Burns & McDonnell’s plan for a $130 million headquarters expansion project at 9400 Wornall Road cleared its first hurdle Tuesday when a development agency endorsed its request for tax increment financing assistance.
The fast-growing Kansas City-based engineering firm wants to build the addition next to its world headquarters at 9400 Ward Parkway to accommodate the 2,100 additional employees it expects to hire over the next decade.
The employee-owned business now employs 4,300 people overall, 2,600 of them locally. It was recently ranked as the 18th-largest engineering firm in the country by Engineering News-Record, a trade publication.
Burns & Mac wants to expand on the site of the former Beth Shalom Synagogue, which has been vacant for three years. The company plans to tear down the synagogue building and redevelop the property with a phased office development totaling 450,000 square feet and an 800-space garage.
The project would be developed by VanTrust Real Estate, which bought the 17-acre site last year for $2.5 million. Burns & Mac officials have said they plan to lease the new office complex for at least 15 years.
The request by VanTrust for $41.9 million in tax increment financing assistance was endorsed by the Kansas City TIF Commission. That amount includes financing costs over the 23-year life of the TIF plan, with about $22 million going toward actual construction.
The firm also is seeking a 25-year property tax abatement, scheduled to be considered next month by the Kansas City Council. It would be 100 percent for 10 years and 50 percent for 15 years. The current property tax generated at the site based on VanTrust’s purchase price is $90,000 annually.
At the TIF meeting, experts testified that the incentives are necessary because of the difficult conditions at the site. The former synagogue building has been vandalized extensively and has environmental issues such as asbestos and mold. The property also has substantial drainage issues.
“This is one of the most vandalized buildings I’ve seen in my 29 years of work,” said Scott Belke, the consultant who prepared the blight study.
A financial report indicated that without the incentives, the project would have a 3.45 percent return on investment to the developer. With the TIF and property tax abatement, the return would be 8.75 percent. That figure was described as within the range expected for similar projects.
But Patrick Tuohey, a representative for the Show-Me Institute, a libertarian-leaning think tank based in St. Louis, argued that Burns & Mac is a very profitable firm that is capable of building the development without incentives.
The firm reported $2.3 billion in sales in 2013, up 15 percent from 2012, and is projecting another 15 percent increase this year.
“If it makes sense for Burns & McDonnell, they’ll do it,” Tuohey said. “If Burns & McDonnell is allowed to cry poverty from taxpayers to build next to their corporate headquarters, then TIF has been a joke.”
But two City Council members representing the area said Burns & Mac’s plan to invest in the project is a vote of confidence in the city. About 82 percent of the total cost of the project would come from private sources.
“Burns & McDonnell has been a good corporate partner and corporate citizen,” said Councilman John Sharp.
Councilman Scott Taylor said, “This is the kind of business we want in Kansas City. This project is not going to work by hoping the free market will take care of everything.”
Even with the incentives, the project is projected to provide additional revenues to local governments over the life of the deal. The estimates presented to the TIF Commission included Kansas City, $93.6 million; Jackson County, $16.4 million; Center School District, $21.9 million; and Metropolitan Community College, $5.3 million.
If the council approves the TIF assistance and the property tax abatement, demolition of the vacant synagogue is expected to begin by midsummer, with construction of the 316,000-square-foot first phase of the office project beginning this fall.
The first phase would be completed in spring 2016.