A proposal to turn an outdated downtown office tower into mixed residential and commercial use may launch a major public policy debate affecting several other redevelopment projects.
A Kansas City agency empowered to authorize tax incentives for economic redevelopment projects sent a renovation proposal for Ten Main Center into limbo on Wednesday when agency commissioners expressed skepticsm that the project merited public assistance.
Of broader consequence, commissioners of the Land Clearance for Redevelopment Authority decided to draft a letter to City Hall requesting housing policy guidelines for proposals that aim to redevelop older office buildings that no longer are commercially viable into residences.
“We don’t really have a policy to deal with office-to-residential conversion,” said LCRA chairman Michael Duffy. “This obsolescence-of-floor-plate argument suggests a need to develop policy.”
Representatives of New York-based Sovereign Partners LLC, owners of the 21-story tower, said that the building’s 14,000-square-foot floor plates no longer attract businesses and that the tower is less than two-thirds occupied. The owners want to phase in residential use on the top 10 floors.
Duffy and LCRA vice chairman James White said they have become increasingly concerned about granting tax abatement for downtown conversions that don’t require low-income housing set-asides. White said he saw a “disturbing trend” for such conversions.
“You’re asking for our richest benefit with no public benefit,” Duffy said of market-rate and luxury apartment conversions that get property tax abatement without having to provide lower-rent housing as a part of their plans. “We need a set-aside policy to make sure people who work downtown can afford to live downtown.”
Kerrie Tyndall, Kansas City’s director of economic development, said she will take the commissioners’ concerns to City Hall and also encouraged them to put their request for a policy in writing. She said a low-income housing set-aside policy likely would be led by the city’s Housing Department.
Tyndall agreed that the city needs a comprehensive goal and demographic information about downtown residents.
“We need to look at a threshold of what a set-aside might be (as well as) the supply and demand of affordable housing downtown,” Tyndall said, noting that the Downtown Council is a good source for some of that information.
Duffy told Tyndall that “LCRA wants city action to be able to work within a larger framework” and not end up with a downtown that has mostly higher-income residents.
The broad policy discussion piggybacked on lengthy and detailed probing of the statutory meaning of “insanitary,” a condition under which developers legally can seek property tax abatements for redevelopment projects.
The building owner proposes a $22 million reuse of the 1968-era tower and adjacent parking garage. The building’s occupancy rate has withered in the last two years since AMC Entertainment Inc. moved to Leawood and vacated about a third of the tower.
An attorney for the owners, John McGurk, said the office tower is plagued by high vacancy, vandalism and vagrancy. He said that rent receipts are too low to afford more security services and that there’s a constant influx of transients, given the bus transfer station across the street and the public library next door.
Duffy and other commissioners questioned whether low occupancy contributed to crime and other problems on the premises and whether, given the building’s location, that residents instead of office tenants would improve things.
The five commissioners indicated they weren’t convinced the building at 10th and Main streets qualified for public assistance under their statutory authority. By failing to offer a motion to advance the project, the commission sent the building owners and developers into confusion about whether or how to proceed.
Roxsen Koch, a Polsinelli attorney representing the Ten Main developers along with McGurk, acknowledged downtown has a “long trend of office buildings with smaller floor plates losing commercial tenants.” She and McGurk said they will meet with their client to analyze options.
Bob Long, development services specialist with Kansas City’s Economic Development Corp., the umbrella over LCRA and other agencies, said options might include taking the Ten Main project to a different abatement-granting agency or trying to proceed without property tax abatement.
Long said he could recall only one other instance in which a Kansas City abatement agency declined to act on a proposal by not making a motion to vote the project up or down. In that instance, he said, the redeveloper went ahead with what was a condominium conversion without obtaining tax abatement.