Government & Politics

USDA set to pay low rent on KC building after state, local incentives cut cost

The U.S. Department of Agriculture has officially announced the selection of 805 Pennsylvania Avenue, pictured here on Friday, Oct. 25, 2019, in downtown Kansas City.
The U.S. Department of Agriculture has officially announced the selection of 805 Pennsylvania Avenue, pictured here on Friday, Oct. 25, 2019, in downtown Kansas City.

The U.S. Department of Agriculture will pay only a fraction of the value of its lease when it relocates two research agencies to downtown Kansas City, a break in the rent made possible by state and local economic incentives.

The USDA officially informed employees Thursday of plans to move two research agencies to an office building at 805 Pennsylvania Avenue after considering locations on both sides of the state line.

Missouri and Kansas political leaders applauded the announcement as a win for regional cooperation on economic development. The two states submitted a joint bid to bring the Economic Research Service and National Institute for Food and Agriculture to the Kansas City region.

But the celebratory statements largely glossed over what Kansas City and Missouri will pay in tax dollars to subsidize the move, which will bring more than 500 federal jobs to the city.

The city could redirect up to $6 million in local taxes to support the relocation, pending a City Council vote on the plan introduced by ordinance on Thursday. Additionally, the state-funded Port of Authority of Kansas City has already moved forward with a plan to provide $19.7 million in incentives to the USDA’s landlord over a 15-year period.

Those incentives helped drive down the cost of renting space in Kansas City.

The General Services Administration (GSA), the agency which oversees the federal government’s real estate decisions, said the USDA will spend $25,663,808.97 over 17 years to lease 120,000 square feet. That comes to about $12.58 per square feet annually—well below the $22.50 per-square-foot advertised lease rate at 805 Pennsylvania.

It’s also well below the average listing of $21.73 per square foot for Class A downtown office space, according to third quarter data collected by commercial real estate firm Cushman & Wakefield.

The GSA would not answer any questions from The Star and would not say whether it selected the lowest bidder.

Secretary of Agriculture Sonny Perdue told USDA employees Thursday morning that the lease had been signed. Perdue is expected to visit Kansas City in November to meet with staff who have already relocated to the region.

Neither Kansas City Mayor Quinton Lucas, nor Missouri Gov. Mike Parson referred to the incentives in initial public statements touting the move as a win for the local economy.

Lucas said in an interview Thursday afternoon that one level of government offering incentives to another should generally be “disfavored” but that he and the City Council would carefully evaluate the package proposed for USDA. He said the project was important to Kansas City and expected it to generate further economic activity.

“We should all cast an unfavorable eye to incentives, particularly having the taxpayers in essence fund the taxpayers through a different way, but at the same time, you have to look at what the project itself is delivering, what the long-term impact is,” Lucas said.

The downtown Kansas City building beat out Sprint’s campus in Overland Park, among other locations considered by President Donald Trump’s administration.

“This is a great day for the entire Kansas City region. I’ve been proud to advocate for the USDA move and finalizing the site selection marks a huge step forward,” said Sen. Roy Blunt, R-Missouri, a member of Senate GOP leadership. “Bringing these two important ag research agencies closer to the people they serve and the leading research institutions that support their mission is the right move.”

While Lucas commended both Missouri and Kansas’ Congressional delegations, he said he was “delighted” to see the jobs land downtown.

“I continue to think that downtown Kansas City is the most dynamic place for commercial office,” Lucas said. “I’m glad the USDA recognized it. Culture, public transportation, amenities are all downtown, and I’m glad that it all worked out this way.”

Opponents of the move, including many of the agencies’ D.C.-based staff, have decried it as an attack on science and an attempt to hinder the study of politically sensitive issues, like climate change, by forcing experienced researchers to quit.

“This administration willingly and knowingly fired hundreds of highly qualified staff by creating an unnecessary and malicious relocation. The agency has suffered the loss of thousands of staff years of expertise that will ultimately harm the very people this relocation was supposed to benefit, the American people,” said Laura Dodson, the steward for the union which represents ERS employees.

“It will not be easy to restaff ERS, especially when the agency still remains in the cross-hairs of this administration.”

House Democratic leadership has been outspoken in its opposition to move because of the staff turnover. But Rep. Emanuel Cleaver, D-Missouri, dismissed concerns that the relocation was an effort by the Trump administration to undermine scientific research.

“I think the USDA is going to hire professionals whether they hire them in the Washington, D.C. area or hire them in Kansas City,” Cleaver said. “We’ve got excellent math and science programs at KU and UMKC, K-State, Rockhurst. They’re all around. The word on the street is that this may be inspired by some resistance to science. I don’t think we ought to let that bother us.”

Cleaver, a former Kansas City mayor, said that it was “worthy of a celebration when you bring people into what we now consider the central business district. It means that the downtown area becomes infinitely more healthy.”

As of Oct. 12, only 125 of the roughly 550 eligible employees had moved or planned to relocate to Kansas City. USDA has hired 26 more people in Kansas City, a spokesperson said, and is currently recruiting more than 100 people to fill positions.

The two agencies have relied on short-term contractors, brought back retirees for temporary work and tapped workers in other agencies to help in the interim. USDA is looking to fill some of the hundreds of vacancies created by the move with local hires. The Department will host a career expo on Nov. 6 at Kansas State University’s Olathe campus.

“We’ve already had tremendous interest from applicants who are eager to join our USDA family in Kansas City, and we’re eager to recruit from the large talent pool in the heartland,” said Deputy Under Secretary Scott Hutchins, contending that the Department has already received 500 applications for openings at NIFA.

The Missouri Department of Economic Development said it is also providing recruitment assistance to the USDA as a non-financial incentive.

Despite the selection of Missouri, officials from Kansas touted the relocation as a boon to both sides of the border.

“I am glad to see USDA recognizing all the rich resources the heartland provides,” said Sen. Pat Roberts, R-Kansas, the Senate Agriculture chair.

The Kansas Department of Commerce said it had offered the USDA an incentives package which included a job creation fund, a sales tax exemption and money through the Promoting Employment Across Kansas (PEAK) program, which allows employers to keep 95 percent of employees’ state withholding taxes.

The agency said it could not provide the dollar value of the incentives for comparison with Kansas City and Missouri.

Parson’s office released a statement from the governor Thursday morning thanking Kansas Democratic Gov. Laura Kelly for her cooperation and promising that the relocation would benefit both states.

But on his campaign Twitter feed, Parson struck a decidedly more partisan tone.

Parson, a Republican, said that he was glad to see that Trump “is fulfilling his promise to drain the D.C. swamp. This is a move that has never been done before and it’s because of the hard work we are doing to make Missouri a great place for opportunity.”

When asked if that meant the governor regarded federal researchers relocating to the region as part of the swamp, the campaign said the tweet spoke for itself.

The Kansas City Star’s Steve Vockrodt contributed to this report.

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Bryan Lowry covers Kansas and Missouri politics as Washington correspondent for The Kansas City Star. He previously served as Kansas statehouse correspondent for The Wichita Eagle and as The Star’s lead political reporter. Lowry contributed to The Star’s investigation into government secrecy that was a finalist for The Pulitzer Prize.
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Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas