Kansas City tax abatement board wrestles with precedents

One developer was sent back to the drawing board. Another was given the go-ahead after each presented unusual requests as part of property tax abatement proposals.

The Planned Industrial Expansion Authority, one of Kansas City’s boards empowered to grant tax abatements as a means to facilitate development, typically rules on developers’ requests to receive a 100 percent abatement for 10 years, followed by a 50 percent abatement for 15 years on the development’s added value.

Also typically, the abatement plans require PILOTs, or payments in lieu of taxes, negotiated to lessen the abatements’ effect on what taxing jurisdictions, such as counties, school districts and libraries, might have received if abatements weren’t granted.

On Thursday, a developer’s request to rehabilitate a series of run-down apartment townhomes at 18th Street and Topping Avenue was tabled because the proposal asked for relief from any payment in lieu of tax responsibility. Expansion authority members said they wouldn’t set that precedent by removing that obligation.

Attorney Roxsen Koch, representing KM-TEH Realty 5 LLC, the developer proposing the $11 million Green Village apartment rehabilitation on Kansas City’s East Side, was asked to return to her client and come back with a payment offer.

“We can’t open the barn door for every other developer to ask us to waive PILOTs,” said expansion authority member Bonnie Sue Cooper, reflecting the board’s sentiment. “I can’t vote for (abatement) with waiving PILOTs.”

Except for the PILOT problem, the board largely approved the project’s goal — to upgrade the affordable, market-rate apartments that now have a high vacancy rate and need significant remodeling. The plan calls for the one- to four-bedroom units to rent for $425 to $650 a month, Koch said.

At the same meeting, the board gave a green light for an industrial development project to proceed through the tax abatement procedure, despite an unusual proposal to allow the tax abatement period to be reset after the first phase of a four-phase development proposal.

The approval went to Universal Land Development Co., which wants to build four large industrial/warehouse buildings on 60 acres of undeveloped ground east of Interstate 435, between the Missouri River and Front Street.

Attorney Aaron March, representing the development company, submitted the proposal for a $54 million project that requires the developer to put in streets, utilities and other infrastructure before it builds its first speculative industrial building, planned to cost about $19 million for 250,000 square feet.

Because of the high cost upfront, March said, the company sought a traditional tax abatement plan for the first phase, starting in 2016, but it then wanted to start an abatement period timeline anew for its $12 million, second-building second phase in about 2020. It also sought plan variations for phases three and four.

Despite disapproval from Jackson County taxing authorities, who want to retain the one-time, 25-year abatement timeline for the entire development, the expansion authority decided that the economic development benefit of the project called for approval.

“Kansas City is losing projects like this” to suburban communities, said David Macoubrie, the board’s executive director. “We don’t have competitive, large industrial buildings to offer. This is badly needed,” and if each phase were to get a 25-year abatement, it would be good news because “it means they’re building the project.”

Board member Brian Noland said he was confident that current and future expansion authority boards could rule on each proposal on its merits and not worry about setting precedents.

This story was originally published September 17, 2015 at 1:50 PM with the headline "Kansas City tax abatement board wrestles with precedents."