Waddell & Reed deal collapses, and KC taxpayers are on the hook. Reform incentives

The news that the new owners of Waddell & Reed have abandoned plans to move to downtown Kansas City from Overland Park should be a warning for those who still think handing out public incentives is always a good idea.

Kansas City, and the state of Missouri, should learn something from this debacle.

Workers are making steady progress on a new office building and parking garage at 14th Street and Baltimore Avenue. Waddell & Reed employees were supposed to occupy those offices, bringing high salaries with them.

That’s why Missouri and Kansas City poured incentives on the $140 million building project. The state provided $62 million, while Kansas City’s subsidy approached $35 million — 70% of the cost.

We opposed the project from the beginning. Now that Waddell & Reed workers won’t occupy the structure, the deal seems even more foolish.

City officials, including Mayor Quinton Lucas, say the building will be finished and tenants will be found. “In many ways, almost nothing has changed,” Lucas told The Star.

But of course everything has changed. The incentives were approved to encourage the relocation of a specific company downtown, with 900 new jobs. Now, the incentives support what in essence is a speculative office building with lots of parking spaces.

In a community with too much substandard housing and a major violent crime problem, committing $35 million in future revenues for a office building is wrong. Public dollars should not be used to make the government a partner in private enterprise, and especially not in speculative real estate ventures.

But there are practical concerns, too. Where might new tenants come from? If they come from other downtown locations, the net economic impact of the new building is likely to be zero. The whole point of the Waddell & Reed agreement was to bring new money into Missouri from Kansas.

There’s a chance new tenants could come here from other states. But does anyone think a major corporation will move to downtown Kansas City without additional public incentives? Of course not. Commercial real estate sits empty across the country, making it easier for firms to demand concessions before a move.

And the nature of office work is changing, dramatically. COVID-19 has convinced employers and employees that working from home is practical and cheaper. Would any private interest invest today in a $140 million office development with no tenants? The answer is no.

Kansas City, and Missouri, must now insist on full execution of any agreements it has with the developers of the 14th and Baltimore building. The city should not honor any bond agreements or payment structures until it is sure the revenue stream from new tenants is sufficient to cover those costs.

Taxpayers should not lose a single dime on this building.

The city must help find tenants, but it should not provide any additional incentives for relocating businesses. This project needs to stand on its own.

Then, city officials should study this process and understand why incentives are so risky. There’s a reason the code name for this development was Project Decoy.