Reducing tax breaks for developers makes sense in KC, but where and by how much?

Cerner received large public subsidies to build its Innovation Campus in south Kansas City. Elected officials are looking at reducing incentives for future development.
Cerner received large public subsidies to build its Innovation Campus in south Kansas City. Elected officials are looking at reducing incentives for future development. jtoyoshiba@kcstar.com

The reasonable push to reduce public tax breaks for private development is on again in Kansas City. Just how far it goes will depend on the work of elected officials and, possibly this time around, voters.

The primary discussion is over whether to place a cap on how much future property tax revenue is abated for developers or diverted to them to help build their projects.

A cap would make it possible for more revenue to flow to jurisdictions such as school districts and libraries that heavily rely on property taxes to provide their services.

At a meeting Wednesday, a City Council committee will discuss an idea broached by council member Quinton Lucas: Reduce the maximum property tax break from the current 100 percent to 75 percent for many projects, while sensibly allowing higher subsidies in economically distressed parts of the city.

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Separately, a group called the Coalition for Kansas City Economic Development Reform is calling for an even lower cap of 50 percent and no exceptions. They want to gain enough signatures to put the idea on a future ballot for voters to decide.

The group’s idea isn’t that far out on a limb. Mayor Sly James two years ago announced that he wanted a “new normal” of 50 percent property tax abatement for redevelopment projects, making the argument that city officials could peel back the public incentives offered to developers.

Yet within two months, that plan was dead after lots of criticism from some council members and a contingent of developers and their lawyers.

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Today, many in the development community still say the city must keep property tax breaks as high as possible. That saves them money and makes it easier financially for their deals to get done.

Taxing jurisdictions argue otherwise. They complain with some justification that City Hall has aggressively awarded almost automatic property tax breaks in the past. These opponents also note that parts of Kansas City such as downtown and the Country Club Plaza have rebounded nicely thanks to redevelopment efforts and thus don’t need as much public assistance in the future.

For example, James and many others tout the claim that the new streetcar line has attracted lots of new construction downtown, yet some developers still seek close to full abatement for projects in that area.

Enter Lucas and his idea. He says he has been working with the petition group to find a sweet spot on what the “right” property tax abatement level could be, as well as when it might be exceeded.

For instance, almost everyone agrees that it’s tougher to woo developers to forlorn parts of the city’s East Side. Giving larger incentives to build projects in the heart of the urban core certainly could be wise public policy, as Lucas and James note.

However, the East Side looks even less attractive to developers if they can still get full tax breaks while going to other parts of the city, not just downtown but also north of the Missouri River and into far south Kansas City as well.

On Tuesday, James said in an interview that he supported significant discussions on incentive policies, and said he wanted to make sure the city still had some “flexibility to address specific needs.”

In recent years, outspoken representatives of the taxing jurisdictions have put more pressure on James and city officials to reduce incentives. The most publicized victory was killing a proposed reuse, with tax breaks, of a Crossroads Arts District building for the headquarters of BNIM architects.

While some feared that event could slow redevelopment, it hasn’t happened. In fact, developers have seemed a little more willing to come to the negotiation table with neighborhood leaders, city staff and City Council members in recent months.

City officials have good reasons to fully investigate the pros and cons of ratcheting back tax breaks that might no longer be needed — at least at current levels — to spur redevelopment in lively parts of the city.

That review of tax breaks also should help City Hall determine where it ought to focus the highest amount of public aid, which certainly has to include the East Side.

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