Missouri offered double the incentives, but Urban Outfitters chose to build in Kansas
When Kansas City lost its bid to land a massive Urban Outfitters distribution center this summer, Mayor Quinton Lucas wrote to city staff, congratulating the negotiating team for holding the line when negotiating incentives with the company.
The mayor said the Port Authority of Kansas City, which led those talks, was determined to “not give away the farm,” even with competition from other cities.
What was not publicly known at that time were details of the various incentive packages offered on opposite sides of the state line. In Kansas City, Port KC offered about $125 million in total incentives to lure the $400 million project.
But in Wyandotte County, which ultimately landed Urban Outfitters, local and state governments offered less than half that amount in taxpayer subsidies.
“I think it tells you that incentives are only part of a puzzle for projects,” said Jon Stephens, Port KC president and CEO. “Incentives are neither good nor bad. And nor are incentives isolated from the larger conversation.”
In Kansas City, that larger conversation too often leaves out parts of the community that could use an economic boost the most, the mayor said. Some developers are excited about the potential of rebuilding in areas of disinvestment. And “sometimes people don’t want to confront some of those greater challenges,” Lucas said.
Port KC proposed a site at Bannister Road and Troost Avenue in South Kansas City. While Lucas said the decision is not just about incentives, the huge offer from the Port shows how difficult it is to lure developers east of Troost, traditionally the city’s racial and economic dividing line.
“How much damn stuff do you have to do to get somebody to build between Troost and let’s say 71 Highway?” he said. “That to me is actually an interesting question that we never get an answer to because we never really get a big project to assess it by.”
Port KC offered the Philadelphia-based company about $108 million in property tax breaks. Paired with another $17 million in construction and materials sales tax exemptions, the total package was estimated to be worth in excess of $125 million. The port also said it would consider other incentives for the construction of an on-site childcare facility for the facility’s employees.
A letter to Urban Outfitters said the project could do more than just operate as the company’s next distribution center, but serve as a “catalyst for the revitalization and rejuvenation of community.”
Kansas City officials thought the former home of the Bannister Federal Complex was primed for redevelopment. A project of that magnitude could bring much-needed jobs to an area with abundant workforce nearby and already established transit lines.
And Riverside-based NorthPoint Development had already been working to transform the former military production site, which required millions in environmental remediation, into a modern warehouse and distribution hub.
“If I were a developer I would have picked that site,” Lucas said. “But you know, hell, I’m also Black.”
Instead, Urban Outfitters plans to build a sprawling complex 25 miles away near the Village West in Kansas City, Kansas, on land previously owned by the Kansas Speedway.
In August, the company announced it would create up to 2,000 jobs in a new facility near the intersection of State Avenue and Speedway Boulevard. With some 1 million square feet of work space, it’s expected to become the largest facility of Urban Outfitters, which operates several brands including Urban Outfitters, Anthropologie and Terrain.
Urban Outfitters officials did not respond to multiple requests for comment for this story.
Over the summer, state officials would not share details about incentives for the company, saying negotiations were still ongoing even after the news was celebrated with Gov. Laura Kelly. This month, the state commerce department said the company will receive benefits from several programs.
Urban Outfitters will receive up to $5 million from the state Job Creation Fund. Some of those dollars are earmarked for childcare and transportation services for employees at the new facility. The company is also expected to receive about $1.2 million from the Promoting Employment Across Kansas program.
And Urban will qualify for millions of dollars in tax credits from the High Performance Incentive Program. The exact award will depend on the amount invested at the site, said Robert North, chief counsel at the Kansas Department of Commerce
Companies generally receive tax credits worth about 10% of their eligible investments. North expects the company to receive $30 million to $40 million as it makes a capital investment of $300 million to $400 million into the new facility.
Additionally, Wyandotte County has offered the company a 75% property tax abatement for 10 years. That’s estimated to be worth about $13.7 million, said Katherine Carttar, director of economic development for the Unified Government of Wyandotte County/Kansas City, Kansas.
She said the company would also qualify for some sales tax exemptions, similar to what was offered in Port KC’s proposal.
Between the local property tax breaks and the state programs, Urban Outfitters could receive between $50 million and $60 million in incentives. It’s a lot of money, but nothing like what was offered across the state line.
For years, the watchdog group Good Jobs First has tracked government incentives, arguing that they are overused and often ineffective. Executive Director Greg LeRoy said the Urban Outfitters example — in which the company selected the lower offer — is just further evidence of that.
“It’s a textbook example of our mantra that incentives don’t matter. They rarely determine where companies expand or relocate,” he said. “And there’s a very clear reason why: in the broad scheme of things they’re too small.”
LeRoy said state and local taxes represent just a tiny portion of a big company’s cost structure, so incentives are just icing on the cake, not usually foundational to making a project work.
His group particularly warns governments against offering incentives to e-commerce operations. For years, companies have been expanding distribution and logistics as more shopping organically moves online. Companies will build distribution centers and hire crews to staff them with or without government support, LeRoy said.
“It’s the business model,” he said. “They’ve got to build a million warehouses to have rapid delivery.”
Officials on both sides of the state line said it’s difficult to directly compare incentive packages offered in Missouri and Kansas, where programs and laws vary.
For instance, Kansas law only allows property tax abatements over a 10-year period. In Missouri, officials can offer double that. Urban Outfitters stood to gain more in property tax breaks in Missouri. But in Kansas, it will benefit from millions in tax credits that can help offset income taxes.
States may know they are competing against one another, but these talks don’t play out as incentive auctions, North said, as companies weigh a variety of factors.
“It’s a holistic process,” he said. “But it’s not typically, ‘Hey you’ve got to come up with X dollars or you’re not going to get the project.’ It’s not that direct.”
Still, he said was surprised by the gap between the offers in the two states.
“I wouldn’t expect the variance to be 2:1,” North said, “but it wouldn’t surprise me if there were significant variances in the two states’ offers.”
But Lucas said the Urban Outfitters deal is about more than just numbers. The decision to reject the south Kansas City site is indicative of longstanding development patterns that have largely left out poor and minority communities.
This summer, Lucas criticized Urban Outfitters for giving the Center School District little time to consider the proposal and how the incentives would affect the school system.
“I hope more projects give our community the respect to know that none of our roles are as rubber stamps,” Lucas wrote in an email to city staffers, noting the impact incentives can have on local school districts.
On Monday, the mayor said racist development practices of the past continue to persist in Kansas City.
“If you look at where lots of development has been done, I don’t think I need to tell you that it seems as if development projects, development deals have largely not gone to majority-Black communities,” he said. “They largely have not been done in inner-city areas.”
