Substantial local, state incentives in play for the new USDA jobs in Kansas City

A combination of public subsidy from Kansas City and its port authority to assist in the relocation of two federal agencies to downtown could reach up to $26 million.

The USDA announced earlier this year that the Kansas City region beat out 135 other cities to host the Economic Research Service and National Institute of Food and Research, which combined account for about 500 jobs.

The USDA, through federal the landlord, the General Services Administration, started scouting locations in both Kansas and Missouri. On Friday, The Star reported that an office building at 805 Pennsylvania Avenue in downtown Kansas City was the likely destination for the USDA jobs.

The Port Authority of Kansas City, a state agency, on Monday approved a state incentive inducement called the Advanced Industrial Manufacturing Zone for the building. Commissioners and staffers for the Port Authority took care not to name the tenant at the office building, commonly referred to as the State Street building, after a financial services tenant that once occupied much of it.

Commissioners passed an AIM Zone for the State Street building that could result in a $19.7 million benefit over 15 years for relocating the USDA agencies. AIM Zone funds come from capturing 50% of state employee withholding taxes and redirecting them back to the Port Authority. That amount over 15 years is estimated to be $26 million, based on the assumption that 500 employees are working for the research agencies at an average salary of $116,000.

Of that $26 million, $6 million is earmarked for the Port Authority to use for transportation-related infrastructure projects. The balance, about $19.7 million, goes to benefit the USDA relocation.

On top of that, Kansas City could offer up to $6 million through the redirection of 75% of city taxes, according to a document outlining the local and Port KC incentives obtained by The Star. The Kansas City Council would have to vote to approve the redirection of local taxes for the USDA relocation; an ordinance is expected within weeks.

A Kansas City official confirmed the 75% city share, as did City Manager Troy Schulte. He said in an email those taxes would include the earnings, sales and utility taxes. He expected the incentive to last 15 years.

Money from the city and Port Authority can be used to reduce the USDA’s lease rate and other occupancy rates for the landlord of the State Street building.

The incentives have the potential to substantially reduce the federal government’s effective lease rate at the State Street building. A real estate listing by Colliers International asks for a lease rate of $22.50 a square foot. The GSA solicitation for leases called for a maximum of 115,425 square feet of office space. Assuming that lease rate and the maximum space, a lease would cost more than $38.9 million over 15 years.

If the $26 million in incentives from the Port Authority and the city go to reducing the lease rate, that would mean both are subsidizing 66% of the rent for agencies under the federal government, which can print its own money.

A spokesperson with Gov. Mike Parson’s office would not comment about the USDA relocation until an official announcement was made. An announcement is expected this week or next, multiple sources have said.

Bryan Lowry, a correspondent in McClatchy’s Washington D.C. bureau, and Kevin Hardy of The Star contributed to this report.

This version clarifies an earlier version to say Port Authority incentives are the state incentives offered in the USDA deal.

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Steve Vockrodt is an award-winning investigative journalist who has reported in Kansas City since 2005. Areas of reporting interest include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.