‘We are not just rubber stamps.’ KC board rejects incentives for River Market apartments
A Kansas City incentive board rejected a subsidy requested for a proposed River Market apartment development that city officials have been working to bring to life for years.
The Planned Industrial Expansion Authority board voted 4-6 on Thursday on a plan to award 25 years of tax breaks on a long-awaited project at 3rd Street and Grand Boulevard. 3G Development, a joint venture between CBC Real Estate Group and EPC Real Estate Group, had proposed spending more than $60 million to build 246 apartments there.
Since 2013, the city has tried to redevelop the vacant site, which is currently owned by the Kansas City Area Transportation Authority. The KCATA selected the developers after a competitive bidding process.
3G planned a five-story structure that would include retail space and underground parking. The site is near the Kansas City Streetcar and would also house a transportation hub with room for KCATA buses, scooters, ride share and electric vehicle charging.
Developers asked the PIEA board to award a 75% property tax abatement for 10 years, followed by a 37.5% abatement for 15 years. But several board members balked at awarding subsides to a project that included no affordable housing.
The Kansas City Council last year approved new rules that require developers seeking public incentives to set aside a certain share of their new housing units for residents earning lower incomes. 3G’s project, like several others, was submitted before the rules were finalized and was considered grandfathered.
But board members still questioned whether the public should play a role in building expensive housing units. Studios in the new building would start at just under $1,000 per month and some two-bedroom units would top $2,000 per month, developers said.
“I’m struggling with paying for more luxury housing,” said Councilman Kevin O’Neill, who also sits on the PIEA board. “...I struggle with subsidizing market rate apartments.”
O’Neill acknowledged how rare Thursday’s decision was. Kansas City’s incentive boards, whose members are appointed by the mayor, rarely say no to subsidy requests from developers.
O’Neill, an at-large council member who represents the Northland’s 1st district, said he was proud of the board’s vote.
“We are not just rubber stamps,” he said after the meeting. “We shouldn’t just give favors to everybody that asks.”
During the meeting, he also criticized the project for not meeting city standards for prevailing wage — minimum wage rules for workers employed on public construction projects. Like the affordable housing rules, this project was considered grandfathered in and not subject to those rules.
While stricter guidelines on developers could cost the city some projects, O’Neill said the city can’t keep awarding incentives for market rates apartments.
“Things that help the community shouldn’t be overlooked or be called onerous,” O’Neill said. “If you want to get tax breaks, then help the community.”
With the rejection of the incentives, the development team is exploring its options.
“Obviously, we’re disappointed,” said William Crandall, the managing principal at CBC Real Estate, “and I think we just need to take some time to consider what our next steps are.”
Developers justified the incentive request by highlighting complications of the property, which they agreed to purchase for $2.5 million, according to a third-party financial analysis. The site has challenges with infrastructure, including a 75-foot deep sewer line. It also has height requirements because of the nearby downtown airport.
In their incentive application, developers pointed to the numerous market-rate apartment projects that have been subsidized by taxpayers in recent years.
“Kansas City enjoys significant investment in urban multi-family housing, virtually all of it has been incentivized and offer rent concessions,” the application reads. “Thus, the competitive properties benefit from the reduced market rents, which our project will have to meet in order to be competitive.”
Kathleen Pointer, senior policy strategist with Kansas City Public Schools, said that isn’t a good reason for taxing jurisdictions like the school system and the library to give years worth of potential tax revenues.
“This was an application that essentially said they needed incentives because KC has already subsidized so much of this type of housing, which is an incredibly concerning reason for us to give someone an incentive,” she said. “The school district is tired of subsidizing projects like this one — not all of them. We’re wondering if it’s ever going to stop.”
Since the site is owned by the transportation authority, it is not currently generating any tax revenue. Officials estimated the project would deliver $9 million in new taxes if approved.
Councilwoman Katheryn Shields, District 4 at-large, previously submitted a letter in support of the project.
After being voted down by the PIEA, Shields doesn’t know if the project, if it comes back to the council at all, would ultimately be approved. In a phone call, Shields said she was surprised but, “that’s why we have these independent entities.”
David Macoubrie, the PIEA’s executive director, said the developer met all current requirements to qualify for the incentives.
“The developer complied with the rules set before him. There was no affordability requirement. There was no prevailing wage requirement,” he said. “But obviously the board chose to ignore that and express their vote that those things should perhaps be included anyway.”
Macoubrie doesn’t believe the project will happen without public support.
“It’s definitely going to require some level of incentive. Construction costs have gone up so much. It’s a very difficult site. People have been trying for almost a decade to make something work there and they’ve been unsuccessful.”
