Shirley Helzberg’s TIF isn’t the worst one, but it has spurred the loudest eco-devo backlash

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Of all the tax-increment financing plans to get angry about, Shirley Helzberg’s Crossroads plan ranks somewhere in the middle. After all, City Hall has approved far more egregious incentives.

The Citadel comes to mind. That mixed-use proposal for 63rd Street and Prospect wasn’t a bad idea for what it attempted and where, but that plan from the late 2000s collapsed under the weight of — among other things — the incompetence of the developers. They were later brought up on federal charges of improperly remediating asbestos. The site remains an eyesore today.

Then there’s the Freightquote TIF, in which Kansas City, Missouri, leaders threw almost every sweetheart tax-financed deal available at a Lenexa freight-brokerage firm just to stick a finger in Kansas Gov. Sam Brownback’s eye.

The blowback at City Hall for those two deals was minimal compared with the furor over Helzberg’s request for $5 million in future taxes to pay a chunk of the $13 million cost to redevelop a building that she owns at 1640 Baltimore into a new headquarters for BNIM.

BNIM is a fine company, with the type of architectural jobs that Kansas City should want to keep in its backyard. Yet Helzberg’s TIF has spurred indignation from parents in the Kansas City, Missouri, school district, its teachers union and the local NAACP. Even The Kansas City Star editorial board, which espouses the virtues of urban subsidies (perhaps in part because the newspaper received one of its own), has cast a skeptical eye on this TIF.

So why have Helzberg, a respected philanthropist, and the well-regarded firm BNIM triggered what could be a crisis for taxpayer-funded private-development projects?

“I would say that project just has the unfortunate coincidence of arriving in the political crosshairs through no fault of its own,” says Terry Ward, a Park University professor who also serves on the North Kansas City school board.

Ward studies TIF extensively; arguably, no one in Kansas City knows TIF as well as he does.

“I think the issue honestly is not BNIM,” Ward continues. “I think the issue is the city’s handling of TIF projects, and this was the next one that came up that could be used as a focal point for expressing anxiety.”

To understand the anxiety that TIF can generate, it helps to understand the politics of the economic-development tool. TIF proposals first go to the Tax Increment Financing Commission before heading to City Hall for final approval. For some reason, Missouri law requires that TIF commissions have 11 members. Of those, six are appointed by the mayor. Then two people from the school district, two from the county and one representative from smaller taxing jurisdictions (usually the library system) make up the other five members.

Those five, especially reps from the school districts, are often at odds with those appointed by the city — in Missouri, schools are funded in large part through local property taxes, and their leaders are often sensitive to mechanisms that cut into that revenue. Same goes for counties, libraries, mental-health programs and so on.

It’s not rare for TIF Commission votes to be split 6-5, with the city appointments having a built-in advantage over the other taxing jurisdictions. But when it comes to TIF, the non-city jurisdiction has the most to lose. TIF redirects 100 percent of new property taxes generated by a development project back into itself. That means a school district, for example, won’t receive less money than it did before the TIF was created. But it won’t see increased revenue from that piece of property for at least 23 years, which is how long a TIF lasts.

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TIFs also redirect 50 percent of what are called economic-activity taxes (EATs) back into a development project. In Kansas City, those are largely sales and earnings taxes, sources of money that flow mainly to city coffers.

So while the city has a natural advantage over the 11-member TIF Commission, it also realizes increased revenue from TIF plans. It at least gets 50 percent of EATs as people buy things and pay earnings taxes in a TIF district, while all of the property taxes that would otherwise go to schools or libraries end up in a developer’s pocket. The city sees some gain; the taxing jurisdictions see none.

Because cities have that narrow six-appointee advantage on TIF commissions, it’s important for a mayor to keep his or her TIF commissioners in line. That helps explain why Kansas City Mayor Sly James pulled Phil Glynn off the TIF Commission two weeks ago. Glynn twice voted against Helzberg’s TIF because he believes that the Crossroads Arts District, particularly the western half of it, is thriving enough that projects such as Helzberg’s should stand on their own.

Glynn wasn’t coming from left field on this issue. The Kauffman Center for the Performing Arts was funded through private money (although its parking garage received TIF), and Chartwell Hospitality is building a hotel at 16th Street and Main without incentives.

[Correction: The Kauffman Center parking garage is in a TIF district, but was financed by the city through a sale of capital appreciation bonds, a different type of city subsidy.]

James believes that Glynn was trying to dictate city policy, which falls under the purview of his job as mayor and the rest of the City Council, so Glynn was forced to resign. While that move may have paved the way for a more reliable appointee to the TIF Commission, at least as far as James is concerned, it threw more gasoline on the incentive fire.

“The grassroots now are unhappy,” says R. Crosby Kemper III, CEO of the Kansas City Public Library and a frequent critic of TIF. “They’re beginning to understand, from the head of the NAACP to the head of the teachers union to the head of school-district parents. … The world has changed, and the world has changed for a lot of different reasons.”

One of those changes includes activism from parents within Kansas City Public Schools’ borders. KCPS has $240 million of deferred maintenance in its buildings, just one of a host of problems facing the perennially struggling school district. That’s why it looks bad when Helzberg, one of the richest people in Kansas City, Missouri, reaches for $5 million in future taxes, to build an office for a well-heeled architecture firm, which then pays her top-of-the-market rent.

But it’s also a broader realization that the schools keep getting the short end of the stick on TIF deals.

Take the convention-hotel TIF, which is actually two TIFs on the same property. The developers of the would-be 800-room Hyatt hotel negotiated with City Hall for at least two years before reaching a deal, which city leaders say is a responsible one. They also negotiated privately with Jackson County leaders. But KCPS representatives were left in the dark until the project was announced. By then, it was largely too late for the schools to negotiate a better deal.

Other school districts don’t often get treated this way, particularly the Northland school district, which is among the best in Missouri.

Many TIF plans in the Northland reflect negotiations that lessen the financial hit to schools. Some divert only half of the property taxes that would otherwise go to the school district — which means that as a development area improves, the schools at least get a cut of the gains.

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The Tiffany Springs TIF, in Platte County, where a Lowe’s and a Wal-Mart were built near Interstate 29 and Barry Road, pays full property taxes.

“The Northland school districts have worked very hard to have a solid relationship with the business community, and the business community sells the Northland, in part, on the quality of the schools,” Ward says. “There is a belief on the part of the business community that they need good schools. When they sit down and negotiate, they realize the trade-off they are talking about. … They are open to discussions, and I would say on the other side, Northland schools tend to be open to discussions and are trying to find ways to craft solutions that serve both sides.”

Most taxing jurisdictions I’ve spoken to say they would put down the swords that they have pointed at the TIF process if they received at least 50 percent of the property taxes.

This would reduce the strain on school districts. TIF proponents confuse the matter by insisting that schools wouldn’t get increased revenue if development didn’t happen (and, thus, arguing that development can’t happen without TIF). But this thinking flies in the face of reality.

Ward, who has analyzed TIF statewide, says a 2009 database he assembled showed that KCPS had $35 million diverted by TIF and other economic-development tools.

Any change in the advantage that developers have will inevitably be met with fierce resistance by the development community, which collectively makes up the biggest source of campaign cash for local politicians.

For once, however, the development community is encountering organized opposition.

Jennifer Wolfsie, a KCPS parent not affiliated with the usual crew of City Hall opponents, is leading a referendum drive against the BNIM TIF. If she can get the matter on the ballot, it will be a watershed moment for development incentives in Kansas City.

When The Pitch profiled Sly James two weeks ago, the paper received a call from the mayor’s office. James’ spokesman, Michael Grimaldi, wanted to know how we determined that the mayor’s office budget topped $2 million.

We pointed to the city budget, which is published online.

The mayor’s office did some digging and discovered that the budget wasn’t accurate. James’ office runs on a $1.8 million budget. Grimaldi wanted us to correct the issue, which The Pitch has done online and again here.

In a suggested correction e-mailed to the paper, Grimaldi wanted The Pitch to say we had inaccurately reported the mayor’s budget. But we reported what is in the budget. How else should we, or anyone else, know where public money is going?