Kansas City overwhelmingly OKs millions for company moving a mile into luxury offices
The Kansas City Council overwhelmingly approved a controversial incentive package that will subsidize a luxury office tower for a local company moving just a few blocks.
With little debate on Thursday, the Council voted 11-1 to award $7.5 million in property tax abatements to Fidelity Security Life Insurance, which plans to move from its offices on Broadway Boulevard into a new $83.4 million tower at 2700 Grand Blvd. near Crown Center.
Only Councilwoman Ryana Parks-Shaw voted against the measure. Councilman Brandon Ellington was absent from the vote.
Several Council members balked at the idea of subsidizing yet another parking garage for a private development, particularity one located just steps away from thousands of parking spaces at Crown Center and along the extension route for the Kansas City Streetcar.
Fidelity Security’s 400-spot parking garage was cited as a major driver of the need for public support in an independent financial analysis. That report also suggested the office tower could be built with 10 years of property tax breaks, rather than the 15 that were requested and approved.
Parks-Shaw said the Council should stop awarding excessive incentives to big businesses at the expense of public schools, libraries and mental health services, which are all funded by property taxes.
“I am concerned about the fact that we are continuing to do this,” she said.
With no claim of a public benefit, the project’s incentives have come under fire from neighbors, schools and the library.
Fidelity Security has not proposed to add more jobs, but simply move them less than a mile from the current headquarters on Broadway Boulevard.
That has irked observers who note that Kansas and Missouri ended their practice of awarding costly tax breaks to companies just for hopping the state line. But Fidelity Security will receive millions for simply relocating down the road.
“It’s like a border war that we’re playing with ourselves,” said Janice Bolin, director of finance for the Kansas City Public Library. “We’ve drawn a truce with bordering jurisdictions, but now we’re sticking it to ourselves.”
Before the Council’s vote, Bolin said she worried that an approval could send a startling message to other local businesses.
“I think it sets a bad precedent for the city, “ Bolin said. “Because I feel like any company now that wants a new office building can threaten to leave the city and kind of hold us hostage for tax incentives.”
Like the heavily subsidized Waddelll & Reed tower in downtown Kansas City, the insurance firm sought incentives before submitting specific design and development plans. In the case of Waddell & Reed, which has since been purchased by a foreign company, neighbors and city officials were frustrated that they had limited sway over design particulars once the incentives were awarded.
Councilman Eric Bunch, who represents the area, introduced a change to the Council’s ordinance on Thursday. He said he was frustrated by the Waddell & Reed process.
But he acknowledged his change, which the council endorsed, was largely ceremonious. It added language about the Council’s role in reviewing future development plans for the office tower.
“It doesn’t really do anything substantive,” he said. “It simply just reinforces our role in being careful and taking careful consideration to the development plan as it comes to us for approval with the future rezoning.”
Bunch also lamented the parking dynamics of the project.
The financial analysis completed by S.B. Friedman says the $16.7 million parking costs account for 20% of the total cost of the project. That’s about $41,000 per parking space.
“There are literally thousands of parking spaces within blocks of this project and here we are incentivizing a project with 400 parking spaces.,” he said. “So I just want to highlight that as a continued problem that we should seek to fix through policy as a policy making body. This is driving up costs of every single project when we know there is a simple solution, which is a shared parking strategy.”
Bunch ultimately supported the incentive request.
Academics have found that politicians frequently offer more incentives than are necessary, said Nathan Jensen, a professor of government at the University of Texas at Austin. Generally, academic research has found that at at least 75% of companies awarded incentives would have made a similar investment regardless of the public subsidy, he said.
Still, Jensen was astonished by the Fidelity Security incentive package, particularly because of the historic truce between Kansas and Missouri. He researches government incentives and studied the border war between Kansas and Missouri for years.
“I’m kind of flabbergasted is the best way to describe it,” he said. “There’s not even a claim of any public benefit.”
Another major factor driving the incentive request was the building’s unique curved design. Jensen found that particularly galling, as the company was in essence seeking public subsidies for building a more costly building than is necessary.
“I think the gold toilet is a pretty good analogy here. We really want this, this would be super cool for us, will the public pay for it, please?” he said. “That is really, really rare.”
Fidelity Security received a 15-year property tax abatement that will cut taxes in the first decade by 70%, and by 30% for the following five years. That’s estimated to be worth $7.5 million. The company will also receive a sales tax exemption on construction materials and $3 million from the Missouri Works program, which is aimed at encouraging business expansion and retention.
Before the vote, officials with Kansas City Public Schools said students shouldn’t lose out on potential revenue to subsidize more parking in an area home to thousands of existing parking spaces. KCPS has pushed for the city to implement some sort of shared parking plan or strategy for the Crown Center area to no avail. And they worry this issue will come up repeatedly as more development occurs along the Main Street extension of the Kansas City Streetcar.
“We’re always concerned when a project is over-incentivized because it’s potential dollars coming out of our classrooms,” said Kathleen Pointer, senior policy strategist for the school system. “But especially at this location and especially considering it’s an over-ask for a company already located within Kansas City.”
This story was originally published December 9, 2021 at 6:04 PM.
