Kansas City turns to H&R Block. Not for tax return help, but office space

H&R Block would become a landlord for a city agency under the terms of an unusual real estate deal pending before the Kansas City Council.

The arrangement calls for the Kansas City-based tax preparation company to sublet 70,000 square feet of office space at 4400 East Blue Parkway to the city. The firm had used the location primarily as a call center but moved out in 2010. It still pays rent to the owner, the non-profit Swope Community Builders, which developed the office building in 1999 as part of a revitalization program for the Brush Creek corridor.

The city wants to move its code enforcement staff, part of the city’s neighborhoods and housing services department, and the Land Bank from their current spot at 4900 Swope Parkway. Officials said it would cost $5 million to $7 million to renovate that building. It was listed for replacement or improvement as part of the $800 million general obligation bond package approved by voters in April.

City officials have reconsidered, they said, both because of the structure’s poor condition and planned sewer and stormwater improvements for the area that will involve part of the property.

The proposal calls for the city to take over the remaining five years on H&R Block’s lease at a cost of $5.3 million. Monthly payments would begin at $50,000 a month and grow to $98,000 by 2023. The city would also have an option to buy the building from Swope Community Builders.

An ordinance authorizing the deal was put on hold last week at the request of Councilwoman Katheryn Shields, who raised questions about the cost of the lease. Shields said she didn’t contest the need to vacate 4900 Swope, but wondered whether there were less expensive options available in a city-owned building.

“I think the only people benefiting from this are H&R Block,” she said. “We can’t just keep picking up a million dollars here and a million dollars there out of the general fund and keep functioning.”

She asked the city’s department of general services for an inventory of the city’s available office space. Shields said Tuesday afternoon she had not yet received the information.

Officials have said that the city has sold its surplus buildings over the last few years and that there is no suitable in-house alternative. The H&R Block property was identified by Cushman & Wakefield, the city’s real estate broker. It said the company space was in “move-in” condition, centrally located with parking to accommodate 85 city-owned cars used by code inspectors.

“This is a very good fit,” city architect Eric Bosch told the council’s finance and governance committee last week.

Committee chairman Scott Wagner said remaining at 4900 Swope and leasing the H&R Block space were both expensive propositions and that it was a matter of “pick your poison.”

“The only thing I can say is, yes it is costly,” he said. “There are no good alternatives and what we are getting is something that does not need to be upgraded.” The plan will be discussed by the council again on Thursday.

The city would be pay $10 per square foot for the office space, which covers only part of H&R Block’s monthly costs.

“While not covering the full costs, the proposed sublease agreement helps to cover a part of our rent obligation, so it is certainly an expense savings for H&R Block,” company spokeswoman Susan Waldron said in an email.

The Blue Parkway building was one of the first projects in the Brush Creek Corridor tax increment financing district. H&R Block’s decision to locate about 200 full-time employees there was hailed as part of “a community success story” at a 1999 grand opening by Frank Ellis, president of what was then called Community Builders.

Waldron said the company moved its call center teams to its downtown headquarters in 2010 “to facilitate collaboration and teamwork.” The company will continue to use part of the Blue Parkway site as a warehouse.

This story was originally published December 13, 2017 at 7:00 AM with the headline "Kansas City turns to H&R Block. Not for tax return help, but office space."