Editorials

Why would the KC Council offer $63 million in public incentives for an office tower?

Potential site of new major office tower in downtown Kansas City

An ordinance in Kansas City authorizes city manager Troy Schulte to work on a development agreement on Strata, a new office tower in the Power & Light District. It would be the first major new office development since 1991.
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An ordinance in Kansas City authorizes city manager Troy Schulte to work on a development agreement on Strata, a new office tower in the Power & Light District. It would be the first major new office development since 1991.

The Kansas City Council is considering another massive public incentive program for a commercial building downtown.

It’s a risky plan and potentially harmful to city services. The council made the right decision Thursday when it delayed a final determination on the proposal until January at the earliest.

Kansas Citians will need lots of time to understand this deal.

Developers want to build a 250,000-square-foot office tower at 13th and Main streets. The price tag, including a 750-space parking garage, is $132 million.

Shockingly, almost half of that total would come from complicated public incentives.

Essentially, the scheme calls for public construction of the parking garage, at a cost of $36 million. Then City Hall would provide another $27 million in financing for the office tower itself.

That’s $63 million in public borrowing for the project. With interest, the city’s investment would cost about $5.2 million a year, each year, for the next 20 years.

City officials say the money will be paid back through rent, parking fees, tax diversions and other mechanisms. “New project revenues,” the council was told, “should fully support new project expenses.”

Have we heard that song before? Why, yes. And taxpayers ended up shelling out tens of millions of dollars for the Power & Light District, when promised “new revenues” failed to meet “new expenses.”

Could the new building suffer a similar fate? Why, yes. It has no tenants — it’s being built on speculation.

“I can’t say (payments) won’t ever come out of the general fund,” City Manager Troy Schulte said. That statement should worry every Kansas City taxpayer.

The developers and city officials say the plan is based on an earlier agreement to build on the corner, a deal they want to honor. But they conceded Wednesday that the obligation is “moral,” not legal. City Hall could conceivably walk away.

Taxpayers also should be concerned about the speed of the project. The council’s Finance Committee considered the plan Wednesday, then sent the framework to the full council for a vote the next day — right before the Christmas holiday.

That’s far too fast for a full understanding of the proposal.

Thursday’s decision to delay a vote will give the council, and taxpayers, some time to scrutinize the deal. City staff must do a much better job of explaining why the public needs to provide financing for almost half the cost of a speculative downtown office building.

They also must understand the project’s true cost to the public. If tower tenants come from other existing buildings, taxes and fees will just shift from one source to another. The city could end up collecting less money than it needs to cover the incentives.

This, in a city that is thinking about a $30 million sales tax increase for early childhood education.

There are times when subsidies and incentives make sense. Each project must be judged on its merits.

Today, though, there are many more questions about the office project than there are acceptable answers. City Council members should slow down, ask those questions, and vote only when they are fully satisfied with what they hear.

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