Who’d have guessed? Another millionaire gets subsidized in the Crossroads Arts District

When Jerry Riffel was on the Kansas City, Missouri, City Council, in the 1980s, the lure of tax breaks wasn’t enough to get meaningful construction started in what is today the Crossroads Arts District. “We used to say that even with full incentives, you couldn’t even get an outhouse built,” he says.

Few would dispute that economic-development tools such as tax-increment financing were necessary back then. Downtown was a wasteland. But reasonable people can disagree over whether the details behind all the ribbon cuttings since then have protected taxpayers in a significant way. And Riffel can speak with authority about that, too. He has long been on the other side of the council dais, as an attorney representing developers looking to strike deals with City Hall.

One of Riffel’s clients is Shirley Helzberg, a wealthy philanthropist who these days wants to convert a Crossroads property that she bought in 2005 into a new Kansas City headquarters for architecture firm BNIM. Of the expected $13 million cost of redeveloping her building, at 1640 Baltimore, she wants about $5 million to come from TIF — diverting revenue that would otherwise go to the city, Jackson County, Kansas City Public Schools and the Kansas City Public Library, among others.

She’s just the latest party hoping to benefit from Kansas City’s generous deployment of TIF, an inducement that lets a project such as Helzberg’s keep increases in property taxes and half of economic-activity taxes (like the earnings tax) for itself in order to whittle down a developer’s project costs. Helzberg submitted her request for TIF last month, despite reportedly telling taxing jurisdictions, such as the library, that she wouldn’t ask for public incentives again after the last time she leveraged them. That was in 2008, when she rehabbed the Vitagraph Building, at 17th Street and Baltimore, into office space.

In that case, as now, Helzberg’s TIF requests help companies hopscotch around downtown, paying less in earnings taxes to the city as they go. The Vitagraph Building became home to Global Prairie, which prior to that had gotten its start just a few blocks away, at 16th Street and Walnut. In BNIM’s case, the well-regarded architecture firm would move one block from its current space at the old TWA headquarters, at 17th Street and Main.

BNIM and Global Prairie both use the term “sustainability” in their external marketing, but how sustainable is it for Kansas City companies and developers to continue using powerful tax incentives in well-established areas of town like the Crossroads? TIF was meant to encourage development in places so destitute that a developer wouldn’t consider expending resources there without help from the public till. Is the Crossroads today still such a place?

“In my opinion, the idea that the Crossroads is ready to develop itself is absolute fiction,” Riffel told members of Kansas City’s Planning, Zoning & Economic Development Committee October 14, arguing Helzberg’s case for TIF.

Two companies refute Riffel’s claim.

One is Chartwell Hospitality, which is building a 150-room Courtyard by Marriott hotel at 16th Street and Main without any incentives. “As one of our principles of development, we want to do good business that self-sustains,” Chartwell’s acquisitions & development manager, Will Schaedle, said in a 2014 Kansas City Business Journal story. “Had it needed a bunch of incentives, we wouldn’t have ever attempted to build it.”

There’s that word again: sustain.

Another company with a dollars-and-cents rebuttal to Riffel’s argument is Travois. The Crossroads-based housing and economic development firm refashioned its headquarters, near 19th Terrace and Central, without a dime from City Hall.

One Travois employee, Phil Glynn, sits on the TIF Commission, the agency that evaluates TIF requests and makes recommendations to the City Council for its final say. Glynn was the only TIF commissioner on the 11-member body to vote against Helzberg’s request for 1640 Baltimore last month.

“To me, I was surprised that we are talking about a new TIF deal in the Crossroads, particularly in the west Crossroads, where development is already strong and so good,” Glynn tells The Pitch.

Though Glynn cast the lone no vote on the TIF Commission, his skepticism about Helzberg’s development plan is shared by others. Kelvin Perry represented East Side advocacy club Urban Summit of Greater Kansas City in opposing Helzberg’s TIF request before the council committee.

“Although it is a very worthwhile project, from our vantage point, it appears that the taxing jurisdictions are being used simply as a piggybank, this time to fund a project that can and will be built without incentive,” Perry said. “Even the city of Kansas City is being asked this time to forgo 50 percent of its earnings tax with the relocation of BNIM into this thriving TIF district.”

An economic analysis of the TIF found that Helzberg would have to reduce the costs of her development project by 22 percent to make it financially feasible without TIF assistance.

BNIM will be paying $26 a square foot on its lease at 1640 Baltimore, making it one of the more expensive office leases in Kansas City.

Kansas City Public Schools also voiced its concern about the project, though its position was undermined somewhat by the fact that it had reached an agreement with Helzberg to fund scholarships in the school district — a deal that the district eventually didn’t take.

Al Tunis, the interim KCPS superintendent, took responsibility for abandoning that arrangement. He pointed out that many of the district’s schools lack air conditioning, even as the district would end up subsidizing Helzberg’s top-of-the-line building.

Even so, the council committee passed Helzberg’s TIF by a unanimous vote. It now goes to the City Council.