Tom Bogdon
August 3, 2007

 

Bad TIF, good TIF
by Tom Bogdon

KC Mayor Mark Funkhouser struck a chord with voters in this year’s city elections with his call for reform of the practice of granting generous tax subsidies to real estate developers, and probably won his job on that issue.

After all, who couldn’t visualize high-priced development lawyers wheeling and dealing behind closed doors with elected and appointed officials for millions of dollars in Tax Increment Financing (TIF) for luxurious projects in, say, the exclusive Briarcliff district or in the area of the Country Club Plaza.

In fact, Yael Abouhalkah, the all-knowing urban affairs editorial writer for The Kansas City Star, recently quoted a remark by the mayor to tar individuals, who Abouhalkah named, as “forces of evil.”

But, wait a minute, Yael. You have been the chief editorial writer and columnist on development issues for Kansas City’s only daily newspaper for more than 20 years and have been complicit with at least the city’s general direction. Shouldn’t you include yourself on your “forces of evil” list?

Although I do not want to belabor the point, tax subsidies to encourage development found to be in the public interest can be a worthwhile investment of tax dollars and can pay dividends in the long run. That is the premise of state laws that permit judicious use of such tax breaks, and I doubt that Funkhouser would want those laws repealed.

The key term here is “judicious use” of such subsidies. Particularly in the downtown area, TIF subsidies granted during the administration of Mayor Kay Barnes are sparking a renaissance of housing, office and retail development that Kansas Citians can take pride in. Before Barnes took the lead, downtown was an embarrassment. Now even the blue-jacketed Future Farmers of America (FFA), long-time visitors at American Royal time, are thinking about returning to Kansas City for their huge annual convention.

I gather that what Funkhouser wants is a meaningful set of guidelines for granting TIF subsidies to developers. Such a policy is under development at city hall, and will be unveiled in the near future. Meanwhile, the mayor has an opportunity to put his stamp on the TIF Commission, a panel appointed by the mayor and confirmed by the city council that makes recommendations as to which TIF proposals are “judicious “ and which are not.

Peter K. Yelorda, who has been TIF commission chairman since shortly after former Mayor Emanuel Cleaver appointed him to the commission in 1998, has submitted his resignation to Mayor Funkhouser. But Yelorda, a Blue Cross/Blue Shield executive and former assistant city manager, has also asked to be reappointed. Several other commission members have also submitted their resignations.

Particularly since Funkhouser has made an issue out of development subsidies, the mayor’s appointments to the TIF commission will be some of the most important that he makes. Has Yelorda, for example, been on the commission too long? Or would his experience be a plus in implementing the new city guidelines? That’s Funkhouser’s call.

Although each TIF proposal must, of course, be considered on its own merits, there are a couple of prominent projects in the last few years that arguably were mishandled by the TIF commission. Taking a quick look at these cases can illustrate mistakes in or even abuse of the TIF process.

A clear abuse of the TIF process was the $29 million give-away to Wal-Mart, the nation’s richest retailer, and the owners of the former Blue Ridge Mall. Even for those who don’t dislike Wal-Mart for its predatory business practices, the $29 million TIF subsidy for one more Supercenter was an out-and-out gift, and totally unnecessary. Once the deal passed muster with the TIF commission, then Councilwoman Becky Nace pushed it through the council.

Just a few months before the Kansas City TIF commission recommended the $29 million giveaway, and the city council granted it, the mayor and council in suburban Mission, KS adopted a zoning policy that blocked a Wal-Mart plan to acquire and demolish the Mission Shopping Center, then build a Supercenter on the site. Wal-Mart knew better than to ask Mission for even a dollar of subsidy, and the giant retailer’s plan was rejected, anyway.

The site of the Mission Shopping Center is now in the process of being redeveloped as a mixed-use project, a much more desirable outcome than just another Wal-Mart Supercenter. In Kansas City, the kicker of the city government’s $29 million generosity to Wal-Mart was that the retailer closed its Benjamin Plaza Hypermart when the Blue Ridge store opened, adding to the blight in the Bannister Mall area.

One other TIF project that Mayor Funkhouser and the city council should keep in mind is the now splendidly restored Hilton President Hotel. The President, an early 20th century hotel that had been boarded up for more than 20 years, was acquired by developer Ron Jury, who planned to restore the historic hotel and its once famous Drum Room. But Jury needed a TIF to make his plan feasible.

Andi Udris, then CEO of the Economic Development Corp. (EDC), the agency that serves as staff of the TIF commission, recommended against the President Hotel project, contending that downtown had too many hotels. Udris, now CEO of Union Station, had no problem with the President falling to the wrecking ball.

But Jury was persistent. With the support of Building Trades business managers (Jury planned to have the renovation done by union craftsmen), Jury took his project directly to the council. Without TIF commission backing but with the support of the Building Trades and Councilwoman Nace, Jury succeeded in obtaining the TIF subsidy that was key to realizing his dream of a restored President, now a true downtown success story that almost didn’t happen.

Tom Bogdon can be contacted at tjbogdon@yahoo.com.


              
              
                 

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