Waddell & Reed plan narrowly passes KC Council — even with controversial garage
Despite vehement objections from neighbors and the two members who represent the area, a divided City Council on Thursday signed off on a development plan for Waddell & Reed, which plans to build an 18-story office building in downtown.
Waddell & Reed, a financial services firm currently headquartered in Overland Park, has already started site work for its new building at 14th Street and Baltimore Avenue, where it plans to move more than 900 employees. The City Council voted 7-6 to sign off on its design, which includes a 10-floor, 913-space parking garage and eight floors of office space.
In a statement, the company said it appreciated the “collaborative spirit and partnership” in the review process.
“We are pleased to be moving forward in our plans to move back to downtown Kansas City, Missouri,” the company said. “This unique design and structure will accommodate a modern, agile workforce, while providing an experience and environment that helps us retain and attract top talent to the city over time.”
Neighbors contend the building, which received significant tax subsidies to move downtown, seems designed around cars and not to fit the prominent city block where it will sit. The legislation council members approved Thursday includes a provision requiring the developers to continue work with city staffers on the parking issue.
That pledge didn’t win over the council members who represent downtown: Councilman Eric Bunch, 4th District, and Councilwoman Katheryn Shields, 4th District at-large.
“Well, they haven’t worked with staff for a year now,” Shields said. “What’s going to get them to come back to the table … is, in fact, us turning this plan down because it is insufficient.”
Shields said it was made clear to developers last year when the City Council signed off on tax incentives for the building that it needed to be pedestrian friendly.
“Now they’ve come back with a design that looks like they’re still out in Kansas and still trying to build something that’s going to be in the middle of a wheat field,” Shields said. “This isn’t the middle of a wheat field. This is downtown Kansas City, the heart of our city.”
Bunch said he didn’t want to “rubber stamp” the project “with the hope that one day they’ll work with staff.” He argued they had not done so to date.
“We’ve given away school district money, library money, our own money to make this project happen,” Bunch said, “and I think the very least we could do is ask for it to comply with adopted policy.”
Burns & McDonnell, which is working on the project, did not immediately return a request for comment Thursday evening.
Supporters, including Councilwoman Teresa Loar, 2nd District at-large, argued if the council didn’t pass the development plan, the company would walk away from the deal. She said they had worked with staff, contrary to 4th District officials’ argument.
At times during the debate, it seemed as though the council might send the plan back to committee for more work.
“I can’t really tell if the project has the votes,” Mayor Quinton Lucas said during debate. He later broke a 6-6 tie to approve the project.
In a statement after the vote, he noted the city negotiated last year to reduce the tax incentive offered to Waddell & Reed.
“After months of negotiation — in which the City significantly trimmed its financial contribution to this project — last year, the City Council approved this contract and we’ve since turned our attention to construction and completion,” he said. “I expect project developers to work with our City staff to ensure the building structure enhances downtown Kansas City.”
Neighborhood opposition
Downtown residents turned out in droves earlier this year to make it clear they didn’t support the proposed design of the building, which, at that time, had no ground-floor activity.
But even the addition developers made — some retail space at one corner and an “urban park” along 14th Street — hasn’t been enough to win over those residents. They object to what they and the city’s own planning department believe is far too much parking.
In an email Thursday, Josh Boehm, vice president of planning and design for the Downtown Neighborhood Association, urged council members to vote against the project. Boehm said it was rare that the group would “vocally oppose” a downtown development project.
“We are generally in favor of more neighbors, workers, and visitors, and we want to make sure this project is able to move forward,” Boehm said. “But the development proposal you are voting on today will do more harm to our neighborhood than good unless you perform your duties as councilpeople to hold this developer and the designers accountable.”
Boehm also argued — contrary to what developers told the council’s Neighborhood Planning and Development Committee — that subsidies, not market forces, drove the firm’s decision to include such a large parking garage.
“After months of campaigning on incentives reform and putting neighborhood voices first, it is time for you to put the neighborhood’s concerns and the advice of your own professional planning staff on an even footing with developers,” he said.
According to city staff, Waddell & Reed is not obligated by code to provide any parking at 14th and Baltimore. And the city’s planners recommended a 575-space garage. In an analysis of the project, planners said the design gives “a perception that the intent is simply to get employees in and out by car.”
Concerns over parking
Where downtown neighbors and city planners, citing the city’s own policies, took issue with the parking, some council members were drawn to it as a possible solution for a coming parking pinch.
Kansas City may soon have to close Barney Allis Plaza and the garage underneath, which serves the downtown convention industry and Municipal Auditorium. The 65-year-old garage has almost no ventilation and has required structural repair to keep chunks of its ceilings from falling on cars.
Replacing Barney Allis with a garage half its size and a street-level plaza that might get more notice than the lofted green space that’s there now would cost more than $61 million.
To help offset the loss in parking, the city bought a $5 million piece land at 12th Street and Broadway Boulevard for another garage. But it has yet to move forward on that project, which would take more than a year to build.
Councilman Lee Barnes, 5th District at-large, and others saw the massive Waddell & Reed garage, which won’t be complete until 2022, as a possible fix for the immediate parking loss. The garage spaces are expected to be open to the public at night and on weekends.
“This is one way that we can fulfill some of the parking needs that are going to occur downtown,” Barnes said.
Kansas City’s auditor found last year that public investment in garages is considered on a “project-by-project basis” and that “public financing continues to support the development of significant new parking supply downtown that may be counter-productive to long-term transportation and economic development goals.”
The finances
Waddell & Reed’s approval also comes at a precarious time in the global economy because of the spread of the novel coronavirus, or COVID-19. And even before the City Council signed off on tax subsidies for the tower last year, a former executive warned of the firm’s own financial footing.
Over the month of March, the assets under the company’s management — a key metric for evaluating financial services firms — fell by more than 13% or $9 billion, according to a form the firm filed with the Securities and Exchange Commission. From 2018 to 2019, the firm’s net revenues — or profits — fell by more than 37%. Last year, the firm informed Kansas it would lay off more than 150 workers.
When the stock market closed Thursday, Waddell & Reed was trading at $12.25 per share, down from $17.27 per share on Feb. 11.
The company said it “maintains a strong financial profile” and has significant cash reserves and little debt. It has a strategic plan in place that includes the planned move to downtown.
“While short-term market volatility can impact asset levels, our financial position remains strong,” the company said. “During the recent disruption brought on by the COVID-19 pandemic, we have not initiated any layoffs, furloughs or reduced hours.”
The company said during the crisis it has maintained pay for all employees, paid bonuses to some, temporarily increased wages for client services employees, boosted benefit coverage for COVID-19 treatments and increased its philanthropic support to respond to the pandemic.
Waddell & Reed won state incentives on its promise to bring jobs from Kansas, a plan that was important to the City Council when it made its decision.
If Waddell & Reed’s payroll isn’t what it promises at any time during the abatement, the city does have clawback provisions.
The state of Missouri last year granted the company up to $62 million in tax incentives to move its operations and employees less than 10 miles from Overland Park.
In December, a divided City Council approved $35 million in local aid to the project in the form of a six-year 75% tax abatement followed by nine years at 37.5%, a sales tax exemption on construction materials and a redirection of earnings and utility taxes.
The combined $97 million in subsidies was approved only a short time after officials in Kansas and Missouri agreed to stop using their tax incentive programs to poach jobs from each other. That practice, dubbed the economic development “border war,” for many years moved companies back and forth across the metro without necessarily creating any new jobs.
Voting in favor of the project were Lucas, Loar, Councilman Dan Fowler, Barnes, Councilwoman Andrea Bough, Councilman Kevin McManus and Councilman Kevin O’Neill. Voting against were Councilman Brandon Ellington, Councilwoman Melissa Robinson, Shields, Bunch, Councilwoman Parks-Shaw and Councilwoman Heather Hall.
