Group Hopes to Raise $500K to Defeat KC Incentive Cap Initiative

By Kevin Collison

A development industry coalition backed by the Greater Kansas City Chamber of Commerce is fighting a ballot initiative they say would cripple the city’s primary incentive program, property tax abatements.

The “Committee for Kansas City Jobs” wants to raise $500,000 to defeat a petition initiative on the city ballot next month supported by a group calling itself the “Coalition for Kansas City Economic Development Reform.”

The Coalition gathered 2,300 signatures to place what’s tagged “Question One” on the ballot June 18. It would cap the amount of property tax abatements available to assist developers at 50 percent of what’s allowed by state law.

At a meeting of the Downtown Council last week, former Mayor Kay Barnes, a key player in the current revival of downtown that began in earnest in 2001, said opposing the initiative was a “critical issue.”

Former Mayor Kay Barnes

“It’s clear to me that 95 percent of the population doesn’t understand how TIF works,” said Barnes, who served as chair of the Kansas City Tax Increment Finance Commission before being elected mayor.

“This is an extremely dangerous question on the ballot. I shudder about what it will mean if it passes.”

The Development Reform Coalition describes itself as “an alliance of community organizations working to improve economic development by targeting incentives toward truly distressed communities and by promoting civic stewardship of voter-approved public resources” on its website.

In its statement opposing the initiative, the Chamber said capping the amount of property tax abatement at 50 percent would undermine the city’s ability to use the incentive to attract investment to poorer neighborhoods.

“The proposed cap is arbitrary, too restrictive and would have a devastating impact on the ability to use economic development incentives in Kansas City’s most blighted and under-resourced neighborhoods,” according to the Chamber.

Richard Martin, an attorney at J.E. Dunn Construction, is the chairman of the Committee for KC Jobs. He said its membership includes development attorneys, unions and contractors.

Besides the Greater Kansas City Chamber, Martin said other organizations supporting the Committee includes the Northland Chamber and Platte County EDC. He said the goal is to raise $500,000 for an opposition campaign.

“I think we can do it, but it’s an uphill battle,” Martin said.

“If you are the average citizen, you naturally don’t think that incentives are a good idea. They think they’re being taken from somebody else.”

Tax abatements were instrumental to the redevelopment of the Wonder lofts at 3001 Troost Ave.

Tax abatements are not a cash subsidy allocated by the city or its development agencies. The abatement funds come from the increased tax value of a property after it has been redeveloped.

A percentage of the new or incremental property tax growth is kept by the developer to help make the project work financially. The abatement can last up to 25 years and often is gradually reduced during that period.

The taxes originally paid on the undeveloped property continue going to taxing jurisdictions including the county, schools and libraries.

The key evaluation required before incentives are granted is called the “but-for” analysis. A third party consultant determines whether a development would be financially viable to move forward “but-for” the incentive.

Under state law, up to 100 percent of the additional or incremental value could be reimbursed to developers for the first 10 years and 50 percent for the next 15.

However, in an earlier incentive reform, the Kansas City Council approved a measure sponsored by Councilman Quinton Lucas in October 2016 that capped the amounts at 75 percent and 37.5 percent.

Martin told the Downtown Council the development industry had expected the backers of Question One to wait to see how the Lucas reform plan worked before introducing their petition.

He noted that even the 75 percent cap puts Kansas City at a disadvantage to competing cities in the metro. The Chamber statement said no local communities have a 50 percent cap, adding it could establish an anti-development atmosphere in Kansas City.

“The messaging that is put forth though this policy could create an an anti-growth image that might deter future developers and employers from locating to not just the city, but the entire region,” the Chamber stated.

A plan to redevelop the historic Muehlebach Hotel at 12th and Baltimore into 117 apartments is in the works using the new, reduced 75 percent/37.5 percent property tax abatement reform approved two years ago by the Cjty Council.

The Chamber also noted a 50 percent cap would undermine the ability to pursue the public policy goal of providing more affordable housing.

“Limiting the available tools for economic development will have a drastic impact on new construction of affordable and mixed-income housing across the city and primarily in the urban core,” according to the Chamber.

Martin also told the Downtown Council none of the candidates running for mayor or City Council in the June 18 election support Question One.

“Among the candidates out there on the frontline talking to voters, not a one of them support the cap,” he said.  “Voters are not bringing it up.”