The city reckons with a complex deal it made to keep an architecture firm

A complicated economic development deal in Kansas City, Missouri, collapsed under the weight of its moving parts.

As Pitch alumnus Steve Vockrodt reported in The Kansas City Star last week, the city is working with a private equity firm to untangle an office building in the River Market from the bad decisions of the past.

The building, 300 Wyandotte, lost its main tenant when the architecture firm Populous relocated to the former Board of Trade building, near the Country Club Plaza. After losing Populous, 300 Wyandotte fell into foreclosure last year and is the subject of a lawsuit between a city agency and a previous owner.

Clutter was baked into the 300 Wyandotte project. In 2007, The Pitch wrote skeptically about the contraption that enabled a slick, four-story office building to rise from ground where the Old Chelsea Theatre, an X-rated moviehouse, stood. Gears grinded, then failed. Now taxpayers are paying for some of the repairs.

Here’s the origin story: 

Populous, formerly known as HOK Sport, had outgrown its office space in the Garment District. City officials were eager to keep an architecture firm with a national reputation — HOK designed the Sprint Center and other sports venues — from bolting to the suburbs. A plan took shape.

Kay Barnes, who was then mayor, took an aggressive approach to promoting development in Kansas City, particularly in the central business district. Much like the plan to develop the Power & Light District, which utilized a change in state law to maximize the public’s contribution, the HOK arrangement tapped into multiple forms of assistance. HOK received $1.5 million in state tax credits. Property taxes were frozen at pre-construction levels — for 25 years.

For all that sweetness, though, the most questionable aspect of the deal involved a parking garage.

A city agency, the Planned Industrial Expansion Authority, issued $8 million in bonds to pay for a parking garage beneath 300 Wyandotte, which was developed by Opus, a real-estate company in Minneapolis. (Opus leased most of the office space to HOK, which became Populous in 2009.)

For a time, the city used earnings taxes paid by Populous architects and other workers at 300 Wyandotte to pay for about half of the annual debt service on the bonds. 

But when Populous vacated its space, the garage’s debt-service fund dried up. In the current budget, the city pulled $610,000 from the general fund to punch the garage’s ticket, up from $300,000 in 2015, the year Populous left 300 Wyandotte. The bonds won’t mature until 2025.

As if that weren’t enough, a real-estate ownership group that bought 300 Wyandotte from Opus in 2015 is suing the Planned Industrial Expansion Authority over the allocation of the garage’s parking spaces.

As Vockrodt explained, the ownership group believes it was entitled to parking spaces that the Planned Industrial Expansion Authority later leased to tenants of the nearby River Market West Apartments. The ownership group says the parking situation scared off a potential buyer. 

The current owner, Ian Ross, a real-estate investor in New York City, bought the building out of foreclosure proceedings last year. Ross, who has rebranded the building 3Y, told Vockrodt he has discussed solutions to the parking problem with City Manager Troy Schulte and the owners of River Market West. 

Schulte, meanwhile, sounds disappointed by the city officials who made the original deal. (Schulte was the city’s budget director at the time; he was appointed city manager in 2010.) He told Vockrodt he does not wish to replicate deals in which the city owns parking garages attached to privately owned office buildings.

So, yeah, it was a bad idea.

The consequences endure. Because the garage is owned by a public agency, the city and the school system and other taxing jurisdictions receive no property-tax revenue from it. The office building, meanwhile, spits up only small sums in taxes each year because of the freeze. Ross recently paid the tax collector $30,341. Most of the money goes to the streetcar ($16,858) and the River Market community-improvement district ($11,205).

As for Populous, it left one tax-free address for another. The firm leases space from the Port Authority of Kansas City, the city agency that redeveloped the Board of Trade building.