas City Council awarded $1.63 billion in tax increment financing, an incentive program that diverts tax revenues back to developers.

The 23-year deal was and remains the nation’s largest TIF award, according to Good Jobs First.

In 2014, government officials pointed to Cerner’s planned $4.3 billion investment in south Kansas City as a pivotal moment in the area’s history.

Then-Gov. Jay Nixon lauded the company’s commitment to building at the site of the old mall, which he said was the “definition of blight.”

“To say this project is a big deal is an understatement,” the governor said. “This project is transformative and a defining moment for this region and the state.”

Then-Councilman John Sharp was similarly optimistic. He said the new campus would usher in other investments in the area.

“This project will not only bring Cerner jobs to the community but will also spur a rejuvenation of commercial retail services in the Bannister and Blue Ridge corridors,” Sharp said at the time.

The first phase of the development opened in 2017.

Community wants transformation

Sharp now acknowledges that progress in the area has been slow. He said a neighborhood survey found that residents felt none of their retail needs were being met save for one: the area’s array of liquor stores.

“It’s taken a little longer than we hoped to see major spinoff development as a result of the Cerner project,” he said.

Just off Bannister Road, tractor trailers sit in the parking lot of a shuttered Walmart. A chain link fence wraps around an old Chinese buffet. The weeds in one empty parking lot reach knee high.

But Sharp, now the president of the South Kansas City Alliance, said there’s been some movement in the area. Since Cerner moved in, a lighting store, a bakery and a cabinet store have moved in near the Home Depot on Bannister Road.

In neighborhoods, Sharp said he’s noticed recent investments in home renovations. On his street, he’s seen three vacant homes recently remodeled for occupancy.

“Those things don’t make any news,” he said. “It’s a couple homes here and a couple homes there. But it really makes a difference in a neighborhood.”

Still, many view Cerner’s 3,000-plus employees more as visitors than members of the community. With easy access to the interstate, most zip off to other parts of the metro at the end of every work day.

When they are there, employees have little reason to leave the gated campus, which contains a food court, a fitness center and a health clinic.

“They put all the needs on the campus,” said Alissia Canady, a former council member who lives in the area. “The only Starbucks in the community is on the Cerner campus.”

Mayor Quinton Lucas recently nominated Canady as the chairwoman of the Kansas City TIF Commission board, which he expects to more heavily scrutinize development tax breaks. She said there’s little the city can do years after approving the deal with Cerner.

“There were a lot of promises made. And I think there were good intentions behind them,” she said. ”But without things built up front to ensure there’s some direct benefit in the community, it hasn’t happened organically.”

She noted that the Planned Industrial Expansion Authority in 2017 began work on a proactive incentive plan to make the wider area desirable for developers.

Like it did with the school system, Cerner set aside $2 million for a neighborhood improvement fund as part of its TIF agreement. That money is supposed to be doled out by a special committee appointed by the mayor. But the current group lacks a chairperson, one of its appointees has died and it’s never held a meeting.

Lucas’ staff said he will soon appoint new members to all city boards and commissions, including the Cerner committee.

Even when it does meet, Canady said the $2 million won’t provide the sort of spark south Kansas City wants.

“It’s just like a drop in the bucket,” she said. “What the community wants to see is something transformational.”

Cerner’s construction progress

While the wider economic benefits of Cerner’s sprawling campus have yet to materialize, the company will soon bring some commercial retail development to south Kansas City.

At an Oct. 14 meeting of the South Kansas City Alliance, Tara Murrell, who leads the company’s construction efforts, said Cerner had nearly finalized contracts for two hotels, restaurants, a bank and an apartment complex along Bannister Road.

“I think you guys will be really excited when you hear what we’ve got going on,” she told community members.

Such developments were welcome news. But the meeting quickly shifted to deeper issues. Residents asked how the company planned to help improve schools and neighborhoods. They questioned why the once-public Hillcrest Road had been closed for Cerner’s private use.

One woman asked whether Cerner would consider bringing local small businesses into the retail development. She said the entire area had been neglected as other parts of Kansas City boomed.

“South Kansas City is the stepchild,” the woman said.

Another audience member asked how Cerner’s recent layoffs would affect the company’s growth plans. Murrell said she didn’t know if the campus would still house the 16,000 originally planned, but she said Cerner planned to put any future growth there and possibly consolidate other local campuses to the Innovations campus.

“There’s nowhere Cerner is going to build when we need space except on this land,” she said.

With two office towers complete and another two nearly finished, the campus will soon house some 7,000 workers, she said.

The original TIF plan called for Cerner to build about 250,000 square feet of retail space along with a 121,000-square-foot hotel along Bannister. But the company now plans to hand off the commercial development projects to other developers. It will soon seek a fifth amendment to its plan with the Kansas City TIF Commission.

That change will excuse the third-party developers from meeting requirements to hire a certain percentage of minority and female-owned businesses that Cerner is bound to, said Heather Brown, executive director of the TIF commission. While Cerner won’t build on the site, the projects will still receive tax benefits, Brown said.

That move has further alienated Cerner from the community, school officials said. They would like to see the company offer employment opportunities to those who live in the area.

Carla Fields-Johnson, a lawyer for Hickman Mills, said Cerner has not been a bad neighbor. But she believes the company wriggled its way into struggling south Kansas City with promises of prosperity. But now Cerner continues its taxpayer-supported building spree while “the community around it declines.”

Many students in the provisionally accredited Hickman Mills district are homeless or come from working poor families.

“There is so much that Cerner could do to help address the systemic and academic problems,” Fields-Johnson said. “What it would cost them to be engaged is minimal compared to the positive impact it could have on the community around them.”

The Star’s Allison Kite contributed to this report.
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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
Mará has written on all things education for The Star for 20 years, including issues of school safety, teen suicide, universal pre-K programs, college costs, campus protests and university branding.
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