Government & Politics

KC awarded $350,000 contract to study development handouts to agency tied to industry

Council of Development Finance Agencies on Thursday issued its long overdue report on Kansas City’s use of incentives to encourage development.
Council of Development Finance Agencies on Thursday issued its long overdue report on Kansas City’s use of incentives to encourage development. File photo

An agency that received a $350,000 contract from Kansas City to study the city’s use of tax incentives for private projects has financial ties to the development industry and lobbies federal lawmakers on legislation affecting municipal development.

Council of Development Finance Agencies on Thursday issued its long overdue report on the city’s use of incentives. It painted a rosy picture, claiming that for every dollar the city invested in incentives over a 10-year period, it gets back $3.83 in additional tax revenue.

CDFA, based in Ohio, has corporate sponsors with close ties to the development industry. One of CDFA’s sponsors is the Bryan Cave Leighton Paisner law firm, which is legal counsel to the Kansas City Tax Increment Finance Commission. The TIF Commission oversees one of the city’s most powerful development incentive programs.

Katie Kramer, vice president of CDFA, denied that the sponsorships amounted to a conflict of interest.

“We make it very clear when corporate sponsors engage us that they have the opportunity to be promoted, but we do not engage or promote their own services,” Kramer said.

Kerrie Tyndall, director of economic development for Kansas City, said she believed CDFA had expertise in economic development.

“CDFA is an entity that is responsible for helping economic development practitioners learn how to do their jobs effectively,” Tyndall said. “They provide a lot of training that is available to staff, such as myself, about how to go about doing economic development and working with developers. We saw them as an entity that had a lot of expertise and would understand from the city’s perspective what we were seeking to achieve by looking at our programs and services.”

CDFA pays North South Government Strategies, a Washington, D.C., lobbying firm, to lobby on tax legislation and policy on Capitol Hill. In 2017, CDFA paid $80,000 to lobby on preserving private activity bonds and municipal bonds in tax legislation, as well as the “expansion of other tax-related federal economic policy tools,” according to records on file with the U.S. Senate lobbying disclosure database.

In a presentation to the National League of Cities in 2014, CDFA referred to itself as “the voice of development finance on Capitol Hill” and “the ‘go-to’ resource for development finance.”

Kansas City Councilwoman Alissia Canady said she was not concerned by CDFA’s lobbying activities because she said CDFA’s report had no value to the city.

“We were looking for a tool that would help us shape policy and we come to find it did not contain the necessary information,” Canady said.

She called the $350,000 the company received from Kansas City “their Christmas bonus.”

Kramer said CDFA’s research division is “agnostic” from its political activities.

Kansas City Manager Troy Schulte said he was not concerned with CDFA’s lobbying because the contract was handled by the firm’s research arm, not its political arm. The firm also has done no economic development work for anyone else in Kansas City, he said.

CDFA got the $350,000 contract to study the city’s incentives in the fall of 2016. At the time, Kansas City Mayor Sly James said the city did not do a good enough job promoting how economic development benefits Kansas City.

TIF, a tool that redirects new property and economic activity taxes generated by a development to pay for project costs, is widely credited with spurring the revitalization of downtown.

But TIF and other tools such as tax abatements for development projects draw critics who say they’re used too often, are a handout to developers and redirect money from other taxing jurisdictions such as school districts and library districts.

The CDFA study said the use of incentives from 2006 to 2015 has increased business sales, economic activity, jobs and per capita income.

But the study couldn’t answer how much of those increases would have happened without incentives.

It also didn’t measure the effect that redirecting tax revenues to developments has on paying for city services or the effect it has on the budgets of school districts and other taxing jurisdictions.

Kansas City in 2017 redirected $83.2 million in sales, earnings and other taxes through programs such as TIF and other incentives, according to its comprehensive annual financial report.

CDFA’s Kramer lauded Kansas City for taking on a study of its development incentives.

“Many cities do not take on this kind of comprehensive study,” Kramer told members of the Kansas City Council during its Thursday business session.

St. Louis hired The PFM Group, a financial consulting firm, to analyze the city’s use of incentives, which are similar or the same as those used in Kansas City. PFM’s report contained several recommendations for how St. Louis could improve its use of development incentives.

CDFA’s findings received a lukewarm response from City Council members.

“In some ways I regret the appropriation that we made here and I think today we did not see the study the city wanted,” said Councilman Quinton Lucas.