To review, there were two offerings to get the USDA to relocate to Kansas City, Missouri. The first was a state subsidy that allowed half of the withholdings tax paid to the state to be used to offset the costs of preparing the new site. Under the statutes relevant to the particular incentive package being used, 20 percent, amounting to $6 million, was to be paid to PortKC in administrative fees.

The second subsidy (unrelated to the first) redirected local Kansas City taxes to the project. This amount also happened to total to about $6 million. So rather than have local taxpayers give up all that money, the city council simply directed PortKC to forgo some of its administrative fee so that Kansas City taxpayers didn’t have to cough up as much. The amount given to the USDA is the same, but PortKC’s windfall is dramatically reduced.

Monday, Steve Vockrodt reported in The Kansas City Star that PortKC followed suit, albeit begrudgingly:

Last month the Kansas City Council passed an ordinance that reduced by about $4 million what the city would contribute to the USDA incentive package. In turn, the Port Authority felt compelled to cut the $6 million it had counted on from the AIM Zone by $4 million to make up the difference and keep the USDA interested in relocating to Kansas City.

This is a victory for Kansas City taxpayers and a necessary limitation placed on PortKC. Back in August I called for further restrictions to be placed on PortKC’s authority and jurisdiction. This is a good start, but more should be forthcoming.

The post Show-Me Gets Results? PortKC to Refund Taxpayers appeared first on Show-Me Institute.

The EDC’s primary job seems to be the promotion of economic development subsidies in Kansas City. It lobbies on behalf of such subsidies before the city council and is funded largely through fees collected on projects that are approved to receive taxpayer subsidies. Nothing is wrong with any of that, in a vacuum.

The problem is that the EDC is also funded out of the city’s general fund to provide staffing assistance to the city’s several economic development agencies, such as the Tax Increment Financing (TIF) Commission, the Planned Industrial Expansion Authority (PIEA), and the Land Clearance for Redevelopment Authority (LCRA). The EDC even assists PortKC, which many fear is facilitating and approving subsidies that elected leaders would oppose. It is important to note that the members of these commissions and authorities are not paid and are free to vote as they see fit. But the staff they depend upon for advice and council have a financial interest in every vote. The more subsidies these agencies hand out, the fatter the EDC’s bottom line—and the EDC’s budget has doubled since 2000.

In 2015, for example, $1 million 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 projects than from the general fund.

Show-Me Institute analysts have published concerns about this before, and others—including those at the Kansas City Business Journal—have as well. Steve Vockrodt and Steve Roberts wrote this in the Business Journal back in 2010:

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 manifestations of the EDC’s conflict of interest are numerous. Consider the following:

• Back in 2015 members of the TIF Commission were so frustrated with the lack of financial transparency and professional services that they threatened leaving the EDC. Mayor James and the city council intervened and changed the process. TIF recipients now pay fees to city hall instead of the EDC, and financial reporting and auditing of TIF projects is now contracted out, instead of being handled by the EDC.
• The EDC apparently adheres to no long-term vision of what is best for Kansas City. Instead, it merely acts to assess each developer request as they are submitted. The EDC’s online application form suggests no particular policy goals that subsidies are meant to achieve, only that “Applications will be reviewed by EDC staff to determine the best course of action.” The recent discovery that at least one hotel was seeking a subsidy to protect itself from the overdevelopment of hotels suggests that no one at the EDC is taking a long-term view.
• The recent Strata deal—in which developers claimed a downtown office tower project was infeasible without public subsidies—was reworked by the city council to dramatically reduce overall subsidies and remove them completely for the tower itself. One wonders whether the EDC is capable and willing  to substantively vet developer applications for subsidies.
• Back in 2017 when Kansas City was trying to measure the value of its economic development policies, the then-CEO of the EDC wrote to the city hall staffer overseeing the study:

We need a report that explains and supports the city’s economic development policy in the context of local and regional competition. Such a report would be helpful in dealing with the KCMO Library and citizen petitioners interfering with an orderly eco-devo policy.

Kansas City spends at least $175 million each year on economic development subsidies. The organization charged with helping city leaders discern good subsidies from bad has demonstrated it is not up to the task, not looking out for the interests of Kansas City, and possessing an attitude of self-preservation that creates significant conflicts of interest. The EDC’s role should be significantly reformed or discarded altogether.

The post Kansas City’s Economic Development Corporation Is in Need of Overhaul 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.

The Port Authority, or Port KC, ultimately could issue up to $25 billion in bonds over 35 years for the Google data center project, a figure that represents the company’s maximum investment in Kansas City. Think of the $25 billion as a credit limit on a personal credit card. It’s not necessarily an indication of how much Google will invest.

The benefit to Google is that the Port KC can issue Chapter 68 bonds that give Google a property tax exemption for 25 years. Vockrodt goes one step further and makes clear in the story that such subsidies for data centers don’t offer a great return, if any, for taxpayers:

Good Jobs First, a research group often skeptical of corporate incentives, in a 2016 report identified a Google data center project in Oregon from 2006 that received $360 million in subsidies in return for 175 jobs, or $2 million per job. Good Jobs First advised cities and states to treat data center subsidies with caution.

“Internet-based companies have to grow the cloud and they will choose stable areas with cheap electricity,” the report said. “They will barely benefit your local economies because they create so few jobs and often import top-wage labor.”

Once again, Kansas City through its port authority is playing handmaiden to large corporations even when there is so little to gain. (Rest assured, this same story will unfold if/when the USDA considers locations in Missouri.) How is Kansas City supposed to fund infrastructure, education, public safety and all the other basic needs on which we depend if we continually offer exemptions from the taxes needed to provide them?

If taxes are too high for Kansas City to be a competitive place to attract business, then that needs to be addressed fairly for everyone. Offering sweetheart deals to a few while the rest of us pull their weight is no way to operate a city.

The post Port KC Versus Taxpayers appeared first on Show-Me Institute.

The conversation with [Southwest Airlines chief executive Gary] Kelly, which [Mayor Sly] James initially denied but Southwest confirmed, happened early in the week. James, through a spokeswoman, said the conversation was about cost sharing among airlines for a baggage handling system at the KCI terminal, a $20 million element in the project but a fraction of the overall cost.

I don’t know why the mayor would have initially denied speaking with an executive at Southwest. However, it is the sort of tactic that proponents of the new single terminal have been employing since the very beginning. Remember that proponents of the new terminal told us that there is no correlation between ticket prices and the fees airlines pay to fund airports. But Spirit and Allegiant Airlines have made it clear there is a connection.

Then we learned the price for the terminal was going way up. Cat Reid’s story on November 1 for KSHB indicated that this wasn’t a big deal for the airlines:

The director of the Kansas City Aviation Department, who has been meeting with airline executives across the country, said they have “no anxiety at all” about the $1.9 billion price tag on the new terminal.

But that wasn’t true. The airlines did have problems with the $1.9 billion price tag, and are asking to have their own consultants look at the price.

Fox 4 reported on November 15 that Mayor James said the price problem was specific to a dispute about paying for the new baggage handling system. But that wasn’t true, either. While there is a dispute regarding baggage fees, Steve Vockrodt reported on December 2 in the Star that, yes, the price itself was a point of contention.

Part of the reason why airline buy-in is so important is that Kansas Citians have been told all along that the airlines would be footing the bill without taxpayer funds. But this might not end up being the case—finance department representatives said they might use the general fund to cover initial costs. Now the city council is acting to make sure that those previous promises are honored.

Regardless of whether officials are misleading the public or simply do not know what they are doing, the airport project appears to be a mess. But civic leadership is willing to look the other way. Good public policy is unlikely to result from such an awful process.

The post What Is Going On with the KCI Project? appeared first on Show-Me Institute.

Fast forward a year and Vockrodt writes that the new Aviation Department director, Pat Klein, was unaware of Federal Aviation Administration (FAA) guidelines on conducting an environmental assessment. He writes,

Klein said there had been an assumption that the city could put out solicitations for certain construction work before the FAA approved an environmental assessment in October, and then signing those contracts shortly afterward.

“What we’ve been told initially by the FAA is they don’t think that’s a smart idea,” Klein said. “They think we should hold, so we’re in discussions with them to do that. That’s a three-, four-, five-month lag on our schedule, which could be the difference between summer or winter of 2022.”

Now we learn that even before construction has begun, the project’s opening is being delayed 11 months to October 2022 and will cost much more than originally planned. Delays and increased costs such as these are not surprising for such large projects. After all, the Aviation Department itself has been all over the map on costs for years. Changes in costs and timelines can be forgiven. Not knowing FAA rules on construction suggest a deeper problem of management.

The Kansas City Star editorial board rightly called for more transparency in the construction of the new airport terminal. The Show-Me Institute has also called repeatedly for more transparency in the airport process since 2013, when the Council first took up the matter.

It’s difficult to be confident that the City will suddenly adopt a position in favor of transparency after years during which the process was opaque. We remain confident, however, given the Aviation Director’s unfamiliarity with FAA guidelines, that transparency remains the highest need.

The post Kansas City Airport Stumbles Along appeared first on Show-Me Institute.

On November 1, 2016, the Council of Development Finance Agencies (CDFA) signed a contract with Kansas City to study the city’s economic development practices. Show-Me was critical of the City for hiring CDFA,  because they are a trade association whose mission is “to promote the common interest of Development Finance Agencies with respect to public policies and programs.” In other words, this group is being hired to analyze the success of the programs they promote. That hardly sounds like an impartial researcher. (But then our TIF Commission staff is funded by fees collected from TIF recipients, so conflicts of interest seem to be the standard operating procedure.)

Nevertheless, a study such as this is warranted, because Kansas City spends or diverts a lot of tax money to private developers. Studies of TIF and other incentives have found they are largely a waste of taxpayer money. This includes a report recently completed in St. Louis for the very corporation that doles out these dollars. That study concluded that TIF does not spur investment or create jobs; that it is not used in the economically struggling areas that need it; and that the level of reporting on these subsidies is poor. Other studies by universities and research institutions have likewise found TIF policies greatly wanting. Kansas City is due such an examination.

The contract signed with CDFA set a maximum payment of $350,000 for the study and set a deadline of May 1, 2017 for the final report. In an October 2017 email, Kerrie Tyndall, the director of economic development for Kansas City, wrote that the report should be received by the end of 2017—seven months late. In a November 2017 Kansas City Star story, Steve Vockrodt wrote that the report should be released in January 2018—eight months late. Ms. Tyndall indicated to me in March that the report should be delivered in mid-April—11 months late. As of this writing, May 25, there still is no report.

It is noteworthy that Public Financial Management, Inc., the company retained to provide analysis of economic development subsidies in St. Louis completed its study in 15 months and for half the cost of what Kansas City authorized. The Show-Me Institute issued its own analysis of TIF use in Kansas City and St. Louis after less than a year of study and at no cost to taxpayers.

A pricey, publicly funded and repeatedly delayed report on subsidies—performed by a group that supports such spending—isn’t likely to build confidence among residents. Kansas Citians deserve better policy and better policymaking.

The post Where Is That City Report on Economic Development? 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.

To us, one of the main selling points of the proposed new terminal is the expectation that airlines would add more direct flights out of here, and maybe even some international flights.

Two days later, Star reporter Steve Vockrodt authored a piece that made clear there was no guarantee of new flights should voters approve a new terminal. Vockrodt clarified:

A new terminal, by itself, won’t lead to more direct flights to more destinations.

“That’s probably fair,” said Steve Sisneros, senior director of airport affairs for Southwest Airlines, the dominant airline flying in and out of KCI.

The editorial board did eventually correct their error, stating on October 15 that, “There are no guarantees that more flights will be added by the airlines if voters agree to construct a new single terminal.” The next day, Vockrodt caught pro-terminal mailers making the same mistake.

In that October 15, the Star editorial board again endorsed a new terminal vote, but seems to have made a second error, stating that, “if nothing is done, the number of flights out of KCI will continue to dwindle.”

Dwindle? According to the Aviation Department’s own statistics, enplaned passengers (those boarding an airplane) are up 4.5% over last year. Likewise, air carrier operations showed an increase in flights of 5%. Southwest Airlines—the biggest carrier at MCI—saw an increase of enplaned passengers of 5.6% over last year. Passengers and flights are increasing, not dwindling.

Two emails obtained by the Show-Me Institute (see links at the bottom of this post) and sent by Mark Nevins of the Dover Strategy Group—the company running the yes vote campaign on the airport—indicate that members of the Star editorial board are apparently committed to supporting the effort with regular editorials. In an October 8 email, Nevins links to a supportive op-ed and writes that single-terminal backers “can expect to see more of these kinds of generally supportive editorials in the weeks ahead.” Then in an October 15 email Nevins reiterates that the Star “will continue to publish editorials supportive [sic] Question 1 on a regular basis through Nov 7.” I hope the editorial board is not simply working as a mouthpiece for the yes campaign. Of course, that could explain why the latter’s misleading claim about increasing the number of direct flights also appeared in a Star editorial. It might also explain why the Star is running editorials pushing the new terminal regularly—so as to make them more a part of the campaign than an expression of editorial board views.

This same editorial board has decried the airport bidding process as “marked by distrust, misinformation, unnecessary secrecy and conflict.” It would be a shame to learn that in its zeal to promote a single terminal, the Star editorial board has contributed to the very atmosphere of distrust that it decries by helping spread misinformation about the airport.

The post Is the Fate of Kansas City’s Airport Terminal In Its Star? appeared first on Show-Me Institute.

It should be noted that members of the City Council did not appear to be welcoming of public input since the very beginning. Recall that back in late 2011, then-City Councilman Ed Ford said that Kansas City was going to get a new terminal regardless of what voters think. Then, after calling it a “wasted effort,” Mayor James and the City Council yielded to a petition requiring a public vote on the airport regardless of funding. More recently, Mayor James sought non-disclosure agreements from other Council members to avoid information becoming public.

Former Aviation Director Mark VanLoh has accepted much of the blame for the new terminal mess. As the Star’s Steve Vockrodt wrote, he simply did not know about Missouri’s requirement that a vote be held in order for airport bonds to be issued. Recall too, that:

• While developing plans for a new single terminal, the Aviation Department  did not consult with the airlines.
• The new terminal campaign was so disorganized that former Star editorialist Yael Abouhalkah called for VanLoh to be removed, writing that he did not “have the public credibility to lead on this extremely crucial project.” It was more than two years before VanLoh was finally forced out.
•  A year before being replaced, VanLoh made a startling admission to a northland chamber of commerce, saying he just wanted a new terminal regardless of facts.

During all of this, Mayor James appointed an Airport Terminal Advisory Group (ATAG) which itself became a source of mistrust and unnecessary secrecy:

• In appointing the co-chairmen, Mayor James made it clear the conclusion he wanted them to reach, saying that anyone who opposed a new terminal was “uninformed.” [July 9 Kansas City Star, story taken down.]
•  Many of the members of the advisory group had contracts with the city, and at least one may have had a conflict of interest in that she worked for the Aviation Department director.
• The advisory group began its series of meetings by removing skeptics at the very moment its leaders were saying the meetings were open to the public.
• In presentations to the advisory committee, the Aviation Department appeared to be inflating repair costs. The estimated costs of building a new terminal were all over the place.
• Despite shifting cost claims, the advisory group appeared uninterested in engaging with anyone skeptical of the Aviation Department’s information regarding the necessity and cost of a new terminal.
• Advisory group members and even Mayor Sly James asserted incorrectly that Kansas City may not use airport funds for city purposes.
• Advisory group leaders secretly met with the Aviation Department’s public relations team.
• Shockingly, one of the co-chairmen of the advisory group—who led an accounting firm in Kansas City—said, “any dollar amount placed on any alternative is almost pretty random.”
• After suggesting they may not make a recommendation because, “the group didn’t have enough information,” advisory group leaders reversed course and indicated they would make a recommendation anyway.
• The advisory committee recommended a new terminal, subject to cost—only after a renovation of the existing terminals was removed as an option.

In addition, many of the arguments used to support the need for a new terminal just collapsed under examination,

• Despite initial claims made by the Aviation Department, there were no EPA or energy needs for a new terminal. In fact, the initial claim about the EPA was bogus.
• Likewise, security concerns about the existing terminals were overhyped. More recent claims that KCI has a long security wait proved to be just as baseless.
• VanLoh once asserted that “KCI now has more airport screeners than all three New York airports combined.” That statement was clearly and unambiguously untrue.
• Suggestions that the airlines won’t expand services with the current configuration have been shown to be unfounded. During the debate over a new terminal, new airlines have come to the airport and existing airlines have expanded service.
• We were told the airlines agreed to pay for a new terminal. This claim was never true and thankfully has been abandoned.
• Despite being strapped for cash, it was even suggested that Kansas may build an airport if Kansas City does not.
• Advocates for a new terminal still claim that if we build a new terminal we will get more traffic, more direct flights to Europe, and new business in Kansas City. They even say we cannot win a bid for Amazon without a new single terminal. This is all speculative, and none of it is founded in any commitments from businesses or airlines.
• In the last few months, we were told that a secretive, no-bid deal was the best option for a new terminal in Kansas City. This was demonstrably untrue, as the Council chose a different vendor once other bids were considered.

Throughout this debate, the conversation shifted from whether or not we need a new terminal to who was going to pay for it, and then again to who was going to build it. We’ve never satisfactorily answered the initial question, which is probably why voters remain skeptical.

Process is important in public policy, and while the Star editorial board and others may be relieved that Kansas City finally has a vendor and we’re cleared for a November vote, ultimately it appears voters are left choosing fruit from a poisoned tree. While it may be true that this proposal is better than what City leaders originally advocated, that is not saying much. We can only guess what other companies would have bid on the project if the bidding process had not appeared to be fixed, if the project did not require private financing, or if the project had not been limited to a single terminal rather than a mere renovation. To advocate for this plan simply because the process is over amounts to letting policymakers off the hook for years of bad behavior. Kansas City deserves much, much better. 

The post A Linked Summary of the KCI Terminal Saga appeared first on Show-Me Institute.

Process matters in public policy. Moving past a fast-track no-bid contract to an open and transparent bidding process is necessary for good decision-making. As a city-wide vote is required, there will be a public campaign on what to do. The public has been wary of the proposal up to this point.

That may be changing. Steve Vockrodt at the Star has authored a piece about a public opinion survey conducted by Remington Research and paid for by Burns & McDonnell, the firm that was to be awarded the no-bid contract before the City Council got involved.  Vockrodt wrote:

The latest poll by Remington said 40 percent opposed the single-terminal idea, while 22 percent were unsure.

Those results ticked upward by double-digit percentage points when respondents were told about a Burns & McDonnell plan to privately finance, design and build a new single terminal. Support on that basis grew to 55 percent favoring the proposal, compared to 23 percent against and 22 percent unsure. The polling suggests that respondents warm to a local firm’s involvement in the project as well as a private financing model.

Unfortunately, neither Remington nor Burns & Mac have released the full survey. This is important as surveys can be subject to bias—both intentional and not. Having worked in public and corporate polling for 15 years, I know that opinion research can not only measure public opinion, but be used to influence it. That is why the American Association for Public Opinion Research’s (AAPOR) Code of Ethics requires researchers to release, among other things:

The exact wording and presentation of questions and response options whose results are reported. This includes preceding interviewer or respondent instructions and any preceding questions that might reasonably be expected to influence responses to the reported results.

Vockrodt quoted Councilwoman Katheryn Shields as being skeptical of a poll sponsored by a firm that had so much to gain from the debate. She offered, “I’m astonished that a company with the reputation of Burns & McDonnell would continue to needlessly interfere with the bid practices of this city.”

The public has been engaged in the discussion of a new terminal at MCI for at least 4 years. The debate has been less than transparent, and many of the arguments in favor of a new terminal have been proved false. Councilwoman Shields is right: For the sake of good public policy, it is incumbent on all the participants, including Burns & Mac and other applicants, to respect the process.

The post On KCI, Process Is Important appeared first on Show-Me Institute.

Such an analysis, if done correctly, will take some time to complete, however, we will be working to complete it as soon as possible. The report will provide the sort of data and facts that can lead to reasonable and responsible improvements to our economic development policy.

It’s been three months since that piece, and no study is forthcoming. A subsequent Star story, however, suggests that the City’s effort may be more interested in highlighting incentives than in assessing them.

Mayor Sly James said at a recent meeting of KCStat — a data-crunching initiative of the city’s meant to improve its effectiveness — that City Hall doesn’t do a good enough job of promoting how economic development benefits the city.

Will the proposed $350,000 study aim to assess policy or “promote” successes? Existing research into the city's economic development policies does not paint a pretty picture. The Show-Me Institute conducted its own examination of TIF abuse in Kansas City broadly as well as individual analyses of questionable tax abatement (TA) projects such as for H&R Block and Burns & McDonnell. We’ve also highlighted independent university research that shows that subsidies like TIF have no impact. Still, some pundits in Kansas City simply “don’t care.”

While we wait for the Kansas City report, let’s consider a similar report recently completed in St. Louis. My colleagues Graham Renz and Michael Highsmith are releasing a series of pieces (the first of which is available here) examining that report. In short, the study found that:

• Development incentives have little to no positive economic development benefits. The $709 million the city has spent on TIF and TA has not created jobs, revitalized neighborhoods, or increased long-term tax revenues. 
• Rather than TIF and TA being used in economically depressed areas, they are used mostly in neighborhoods with strong housing markets. In fact, nearly two thirds are used in just three neighborhoods in the central corridor.
• The level and quality of reporting on incentives is so poor that officials and the public “cannot readily determine what may or may not be deemed a project worthy of consideration for a City tax incentive.”

The sheer amount of money being diverted away from important city services makes this an important area for the city to examine. While Kansas City works to analyze the data, the honest examination from St. Louis should serve as a model—and a warning.

The post What an Honest Economic Development Study in Kansas City Might Conclude appeared first on Show-Me Institute.

Developers often win over politicians and the public by promising that TIF will help "create" a certain number of new jobs. But those projects often miss the mark, and at times by a wide margin.

Last month, the Missouri Department of Revenue released its annual report for all TIF projects in Missouri. The numbers were stark.

Among the 504 TIF districts across the state, developers estimated that 266,261 new jobs would be created. In fact, 89,485 were realized. That's 33 percent of the projection.

The annual report that Steve cites is here. Pages 258 and 259 show that now that the Power & Light District’s KC Live project is completed, only 1,003 of the projected 2,034 jobs have been realized. The reality, however, could be much worse than that.

Using data provided by Kansas City's Regulated Industries Division, we sought to see if there was any citywide increase in either liquor licenses issued to businesses or the liquor cards issued to individuals who work in bars and restaurants. The chart below shows that since the Power & Light District opened in 2008, these numbers have been flat.

If KC Live created jobs as the TIF report suggests, yet citywide employee liquor cards remained flat, it means that the TIF didn’t so much create jobs as just move them from elsewhere in the city such as Westport or just outside the TIF area.

Yet the financial costs to the city and other taxing jurisdictions for this storefront shuffling are very real. In addition to the cost of foregone tax revenue, the city must pay about $15 million each year to cover the underperforming investment through 2040. 

The question that responsible policymakers must consider is not merely how to move jobs and residents downtown, but at what cost? The city has shown that it can drive property development downtown by paying for it. That's hardly impressive. But it cannot show that there is any real net economic benefit citywide. Without that, we're just throwing good money after bad.

The post TIFs Fail to Meet Expectations appeared first on Show-Me Institute.

Steve Vockrodt at The Pitch considers other costs that the city doesn’t seem to be including in their estimates:

The property upon which the hotel will be built (bound by Truman Road and 16th Street and by Baltimore and Wyandotte) is mostly city-owned, which means that it currently generates no property taxes. Troy Schulte, the city manager, has said the land is worth $13 million.

Assuming that valuation is correct, it means that the land—if the city sold it to a developer and it returned to the tax rolls—would generate $333,998 a year in property taxes. Under TIF, the development captures all that money.

Given these arrangements, then, the public subsidy for the hotel is going to be a lot more than $35 million. About half the cost of the $300 million project will wind up being paid for by public taxes.

But wait, there’s more. The Kansas City Business Journal adds:

The post Convention Hotel: Power & Light District v. 2.0? 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.

On Monday, Mayor Sly James said the work being performed by Kansas City’s Parson & Associates LLC and Scott Hall & Associates will help the city fulfill a federal requirement to incorporate an environmental assessment into the expansion routes so the city is eligible to receive federal funding.

“If this assessment is not completed, then the city will have no opportunity to receive federal funding,” James said in the statement.

The effort is the subject of an ethics complaint that opponents to the streetcar sales and property taxes have filed, claiming it is electioneering. Alonzo followed up with the federal agency awarding the grants and found there is no such requirement.

No federal mandate requires Kansas City or its contractors to hold door-to-door meetings before part of the city votes on a proposed extension of the streetcar project, according to the Federal Transit Administration.

This is not the first time the mayor and Kansas City officials have been caught trying to blame federal regulators for forcing the city to adopt questionable policies. Steve Vockrodt, at The Pitch, just penned a piece pointing out that the EPA has never cited the Kansas City airport for environmental shortcomings:

City officials distributed a fact sheet in April 2013 that said KCI couldn’t meet U.S. Environmental Protection Agency guidelines for capturing de-icing runoff.

“The current terminal infrastructure does not allow the airport to meet the EPA’s new standards for capturing deicing fluids, which require capturing about 30 percent of the run-off,” the fact sheet reads. “The new single terminal will capture nearly 100 percent of the runoff and resolve Environmental Protection Agency issues the airport is currently facing.”

But there is no such EPA guideline.

Two EPA officials contacted by The Pitch could not identify any published guidelines that call for the capture of 30 percent of de-icing fluids.

And let us not forget the recently ended bid for the GOP convention, in which Mayor James argued that it was necessary to spend hundreds of thousands of dollars, in secret, just to keep up.

The Show-Me State’s Harry Truman once famously quipped, “The buck stops here.” But in Kansas City, Mayor James and Kansas City government officials point the finger elsewhere and the bucks don’t stop at all.

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According to The Bond Buyer newspaper:

Branson Airport LLC previously defaulted on terms of a forbearance agreement and faced possible bondholder enforcement action absent a new agreement. The trustee recently posted an amended and restated forbearance agreement dated April 22. It extends a June 30 expiration this year to June 30, 2014.

There is a huge difference between the Branson and Kansas City airports, though. Branson is America’s only private commercial airport, so there is no way taxpayers will be on the hook there. (As an aside, with Southwest Airlines recently entering the Branson market, we are optimistic that this important experiment will succeed. We are certainly rooting for it. If it does not, well, risk is a part of free-market capitalism.)

What would happen if the Kansas City airport similarly failed to meet its bond obligations? In a story about the airport for The Pitch, Steve Vockrodt wrote:

The city would not be on the hook to make up the difference if the airport didn’t produce enough revenue to cover bond payments. Bondholders would be screwed on their investments, but so would the airport’s reputation when it wanted to issue bonds in the future.

Vockrodt is correct, but it is unlikely that Kansas City’s leadership championing this project would sit by and let the airport default. For example, Kansas City recently refinanced debt incurred by the Citadel development scheme, which was never actually built. (Talk about a bridge to nowhere!) We’ve already written about how the city is on the hook for the Power & Light District. Like the airport, the city is not legally required to make the Power & Light’s Tax Increment Financing (TIF) payments. However, it has chosen to. It is therefore reasonable to expect that if a new MCI terminal fails to generate enough cash to repay its debts, Kansas City would reach into its general funds to make up the difference. In other words, the city will take money currently spent on essential city services and divert it to pay for the new airport.

Other airports have failed to live up to the fantastic expectations of development boosters. Cincinnati’s traffic dropped as ticket prices rose. Kansas City has enough financial drains, our airport need not be one of them.

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