Downtown office tower moves ahead — minus a big chunk of incentives developer wanted
A scaled-back incentive package for a $133 million downtown office tower won a City Council committee endorsement Wednesday, granting new momentum to a project that was at risk of stalling out.
The proposed tower, called Strata, was announced last year and would sit atop existing retail at 13th and Main streets in the Power & Light District. Its developers, Jon Copaken, Ron Jury and H&R Block, are building it speculatively, meaning they’ll build it without first securing an office tenant.
Developers and advocates say Kansas City’s lack of speculative high-end office space is a hindrance when the city tries to attract new businesses that want to move in quickly.
At first, Strata’s developers requested $63 million in debt guarantees, backed by the city’s general fund. But the new proposal, drafted after City Council members signaled opposition to the major public investment, would scale that back significantly. It passed the Finance, Governance and Public Safety Committee by a 3-1 vote, and the full City Council is expected to debate it Thursday.
“We think we can avoid a lot of the budget risk and get a new 250,000 office tower in a very prime location and meet our original commitments to H&R Block,” said City Manager Troy Schulte, who has been integral in negotiating the deal.
Under the revised proposal, Kansas City would play no part in the tower itself. The city was originally asked to guarantee $27 million in debt on the tower in exchange for a 28% revenue stake, potentially receiving part of the tower’s profits. That was struck from the deal.
Kansas City will still guarantee $36 million in debt on the 750-space parking garage with the hope that operating revenues and a PortKC incentive will be enough to pay for it without dipping into the city’s coffers. Developers are also seeking a 75% abatement of property taxes and a 75% redirection of city earnings taxes generated by the jobs at the site.
As part of the revised deal, developers offered several tweaks to minimize the risk to the city in backing the garage debt.
Copaken said developers will be last in line to receive funds generated by the project, including garage revenues and money generated by the PortKC Aim Zone, which redirects state taxes generated by new jobs in the tower to help pay for the project. To help protect the city from having to pay for shortfalls, those funds will go first to pay the debt on the garage and then to other public payments before finally flowing to the developers.
Councilwoman Katheryn Shields, who represents downtown and chairs the committee, said if the Aim Zone dollars come in as estimated, it will “clearly work.” She also appreciated developers’ agreement to give up part of another incentive — a redirection of city earnings taxes — if other revenues don’t sufficiently cover the garage payments.
“I think both of those things very much help protect the city’s bottom line and our general fund, and I appreciate how cooperative the developers have been in multiple meetings working and working to this final point,” Shields said.
But Councilwomen Melissa Robinson, 3rd District, and Ryana Parks-Shaw, 5th District, were unconvinced.
Parks-Shaw said she wasn’t comfortable voting on the changes after being handed a 30-page document on the deal just moments before the discussion began.
“This was delivered to me as I was sitting here,” Parks-Shaw said. “I can’t read 30 pages as we’re sitting here.”
According to Schulte, tweaks were still being made to the deal earlier Wednesday morning.
Robinson said she wouldn’t support the deal, but missed the vote, which was delayed into the afternoon after morning committee meetings ran long. She said economic development is too focused on downtown and doesn’t benefit other parts of the city, including her district.
Wednesday marked the third time the committee has considered the deal. It’s been on the City Council docket only to be kicked back to committee twice.
Voting for the proposal Wednesday were Shields, Mayor Pro Tem Kevin McManus and Councilwoman Heather Hall. Parks-Shaw voted no.
This story was originally published November 13, 2019 at 3:25 PM.
