‘This was a tough one’: Kansas City Council approves tax incentive for Waddell & Reed
A controversial package of tax incentives for a company moving to Kansas City from Johnson County passed a divided City Council Thursday, despite members’ complaints that the proposal was too generous and the process disrespectful to area schools.
Council members voted 8-4 in favor of a pared down incentive package for Waddell & Reed, a financial services firm currently headquartered in Overland Park.
The company plans to move more than 900 jobs to a new building planned at 14th Street and Baltimore Avenue and will receive just over $35 million in local incentives and $62 million in subsidies from the state of Missouri. All told, the benefits represent nearly 70% of the $140 million project budget. The company plans to hire another 120 employees over the next six years.
Mayor Quinton Lucas, who was supportive of the deal even at a higher incentive level, said every development project gives him qualms and heartburn. He’d rather not offer incentives at all.
“It’s not the perfect deal. I don’t like these any more than anybody else,” said Lucas, who made limits on incentives a major message in his mayoral campaign. “I think it is still something that we need to do to continue to develop and stimulate Kansas City, and I think to the extent that we do it, we need to make sure that we’re collaborating in as many situations as possible with the public schools and others.”
Council members bumped Waddell & Reed to the bottom of a lengthy docket Thursday to allow time for 11th-hour negotiations over the incentive package. Kansas City Public Schools has pressured the city to reduce the property tax abatement the building will receive. The district’s board last week took the extraordinary step of adopting a resolution formally announcing its opposition to the project.
A divided council
The last-minute wrangling, which resulted in an amendment to the ordinance, frustrated several council members who voted against the project. The amendment also allocated $10,000 in city funds to support public relations efforts around the controversial project.
Councilwoman Melissa Robinson, 3rd District, a former KCPS board president said the school district hadn’t been treated appropriately in the process. She criticized Councilman Kevin O’Neill, 1st District at-large, who noted the city would benefit from more earnings tax revenue as a result of the jobs promised.
“We cannot salivate over earnings tax to an extent that we are giving up children’s education,” Robinson said. “We talk about violent crime in this community — there is a direct correlation between our ability to educate children and the homicide rate that we have.”
Councilwoman Heather Hall, 1st District, urged the council to hold the matter until the New Year. She lamented that KCPS and other taxing jurisdictions were not given enough consideration earlier in the negotiations and that the council was “scrambling” with an amendment on the floor.
But Councilman Eric Bunch, 4th District, who had been skeptical of the venture because of the opposition from the school district said the compromise won his support.
“My support of this project really hinged on something where we could go to bat for the school district and something that they were O.K. with,” Bunch said, “and I think we got there, so this was a tough one.”
In the audience, a small group of critics held signs with Lucas’ face and his previous statements critical of the city’s approach to development. Lucas has championed reforms to economic development incentives and often criticized projects.
One sign, with a quote pulled from a KCUR report, said the city needs to “stop giving away the whole farm west of Troost” Avenue.
Asked about the signs, Lucas argued the Waddell & Reed deal was better than others, including a speculative downtown office tower called Strata, because it had a known tenant and didn’t ask the city to guarantee any debt or backstop the project.
“At no point did I say we would abolish all incentives,” Lucas said. “What I said was that we will continue to take steps to make the provision of incentives more responsible.”
A generous deal
Originally, Waddell & Reed was set to receive $44 million in local incentives, including a 10-year 75% property tax abatement. That package was reduced slightly last week, but negotiations for even more funds for schools continued.
The deal that emerged Thursday, according to KCPS, reduced the original incentive by $8.6 million, giving Waddell & Reed an overall local package worth about $35 million. The property tax abatement was reduced to a six-year 75% deal followed by nine years at 37.5%. That’s worth about $19.8 million. Waddell & Reed will also benefit from a sales tax exemption on construction materials worth about $2.7 million and a redirection of earnings taxes and utility taxes worth about $13 million.
All in all, Waddell & Reed will receive just shy of $100 million in incentives.
Dave Frantze, an attorney representing Waddell & Reed, said the development team had not independently calculated the value of the local incentives.
The amended version of the ordinance also allocates $10,000 to the city’s communications department for “educating the public about the project and agreement terms.”
Councilwoman Katheryn Shields, 4th District at-large, said it was incumbent on the city to do so because there was “so much misinformation” about the project. She cited a kerfuffle earlier Thursday in which it was unclear whether Waddell & Reed would be subject to a downtown tax that helps fund the streetcar. The company will have to pay it.
“So the purpose of the $10,000 is to supply the communications department with some minimal additional funds to either create a sign on the website that helps explain all of this — or whatever other tactics we think are appropriate — so the people aren’t spreading things unintentionally that aren’t true and not giving recognition to the really great work that our staff and, frankly, some of our newer council members and our mayor have done on this project,” Shields said.
Asked about the appropriation, Lucas said it was not atypical for the city to spend some funds in such a manner.
State and local officials in Kansas and Missouri expect Waddell & Reed, which announced the move this summer, to be among the last companies to receive major incentives to hop the state line from one part of the metro to another. The practice, dubbed the economic development “border war,” is regarded by many to be wasteful because it spends taxpayer funds to move jobs around but not necessarily create new ones.
Officials on both sides of state line have agreed this project is grandfathered into the truce they signed this summer.
Council members Heather Hall, Brandon Ellington, Melissa Robinson and Ryana Parks-Shaw voted against the project. Mayor Pro Tem Kevin McManus was absent. The rest of the council and Lucas voted to approve the project.
This story was originally published December 19, 2019 at 8:05 PM.
