The EDC Gets It Wrong

Last week we published a blog post in which we explained how Kansas City’s Economic Development Corporation (EDC) benefits from the TIF projects it administers. In the piece, we asserted,

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.

Then we issued a press release bringing attention to the post. Rob Roberts of The Kansas City Business Journal received our release and wrote about it. But apparently neither he nor EDC CEO Bob Langenkamp, who was quoted in his piece, clicked on the link in the email or read the actual post to which the release referred. That’s a shame, because Langenkamp was made to look foolish. For example, Roberts wrote,

As EDC CEO Bob Langenkamp pointed out, the Tax Increment Financing Commission of Kansas City recommends approval of TIF projects to the City Council, which makes the final decisions.

This is exactly what we assert in our post, as cited above. Roberts also wrote,

Langenkamp also corrected Tuohey’s claim that the majority of the EDC’s funding comes from administrative fees associated with TIF projects.

“If you look at the current EDC budget, you’ll see we’re not receiving any administrative fees,” Langenkamp said. “They’re collected by the city.”

Yet in an August 23 email to me, Langenkamp wrote that $3 million of the EDC budget is from “the annual admin fee on active/approved TIF projects.” Langenkamp may respond that his email refers to previous years and not the current budget, but the distinction is largely meaningless. Due to the TIF Commission’s dissatisfaction with the quality of financial management by the EDC, the TIF fees now go to City Hall, which assesses a fee for outside bookkeeping and then channels the remaining funds back to the EDC. The City is merely a pass-through; the EDC still gets funds generated from TIF fees. If anything, this makes the process more questionable because now the city administration also gets a cut.

The Show-Me Institute is not the only one to question the nature of EDC funding. In 2010, one outlet published a piece that included this passage:

Among the options the EDC executive committee has explored are consolidating boards that deal with tax incentives—the Tax Increment Financing Commission, Land Clearance for Redevelopment Authority and others—and having the city finance the agency to remove the potential for conflict that exists because the EDC is partly financed by revenue and fees from development projects.

The author of that piece? Rob Roberts of The Kansas City Business Journal. The difference now is that the portion of the EDC funding generated by fees has grown immensely—even if it is filtered through City Hall along the way.