Money on scale
Patrick Tuohey

The quotation above, attributed to Saint Francis of Assisi, might make a good motto for Kansas City’s Economic Development Corporation (EDC)—but not necessarily in the sense that Italy’s patron saint intended.

The EDC oversees, among other groups, the city’s Tax Increment Financing (TIF) Commission. This places them in the middle of the debate over how and to what degree Kansas City subsidizes development. Ideally, the EDC would be structured to facilitate the judicious use of city resources to promote economic development. However, the way the EDC is funded seems far from ideal. Since 2000, the EDC budget has doubled. That may or may not be warranted, but what should concern taxpayers is the growing percentage of their revenue that comes from fees associated with the TIF projects they oversee.

In 2015, for example, $1 million dollars of the EDC’s $5-million organizational budget was funded through the Kansas City general fund; but $3 million came from fees the EDC received from the TIFs it approved. So the EDC is getting three times more money from TIF recipients than from the general fund.

The potential for conflicts of interest here is obvious. The EDC doesn’t just have financial relationships with the organizations they regulate—they depend on those relationships for over half of their budget. Worse yet, the more subsidies that are awarded, the more money they collect in fees. While TIF Commissioners—who make the final determination on the awarding of subsidies—are appointed by the mayor and are themselves unpaid, they rely on recommendations from EDC staff. That arrangement may not be working so well.

Last year the TIF Commission considered leaving the EDC, “as a result of board members' concerns with the level of financial information and professional services they are receiving for their money.” Since then the EDC’s financial reporting and auditing functions have been contracted out to a private firm through City Hall.

Although this is a step in the right direction, it doesn’t resolve the conflict inherent in having the EDC benefit financially from every TIF project approved. While TIF Commissioners may be dissatisfied with the quality of reporting from EDC staff, there is no other place for them to go; they do not seek out second opinions. Taxpayers are displeased with the frequency and degree to which Kansas City doles out subsidies; but without EDC funding reform, prospects for improvement seem dim.

About the Author

Patrick Tuohey
Patrick Tuohey
Director of Municipal Policy

Patrick Tuohey is the Director of Municipal Policy at the Show-Me Institute.