Three major KC redevelopment projects are greenlighted with tax abatement approvals

Three redevelopment projects that will significantly alter three Kansas City neighborhoods received property tax abatement approvals Thursday that the developers said will make their plans financially feasible.

The Planned Industrial Expansion Authority, with minimal disagreement, greenlighted tax breaks for:

▪ An $80 million Gallery Green development by Milhaus and UC-B that plans more than 400 residential units on 18.4 acres of mostly vacant property between Crown Center and Union Hill.

▪ A $39 million renovation by Aparium Hotels of the long-vacant Pabst and Pendergast brewery buildings in the Crossroads Arts District into a 125-room boutique hotel, restaurant and art gallery.

▪ A $63 million, four-phase project by Joseph Kashani to convert the empty former MGE office building at 34th and Broadway into apartments and to erect retail and apartment buildings and townhouses on the site.

The Gallery Green project, planned for south of 27th Street along McGee Trafficway, earned multiple kudos as a project that undertook extensive negotiations with the city, the taxing districts such as Jackson County and Kansas City Public Schools, and neighbors to craft a workable plan and agreed-upon public incentives.

The project, on property purchased from Hallmark Cards, last week dodged a potential citizens referendum petition against it, partly because taxing district representatives agreed with the abatement plan.

The 25-year, 60 percent property tax abatement applies to the planned 356 rental or leased properties, not to about 70 planned for-sale residential units. The agreement also provides for $447,457 in payments in lieu of taxes in the project’s first year.

The project still needs to undertake a rezoning process but otherwise is on track for groundbreaking by September.

When completed, Gallery Green is expected to contribute $25.6 million to the tax rolls, with about $8 million of that going to the public school district.

The Gallery Green developers, who have been involved in many urban housing redevelopment projects, also committed $1.47 million to the city for its intended Shared Success Fund, which aims to make possible targeted development projects east of Troost Avenue. That is payable at a rate of about $60,000 a year over 25 years, said Charles Renner, attorney for the developers.

Kevin Masters, representing the school district, made a point of telling PIEA chairman Lee Barnes that the taxing districts “had nothing to do with” the petition flareup and that, as a city councilman, Barnes needs to talk to his constituents to help them understand that “this is a project where things can go right.”

In contrast, there was some opposition to the Aparium Hotels abatement plan from Jackson County taxing authorities who argued that the Crossroads and downtown areas are booming with hotel projects and that the plan ought to be able to proceed with less public assistance.

Commissioners nonetheless unanimously approved a 75 percent property tax abatement for 16 years plus a sales tax exemption on construction materials for the project.

Additionally, the city agreed to redirect about $5.75 million in sales taxes to help pay project costs at 2101-2107 Central Ave.

“This is a 20-year vacant property and historic buildings worth preserving,” said Kerrie Tyndall, the city’s director of economic development. “The hotel will add 150 jobs, and the developers came down 32 percent from their original incentive request.”

The vacant buildings currently generate about $42,000 a year in property taxes, an amount expected to jump to $85,000 in the second year of the redevelopment and about $416,000 by the end of the abatement period, said John McGurk, attorney for Aparium.

Crossroads businesswoman Suzie Aron urged PIEA approval, saying, “These are truly blighted buildings that have been vacant for 20 years for a reason. … We’re excited to have this blight gone, and the Crossroads neighbors are 100 percent behind it.”

Also despite some reservations, the MGE project was awarded a 100 percent tax abatement for 10 years, followed by a 50 percent abatement for 15 years.

Commissioners, with one no vote, decided the large property tax break was warranted because of the risky nature of the redevelopment, which several speakers called “transformational” for the Broadway corridor in terms of bringing residents to unoccupied blocks.

Developer Kashani said multiple efforts had failed to market the former MGE office building to commercial tenants, and the only viable reuse he could see was to convert it to apartments at a cost of about $25 million. His plan calls for adding penthouses atop the seven-story building in the project’s first phase, which would put 201 rental units in the building.

Second through fourth phases of the project would involve new construction of a small commercial building on Broadway, a five-story apartment building with 114 rental units immediately west of the MGE building and a 20-unit row of townhouses immediately west of the new apartments.

Renner,who represented Kashani as well as Milhaus, said all four MGE phases are planned to start within three years. He said the project expects to produce $44,300 in total taxes — its existing base — in its first year and $6.06 million over the 25-year period, based on receipts after it converts to 50 percent abatement.

Jackson County taxing authorities said they withheld project support because they were unable to work out a plan for payments in lieu of taxes. But Barnes suggested that the property tax gap created by the abatement “may be closed by the personal property tax revenue that renters will bring to the county.”

This story was originally published May 19, 2016 at 3:43 PM with the headline "Three major KC redevelopment projects are greenlighted with tax abatement approvals."