Don’t pass the tax bill, it could hurt KCI, Mayor Sly James warns Congress

Fresh off a victory last week when voters decisively approved a $1 billion single terminal project at KCI, Kansas City Sly James is warning Congress about provisions in tax bills that could repeal a key financing tool for the airport.

James on Thursday issued a statement urging Congress to reconsider provisions in tax bills both in the House and Senate that he said would hurt the city’s ability to finance infrastructure projects.

James’ statement came the same day the Republican-controlled House passed its $1.5 trillion tax bill, largely along party lines. The House bill goes to the Senate, where it faces an uncertain future after key Republican senators expressed reservations.

Rep. Emanuel Cleaver, a Democrat, was the only member of the local House delegation to vote against the House tax bill. House members Vicky Hartzler, Sam Graves, Lynn Jenkins and Kevin Yoder, all Republicans, voted in favor of what would be the most sweeping tax change since 1986.

“Today, Congress is putting people ahead of politics,” Yoder said in a statement. “We’re passing historic, sweeping reforms that will fix the broken tax code in America for the first time in 30 years.”

Republicans have made tax reform a priority this year after assuming control of the House, Senate and White House. Critics have said current proposals amount to a tax break for the wealthy at the expense of the middle class.

James suggested the tax proposals also come at a cost to local taxpayers.

“We need an agenda to revitalize and restore the infrastructure of our cities, not cripple future investment in our urban centers,” James said in a statement.

The House version includes a repeal of Private Activity Bonds (PAB), which are tax-exempt bonds issued by governments for private projects. The Senate version keeps PABs intact.

PABs are being contemplated to pay for KCI. Edgemoor Infrastructure & Real Estate, based in Bethesda, Md., was chosen to develop the project.

“PABs are essential to a number of City infrastructure projects and expected to be a significant tool in financing the new KCI airport approved by voters earlier this month,” James said. “Elimination of PABs could throw the project’s future into question.”

Kansas City could issue fully taxable bonds in place of PABs, but Kansas City Aviation Director Pat Klein said doing so would bump up the cost of financing the single terminal by $6 million to $12 million a year.

“Hopefully, cooler heads prevail,” Klein said.

Geoffrey Stricker, managing principal for Edgemoor, said his team is monitoring both bills in Congress.

“Our team has reviewed alternative financial structures for the KCI new Terminal Project, and are confident that we can implement an affordable financial solution to have the project move forward,” Stricker said in an email.

Stricker did not respond when pressed about details.

James expressed concerns about several other provisions in both tax bills. Both versions propose doing away with Advanced Refunding Bonds, which let local government refinance existing debt at lower interest rates.

James said Kansas City has used these bonds to refinance debt on $580 million associated with projects like Liberty Memorial, the Kansas City Zoo and various sewer projects, realizing a savings of $52 million.

“Abolishing Advanced Refunding would make vital City projects more expensive and prevent some projects from moving forward,” James said in a statement.

James also warned against doing away with New Markets Tax Credits and historic tax credits, both tools used in redevelopment of urban and disadvantaged communities.

“In addition, both the House and Senate bills would either partially or fully eliminate the state and local income, property and sales taxes deduction,” James said. “This elimination would result in double taxation on Kansas Citians – increasing their tax burden and making it more difficult to own a home.”

This story was originally published November 16, 2017 at 2:58 PM with the headline "Don’t pass the tax bill, it could hurt KCI, Mayor Sly James warns Congress."