Tax subsidies for downtown KC office tower with no tenants? That should be a hard no

A Kansas City Council committee on Wednesday will consider a misbegotten development agreement calling for $63 million in public support for an office tower and parking garage downtown.

The proposal, as it stands, should not go forward. It’s too risky and too unfair. It offers excessive subsidies for a building in a prosperous downtown, while Kansas City neighborhoods continue to crumble.

The 16-story, $132 million office tower and parking structure are called Strata. Supporters say the project, at 13th and Main streets, would provide needed downtown office space, enabling the city to compete with other communities for white-collar jobs.

The tower has no publicly-announced tenants. Economic development honchos want to have office space they can quickly make available, just in case.

“The demand for ready-to-occupy space has been proven in other markets,” said Jon Stephens, president and CEO of Port KC, which is part of the deal. “The demand appears to be present here.”

But since banks are often reluctant to loan money for such risky speculative developments, City Hall is being asked to provide roughly half of the financing for the structures.

That’s $36 million for the parking garage and $27 million for the actual office tower. The city would borrow that amount, then pay it back through rent, parking fees, and by capturing some of the taxes paid by people working in the tower.

What happens if those revenue streams come up short and the loans can’t be repaid? Taxpayers are on the hook.

“It is an unusual set-up,” Kansas City Council member Scott Wagner said Tuesday. “These sorts of deals are not typical deals.”

There’s a good reason for that.

Developers and city officials say the $63 million plan is the result of an earlier agreement to build on that corner, a deal the city wants to honor. But they have previously admitted the obligation is “moral,” not legal.

So they’re expected to argue Wednesday that Kansas City simply needs more Class A downtown office space and that taxpayers must shoulder part of the risk to make that a reality.

Some details of the project have been adjusted to reduce the chance of a revenue shortfall. While that’s welcome news, it won’t fix the fundamental flaws in a plan that asks City Hall to do what developers and banks should do on their own.

If the demand is there, as Stephens says, why are public subsidies needed? If the demand isn’t there, why put taxpayers at risk?

This year, at virtually every mayoral forum and every City Council debate, candidates and voters rejected the idea of offering tax incentives for more downtown projects. The message from both was emphatic and clear: If the city is to become a bank, it should lend to projects in distressed neighborhoods, not downtown.

The current City Council should listen to those objections and act accordingly. If members won’t reject the Strata project outright, they should, at a minimum, delay a final decision until Mayor-elect Quinton Lucas and his new colleagues are sworn in Aug. 1.

But there’s a better approach: Just say no. It’s time for downtown projects in Kansas City to stand on their own merits, not on public dollars subsidizing private development.