This is just the latest example over the years of City Hall favoring wealthy, connected corporations with taxpayer subsidies and special treatment.

Port KC CEO Jon Stephens framed the incentives as a “small, supportive element” aimed at ensuring Kansas City retains high-quality jobs. The project promises to add 150 jobs with an average salary of $126,000 while retaining 600 current employees. Yet no precise value for the tax exemptions was disclosed. Its not clear if PortKC attached performance requirements to the deal, but Friestad indicates there was no such discussion of it among the commissioners when the subsidies were approved.

Readers may recall Stephens backed subsidies for an independent baseball team in Kansas back when the team couldn’t pay its utilities. If nothing else, he is consistent in his apparent desire to redirect taxpayer money to private corporate interests

Such a deal is nothing new for JE Dunn. The company received a lucrative incentive package when building its headquarters in 2009. That project fell under the East Village tax-increment financing plan, redirecting $19 million in public funds for a parking garage, demolitions, and blight removal.

This latest deal follows a familiar script in which major corporations, including Cerner, H&R Block, Burns & McDonnell, and Commerce Bank have secured public funding for their private office projects. Research has indicated for years that such incentives do not significantly impact corporate decisions on location.

Port KC has repeatedly played a central role in funneling public dollars into private hands. Its recent involvement with JE Dunn reflects a long history of negotiating deals that often leave taxpayers holding the bag, such as the millions each year taxpayers must fork over to cover bond payments on the Power & Light District owned and operated by Cordish Company. (Stephens is a former manager of that project.)

As Kansas City grapples with persistent infrastructure needs, ballooning public debt, and limited funding for essential services, its continued reliance on subsidies for corporate renovations raises questions about priorities. For now, Kansas Citians can only watch as the city’s public funds are diverted to underwrite private gains.

The post KC’s Corporate Welfare: JE Dunn’s HQ Renovation Gets Public Support appeared first on Show-Me Institute.

It is, alas, same as it ever was. Cordish Cos. is again pushing Kansas City for more taxpayer-funded subsidies. This time, it’s for its $156 million, 24-story Four Light luxury apartment tower. And it is already laying the groundwork for a fifth (Four Light would be the fourth luxury apartment for Cordish Cos.). The catch? Cordish Cos. wants to declare part of the Power & Light District an “undeveloped industrial area” to qualify for incentives—an absurd claim for property it controls.

These developer handouts are draining the city of the resources it needs to provide basic public services. This isn’t about revitalizing a struggling neighborhood—it’s about maximizing profits for wealthy and well-connected developers at the public’s expense.

Kansas City needs to end this cycle. If Cordish believes there’s demand for Four Light, let it fund it privately. If the city thinks there is too much regulation or taxation, leaders should reduce it for everyone, not a select few.

The post K.C. Subsidies Stop Making Sense appeared first on Show-Me Institute.

City manager Troy Schulte said he wasn’t concerned about the increased price of the hotel since cost overruns are covered by the developer.

“We are actually getting a better project with lower public commitment,” Schulte said.

This seemed ominously familiar to me. A quick search confirmed my suspicions. Back in 2009, Vockrodt wrote in the Kansas City Business Journal about Cordish’s effort to reduce the property valuation for the Power & Light District. He included this:

Kansas City Councilman Ed Ford said he was told by city attorneys that the Power & Light District’s dispute would not put the city on the hook financially.

“It looks like the city is not going to have a dog in the hunt on that,” Ford said.

But of course it did affect the city because a low property tax assessment meant Cordish paid less in property taxes, which in turn meant there was less TIF money available to apply to bond payments. And because city leaders committed Kansas City taxpayers to paying any bond shortfall, we very much did have a dog in that hunt.

This doesn’t mean that hotel cost overruns will necessarily cost the city—unless the hotel so underperforms that taxpayers are told they need to add amenities to improve performance, exactly as has happened in the past. When it comes to publicly financed projects, being told by city leaders that there is no cause for concern seems itself to be a cause to be concerned.

The post When City Leaders Aren’t Concerned, Taxpayers Should Be appeared first on Show-Me Institute.

Baltimore’s population has been steadily declining in the past few years. It stands at about 610,000 today—down from 620,000 in 2010 and 650,000 in 2000—and its height of 950,000 people in 1950. Like Kansas City and St. Louis, it has struggled with a high homicide rates, coming in second behind St. Louis in 2017 and ahead of fifth-ranked Kansas City. Like Kansas City’s moniker ‘Killa City,’ Baltimore’s homicide rate earned it the nickname ‘Bodymore, Murderland.’ Baltimore students are some of the worst served in the country.

No one can accuse Baltimore of doing nothing to reverse its fortunes. In fact, Baltimore seems to have done everything that developers and urban planners recommend. Consider the following amenities paid for in part with city and state subsidies:

• Power Plant Live! entertainment district (developed by Baltimore-based The Cordish Companies, developers of Kansas City Power & Light District and St. Louis Ballpark Village)
• Rail transit such as the Baltimore Metro and LightRail Link
• A downtown baseball stadium, Oriole Park at Camden Yards
• The National Aquarium
• The Baltimore Convention Center, first renovated in 1996 and now considering another renovation and expansion; the convention center is connected by rail to . . .
• Baltimore Washington International Airport (BWI), including recent renovations and new concourses
• Baltimore even has a waterfront development!

These are developments that would make any recent Kansas City or St. Louis mayor salivate. And yet none would want to turn their cities into Baltimore. Why?

Maybe it is because we all understand—whether we admit it or not—that cities need to get the basics right. Cities should prioritize basic infrastructure, public safety, and tax policy done well before they splurge on expensive baubles. Kansas City and St. Louis do not yet have the basics right, and nothing should distract us from fixing it.

The post Baltimores on the Missouri? appeared first on Show-Me Institute.

KSHB TV, WDAF TV and The Kansas City Star reported on the matter. The latter quoted Kansas City’s Mayor James saying, “I’m not asking the state legislature to do anything other than leave us alone.” (This is usually the Mayor’s response unless he is looking for more money from state government, such as in tax credits or state funds.)

The Star reports,

And if the city imposes a new 1 cent sales tax for the Central Business District—part of a deal it struck last month with Power & Light District developer Cordish to help pay for parking garages—the cumulative rate would be 13.6 percent.

You don’t need to be an anti-tax ideologue to wonder if there is a point at which sales taxes are just too high.  Back in 2014, Steve Vockrodt of The Pitch asked, “City Hall rationalizes these incentive deals by saying they boost the local economy and expand the tax base. But if that’s true, then why do all these tax proposals keep coming up?” That was back when the sales tax at the Power & Light District topped out at 11.1 percent.

If Kansas City is undergoing revitalization—as city leaders claim—then why are we still raising taxes for the many to give tax breaks to the few? If this is success, it appears taxpayers can’t afford much more of it.

The post Should Five Percent Appear Too Small… appeared first on Show-Me Institute.

Trump has said some traditionally infrastructure-y words when he talks about this. “We’re talking about a very large-scale infrastructure bill,” the president-elect said in a long-ranging interview with the New York Times published Wednesday. “… [a]nd we’re going to make sure it is spent on infrastructure and roads and highways.” A proposal to privatize infrastructure projects released by Trump’s economic advisors describes the “complex network of airports, bridges, highways, ports, tunnels, and waterways” that underpins private sector growth.

Bliss worries that Trump will be more inclined toward “major new property development,” rather than infrastructure. She even cites Paul Krugman’s column, where such spending is often boosted, in The New York Times where he writes,

And we already know enough about [Trump’s] infrastructure plan to suggest, strongly, that it’s basically fraudulent, that it would enrich a few well-connected people at taxpayers’ expense while doing very little to cure our investment shortfall. Progressives should not associate themselves with this exercise in crony capitalism.

The President Elect’s infrastructure plan may or may not amount to crony capitalism. As my colleague Patrick Ishmael recently wrote, the Carrier deal in Indiana invites the accusation. Yet this is exactly the sort of crony capitalism that progressives seem to love in Kansas City and St. Louis. Recall that we’ve redirected hundreds of millions of tax revenue into property developments for wealthy corporations such as Cordish, Burns & McDonnell, Cerner, and H&R Block.

Meanwhile, important infrastructure spending (read: roads, bridges, sewers, etc.) is squeezed, because the city cannot afford it. We’ve heard that the city wants to borrow $800 million for such spending—but we have as much detail about where that money will go as Trump has given on his plans. Hopefully, those funds won’t go toward  “fraudulent” infrastructure projects instead of those truly necessary for the public good.

Policy debate on infrastructure is welcome, as is skepticism toward government spending. But if you want to be critical of fraudulent public programs that appear only to enrich the well-connected, you don’t need to travel to Washington to find it—or even leave Kansas City.

The post Kansas City and “Fraudulent” Crony Capitalism appeared first on Show-Me Institute.

The Power & Light District plan was put together by City Manager Wayne Cauthen, and it was done largely out of the sight of the public. It was too late to make changes when the subsequent city manager, Troy Schulte, told us that in order for the Power & Light District to be self-sustaining, as voters were promised, “You needed Plaza-level holiday-level sales every day of the year.”

Seeking to avoid that same mistake, the 2010 convention hotel effort received lots of scrutiny, including reports from consultants and financiers. Bill Lucas, then president of the city’s hotel steering committee, said, “We’d about have to double our convention bookings” to make the hotel feasible. The project did not go forward because people were skeptical we’d make the goal.

This time the city is rushing a vote on the project to meet an arbitrary political deadline. There are no reports from consultants; no reports from financiers. One councilmember even complained about the short time available to make a decision.

While no one is saying how much convention business will have to increase to repay the investment, consider the impact of TIF giveaways to developers:

• Visitor money spent in the convention hotel itself won’t help us, as we’re giving all the taxes generated from those sales to the developers through Tax Increment Financing (TIF).
• If convention visitors wander to the Power & Light District for dinner and drinks, they’ll pay a high tax rate, but the city is already giving that tax money to Cordish through their TIF. The city won’t see much from it.
• If visitors head north to the River Market, the same will apply—we’re giving at least half of the tax revenue there to the developers.
• Maybe they’ll ride the streetcar. The streetcar will be free, so we won’t see any tourism dollars there (although it appears visitors who stay at the convention hotel will be paying 1 percent to the streetcar Transportation Development District).
• Maybe visitors will go to Country Club Plaza. That will be great, but half of the tax revenue generated from their purchases will go to the developers named in the Plaza TIF.

Therein lies the problem with Kansas City’s frequent use of TIF; we’re hollowing out our tax base. We claim that these developments will help the city, but in order to get the developments, we give away the tax revenue. Kansas City will likely need to more than double our convention bookings to make this financially sound, but no one is saying. This is no way to run a city.

The post How Will the Convention Hotel Help Taxpayers? appeared first on Show-Me Institute.

It appears that, unlike most TIF projects, the developers want 100 percent of incremental economic activity taxes, including sales taxes and the earnings tax. Page 11 of the MOU states,

The City will . . . redirect through its annual budget the City’s portion of the Project TIF for a period of 23 years and Super TIF for a period of 30 years generated from the Project’s tax revenue sources . . .

In  other words, they want the half that they get from the TIFs directly, and then they want the city to give them the rest through the appropriations process. Here is the tax revenue the developers want to keep:

• Tax Increment Financing (TIF): as mentioned above, all economic activity taxes collected by and for the county, school district, library district, and the zoo will be redirected back to the project for 23 years.
• A Super TIF that collects for 30 years the tax not captured in the TIF above, including the convention and visitors tax, and redirects it to the developers.
• A 100 percent exemption on sales taxes on construction materials and real/personal property taxes.
• The creation of a 1 percent Community Improvement District (CID) tax that will then be redirected back to the developers.

Here are some extra freebies the developers want:

• A cash contribution of $35 million.
• The city’s portion of the land, valued at $13 million.
• Fees generated by zoning, permits, inspections, etc., capped at $800,000.
• A management fee to the hotel for catering amounting to $62,363,816 over 15 years. Should the event fees be insufficient to cover this, the city will pay, “from any legally available city funds,” just like we do with the Power & Light District.

Here are some possible problems for the city, based on past issues:

• The “City will maintain the existing Convention Center to its current standards. . . .” Isn’t this exactly what the city failed to do with Kemper Arena?
• The MOU says that the city won’t be responsible for cost overruns, “except to the extent intentionally caused by the City without Good cause.” I’m guessing there will be an attorney whose full-time job it is to find ways to sue the city over this, just like Cordish sued Jackson County over its assessment.

Not mentioned in the MOU is any exemption from the streetcar Transportation Development District (TDD). Apparently, funding the downtown streetcar is more important than funding the city, county, schools, libraries, and zoo. What does that say about the City Council’s view of the rest of Kansas City?

The post The Convention Hotel’s Tax Breaks and Gimmes appeared first on Show-Me Institute.

• Cordish, the company that brought us the Power & Light District then sued to lower their county property taxes, says that the downtown investment has been a success! But apparently the success wasn’t great enough to forgo further subsidies for two more residential buildings.
• The Port Authority in Kansas City recently announced that they will be using public dollars to subsidize the construction of luxury residential condominiums along Kansas City’s riverfront. There is great demand they say, but apparently not enough to avoid the use of public underwriting.
• A Crossroads hotel has received TIF subsidies, and an apartment building in the same area is receiving a property tax abatement and a $1 million exemption in sales taxes.

When will the public subsidies end? How do we know when we’re done? Is there any incentive for developers to say they do not need public subsidies? (The answer to that last question is no.) This is important because every subsidy means less money for city and county services; every abatement means less money for schools, less money for libraries. Right now, at least $93 million of city revenue is redirected each year to these developers. That doesn’t include the new projects for Cordish, Burns & McDonnell, and Cerner. Developers shouldn’t be encouraged to build skyscrapers while digging taxpayers into a hole.

The post Kansas City Builds by Digging Itself into Holes appeared first on Show-Me Institute.

That [Cordish] valuation, which equates to an average of about $24 a square foot, is a far cry from Jackson County’s appraised value of $160 million, roughly $270 a square foot, which is what county officials say the district is worth for 2009, including Cosentino’s Downtown Gourmet Market.

“They said that $12 million was their number for 500,000 square feet when everything is completed,” said Jeph BurroughsScanlon, a Jackson County spokesman.

“We want to make sure we’re right on it,” said Curtis Koons, director of the county’s assessment department. “We just don’t feel $24 on a brand-new commercial venture is realistic.”

Vockrodt’s story went on to include a this statement on the City’s exposure to debt:

Kansas City Councilman Ed Ford said he was told by city attorneys that the Power & Light District’s dispute would not put the city on the hook financially.

“It looks like the city is not going to have a dog in the hunt on that,” Ford said.

Ford may have been talking about the lawsuit, but of course the city did have a dog in the hunt on the valuation. A low property tax assessment meant there would be less money required of Cordish (as taxes are not voluntary) to keep and apply toward their bond payments. And while, in a normal world, any bond shortfalls would be made up by the people making money off the project, Cordish is not a normal company and Kansas City is not a normal world.

In May 2015, Jackson County will again assess the value of the Power & Light District. Now that the facilities have been improved, will their value jump? After all, according to The Kansas City Star, things are booming:

[Cordish’s executive director of the Power & Light District Nick] Benjamin thinks district revenues are likely to continue growing, as the district has finally reached 94 percent occupancy. More than 50 tenants, including 22 locally owned tenants, have 450,000 square feet of retail space leased.

If Jackson County argued in 2009 that the Power & Light District should be valued at $160 million, the valuation should be much higher now, given the high occupancy rates. A higher assessment will mean more taxes paid by Cordish. And while Cordish will get to keep these taxes, they will in effect be paying more toward their own bond debt, meaning a lower taxpayer subsidy from City Hall. Even a large increase in the valuation for Power & Light won’t result in a big savings for Kansas City, but it would be something.

It’s too late for city planners, political leaders or their attorneys to be considered geniuses for the disastrous Power & Light deal. But an aggressive effort to make sure Cordish is paying it’s fair share of property taxes to Jackson County would at least suggest that Kansas City leaders truly have learned a lesson.

The post Righting the Wrongs of the Power & Light District appeared first on Show-Me Institute.

Kansas City leaders want to point to downtown as a great monument to government planning. Look at the revitalization, they say. But given the high cost of the investment and the low return in jobs and businesses, taxpayers should be wary of this so-called success.

We’ve written recently on the premise underlying the investment of downtown and found it lacking. The very notion that those sought-after millennials are moving to urban areas is contested. That they are doing so in Kansas City in any fashion worthy of public cost is demonstrably false. That the city is seeing any financial benefit to the development is likewise risible.

Even the Kansas City Star, which has championed the profligate spending downtown, had to report on the failure:

Nick Benjamin of Cordish, executive director of the Power & Light District, thinks the debt shouldn’t overshadow all the positives, and in other ways the city’s investment has more than paid for itself.

“The point of Power & Light and the city’s investment wasn’t solely for Power & Light,” he said. “It was to revitalize downtown. It’s hard to argue that’s not happening.”

It’s happening? Certainly, the city has paid for very expensive buildings that weren’t there before, but what about this “revitalization”? We wondered if there was any way to justify the expenditures for the Power & Light District based on the number of entertainment venues or jobs or the tax revenue they generated. Given that the city is on the hook for $15 million each year to cover business losses, any increase would have to be substantial. Unfortunately, there appears to be no growth in any of our measures.

According to the city’s Comprehensive Annual Financial Report (CAFR), tax revenue from hotels and restaurants grew 16.56 percent, from 2006 to 2014. According to the inflation calculator at the Federal Reserve Bank of Minneapolis, inflation for that same period was 17 percent—meaning revenue growth from Kansas City hotel and restaurant tax was exactly flat.

In response to a Sunshine Request to the Regulated Industries Division in Kansas City, we learned that from 2007 to 2014 the number of businesses possessing licenses to sell liquor dropped over 13 percent from 870 to 769. Likewise, the number of employee liquor permits, such as those required of bartenders, dropped 7.5 percent from 11,767 to 10,937. In both cases these declines were slow and steady over time.

Kansas City did not get a hockey team or a basketball team out of the downtown development. It did not get a concert venue that it didn’t already have in Kemper. It did not see a net gain in jobs or businesses. It did not see an increase in tax revenue. However, it did get more debt to be paid out of city coffers—meaning less money for roads, parks, and public safety. And the city will be paying that debt for a long time. According to the same Star piece:

Even with a double-digit bump in sales, it’s not nearly what was anticipated in 2004, when consultants projected that new city and state tax revenues paid by the district’s residents and businesses would be able to cover the debt.

“I don’t think there will be a point at any time in the foreseeable future, probably the next 20 years, where it actually pays for itself,” acknowledged City Manager Troy Schulte.

Back in April 2006, the Kansas City Star quoted then-Mayor Kay Barnes:

“We’re going to look like geniuses” in five or 10 years, Barnes said. The city is paying low interest rates for projects that are capable of paying off the debt, she added.

Whoops! If this is genius and the downtown development is a success, it is the sort of genius and success that Kansas City cannot afford.

The post A Tale Full of Power & Light, Signifying Nothing appeared first on Show-Me Institute.

Anyway, it is a true guilty pleasure to read about developers who don’t build anything without tax giveaways (Cordish is doing this in St. Louis, too), and about the fights between city officials who court them. The most egregious line in the correspondence quoted in the article is where Cordish decries the city’s allowance of festival liquor licenses in parts of the city other than downtown. The audacity! How dare city hall allow people to have fun outside of the power and light district! I don’t generally side with the government, but it is hard not to do so here. Excellent series of articles by the Star.

The post The Star Dishes on Cordish appeared first on Show-Me Institute.

[Director of Development Chase Martin] attributed the delay to negotiations with Clayton-based Centene Corp.
after the company announced in September it would relocate its
headquarters to the Ballpark Village site.

This being the same Centene that wowed downtown officials in September with the announcement that they would be moving their headquarters and employees into the city to anchor the new development. This also being the same Centene that, four months prior, lost a judgment at the Missouri Supreme Court that prevented them from seizing "blighted" land in downtown Clayton through the power of eminent domain.

Any chance those two were related?

Now, however, negotiations between Centene, the Cardinals, the city, and Cordish Co. (the developer) are threatening to delay the project even further, to the point where completion is not expected until the beginning of the 2014 season, and officials are worried that the project may not even be under way when Busch Stadium hosts the Major League Baseball All-Star Game in July, 2009.

On one hand, this story brings up the positive side of what can happen when property owners stand up for their rights. Centene, which almost certainly would have built its new headquarters in Clayton had it been given the approval, will act as a major cornerstone in the continued revival of downtown St. Louis.

On the other hand, the last thing that I want to hear over the loudspeakers when I’m standing on the street outside the left-field fence during the Home Run Derby is Joe Morgan telling Chris Berman, "Hey, look at that big vacant lot across the street. That coulda been something really nice, but these people wouldn’t let a company build a building for some reason and they had to move and now it’s just a big ol’ pit. SWING AND A FLY!!!"

Let’s hope that doesn’t happen.

The post Eminent Domain at the All-Star Game appeared first on Show-Me Institute.

Cordish to Centene: "Excuse me, sir? What it is, Mr. CEO; we’re from out of town."

Centene To Cordish: "No s%!t."

Cordish: "We’d really appreciate it if you would move your corporate headquarters down to our brand-new downtown development instead of Clayton."

Centene: "What, for free? Gimme $78 million dollars in tax credits and incentives."

Cordish: "We’re not gonna give you $78 million on top of everything else the taxpayers have already paid for."

City of St. Louis (from passenger seat and reaching for checkbook / aldermanic approval): "I think that’s fair, Cordish."

Cordish: "Here’s $78 million, plus a brand new sales tax for your own sales tax district." (Pauses while Centene pockets it all.) "Keep the change."

Needless to say, I could go on and on. I would really have liked to work "a Torino with no wheels on it" into this, but I think I have made my point. The fact that the above scene actually takes place in St. Louis is all the better, in case you forgot that.

The move of Centene is just another insane example of businesses playing various cities against each other in order to get taxpayer money they don’t deserve. I may sound naive here (and I am not at all naive when it comes to government and politics), but if cities such as St. Louis would just improve their overall business climates, they would not have to give away the store to favored targets. These incentives and tax credits are necessary precisely because of the earnings tax and other disincentives for business in the city. Getting rid of those disincentives first makes giving away new incentives far less necessary.

The post What, For Free? Gimme $78 Million Dollars appeared first on Show-Me Institute.