After years of downtown building, mayoral candidates more cautious on incentives
Until a proposed Crossroads headquarters project for the architecture and design firm BNIM collapsed, Jan Parks wasn’t terribly interested in Kansas City economic development.
But the $13.2 million plan to move the firm into a warehouse owned by developer and philanthropist Shirley Helzberg became a lightning rod for growing animosity toward the city’s use of tax incentives. It sparked a public uprising and an initiative petition to reverse the City Council’s decision to approve the project in October 2015.
BNIM scrapped the idea four months later, before the petition could be put to a public vote.
“Since I’ve been involved...we have seen somewhat of a change from the fact that it seemed like most developers could pretty much get what they wanted as far as tax-increment financing help,” said Parks, who was part of the petition drive against the BNIM project and serves as spokeswoman for the Coalition for Kansas City Economic Development Reform.
The group is the force behind a sweeping ballot question slated to go to voters in June. If approved, it would cap at 50 percent the amount of property taxes the city can abate, exempt or redirect as an incentive for developers to build in the city.
“We definitely would like to see less, at this point, luxury high rises and hotels and more projects that are for your average workforce-type person,” Parks said.
Most of the 11 candidates running for mayor oppose the measure and worry it would stall development not only downtown but in economically distressed communities that Parks—and just about everyone else—agrees need help. Proponents say the cap could be waived for worthy projects, but City Manager Troy Schulte said in an email the city doesn’t see much flexibility in the language, which — unlike existing city policy — offers no exemptions.
Several years and many projects into the debate over incentives, candidates are carving out positions on how the city should be using incentives to grow businesses and spur development.
Tax Increment Financing, or TIF, allows the city to capture property tax revenue from a new project to help the developer cover construction costs. It’s intended to be used in blighted areas and only for projects that wouldn’t be feasible without assistance. TIF agreements can take 20 years or more to terminate, meaning it can be a long time before all of the additional property tax revenue generated by the new construction is available for public purposes.
BNIM applied for a 23-year TIF worth $5.2 million. Opponents objected to using TIF in the Crossroads Arts District, arguing it’s no longer a blighted area.
While arguably the most recognizable by name, TIF is not Kansas City’s only tax incentive. The city operates a number of programs through the Economic Development Corporation and PortKC known by their alphabet soup of acronyms. They offer various incentives to finance construction projects developers say would not otherwise be feasible.
A 2016 ordinance sponsored by Councilman Quinton Lucas, 3rd District at-large, a candidate for mayor, capped incentives so developers couldn’t get more than 75 percent of taxes abated for the first 10 years after the project is built. For programs with longer abatement periods, the next 15 years would be capped at 37.5 percent.
There are exceptions. Projects in economically distressed communities and those determined by city staff to be “high impact” still qualify for full incentives. Some projects that had applied for incentives before the ordinance went into effect were grandfathered in.
The petition for a 50 percent cap has no exceptions.
Cindy Circo, chair of the Tax Increment Financing Commission, said the push back against TIF and other incentive programs predates the BNIM debate. James appointed her to the commission a year prior to the controversy, she says, to mitigate accusations that it was rubber-stamping projects. Circo was in her second term on the City Council representing the 5th District at-large and served as mayor pro tem.
BNIM, she said, met the city’s environmental goals and created jobs.
“The easy part about that project to defeat it was you’re giving a rich person free money,” Circo said, referring to Helzberg.
But TIF isn’t free money, she said. It redirects property tax revenue generated by new construction — revenue that would normally go to school districts, libraries and other tax-supported government services — to developers to help cover their costs. That extra revenue wouldn’t exist without the construction.
But the public agencies that would benefit from the new taxes often argue they have to wait too long to reap the financial benefits of the project. They’ve pushed for smaller abatements and shorter terms.
With BNIM, Circo said, incentive critics “just picked the right project to go after.”
“What they have done is they created this stigma with TIF...” Circo said. “It is the most public process that any economic development process goes through. It has public meetings. It’s vetted. It has economic analysis and blight analysis.”
Where we are now
Concerns over tax incentives don’t grip voters the way crime, infrastructure, schools or affordable housing do, according to a SurveyUSA poll commissioned by The Star and released earlier this month.
But to voters like Megan Rodenberg, who spoke to the Star last month, the incentives the city grants to developers are grating, especially when they cut into funding for other services.
“We’ve been slow to roll out infrastructure improvements because, again, we’re shuffling money around in these accounts to help subsidize developers to do work,” Rodenberg said.
She also lamented the city’s sales tax rate and use of community improvement districts, which allow the city to levy an additional sales tax to help fund improvements in a certain zone. In the case of downtown it means staff for sidewalk cleaning, trash pickup and other services.
“I think buying a Chipotle burrito downtown, I’ve spent — I think it was like 12 percent, 11 to 12 percent,” Rodenberg said.
Phil Glynn, a Crossroads businessman and mayoral candidate, is one of several candidates trying to tap into that taxpayer frustration and promise reform. He was on the TIF Commission and voted against the BNIM project. Mayor Sly James later removed him.
He said that project brought previously behind-the-scenes frustration with incentives to the forefront.
“I think that there was frustration building quietly in the community for years and years before the BNIM project,” Glynn said. “I think that the reason that project became a catalyst for debate was because so many people in the community were fed up with the way the TIF program was being used.”
Park said her group isn’t against development.
“We just do think that it is to the point that it should be moved farther east,” Parks said.
What the candidates propose
Over his two terms, James won funding for the streetcar, secured an airport deal, lured a developer to build a convention hotel and continued the revitalization of downtown.
But nearly all the candidates pledge a shift in where and how the city uses its economic development tools to direct growth.
Glynn said he thought the 50 percent cap proposed by Parks’ group would limit the city’s ability to complete projects on the city’s east side, like the two-year-old grocery store at Linwood Boulevard and Prospect Avenue.
Instead, he said, he would be more disciplined about where the city uses its incentive programs.
“What I don’t want to happen is that we get into a situation where we can land a deal that creates quality jobs for our people and it can make a massive transformational impact on a neighborhood and not be able to go after that deal because we passed a cap,” Glynn said.
Council members Scott Taylor, Alissia Canady, Quinton Lucas and construction attorney Steve Miller, too, worried it would limit the ability to bring projects to economically distressed areas.
But they want to see changes to the way the city handles development.
“The council should not guarantee debt on speculative or luxury real estate developments that do not meet the housing or public needs prioritized in citywide business plan,” Canady said.
Councilman Scott Wagner, 1st District at-large, said the city needs to be “more proactive” in deciding what it wants.
“It’s hard to say no to a project when you have nothing to compare it against,” Wagner said. “The greatest challenge in economic development is being able to walk away from a project when you are unsure another may come. That can be changed by being intentional.”
This story was originally published March 29, 2019 at 5:30 AM.
