Legal Vacancy

David Fenley knows what it’s like to have his ass kissed by city hall. Getting his ass kicked is another matter.

Yet that’s what happened when the head of Kansas City’s third-largest law firm went before the tax-increment financing commission July 10 to request tax breaks for an Overland Park developer’s downtown Kansas City project. Fenley listened in amazement as bureaucrats trashed his client’s plan to create a boutique hotel in the long-vacant Hotel President, an idea the TIF commission said it would help pay for last November.

From the start last Wednesday, TIF employees warned their bosses on the TIF commission that even with $20 million in tax breaks, the rebuilt Hotel President could end up requiring a cash bail-out from city coffers because downtown can’t support another hotel. In November, the commission endorsed the project, but its costs had risen since then, and Fenley wanted the commission to approve his new financial arrangements.

Fenley seemed dazed as TIF staffers picked apart his new numbers and accused him of failing to provide an updated study on the downtown hotel market. Agitated, Fenley grilled his own staff about the lapse.

Blackwell Sanders Peper Martin counsels some of Kansas City’s biggest names, including Hallmark, Applebee’s, Commerce Bank and Highwoods Properties. Fenley runs the firm’s real estate practice, which has persuaded city hall to subsidize development projects for such powerful clients, including Highwoods and its 1997 TIF deal for $53.7 million in tax breaks for ongoing renovations to the Country Club Plaza.

But Fenley’s clout helped little last week. At one point, the board was ready to drop its endorsement of the Hotel President plan altogether. TIF Executive Director Andi Udris blasted the project’s financing as “unrealistic and highly improbable” and questioned whether Fenley was lying to TIF staffers about a $2 million loan reportedly secured for the project.

As the assault continued, Fenley stood up and paced the room.

Udris recommended that the TIF commission reject the Hotel President plan and wait for a developer to raze the building for a park, as a downtown business group and an analyst’s study advised. “We believe that would actually increase the property values,” Udris said.

There’s nothing wrong with boutique hotels outside downtown, Udris added. He cited the Park Lane building on the Country Club Plaza as a potential boutique hotel site — another poke at Fenley, who outraged the public and embarrassed the TIF commission this spring by seeking tax breaks to demolish the revered apartment building and replace it with a parking garage for his firm’s proposed office building (“Truce or Consequences,” March 7).

After the lengthy belittling of Fenley’s plan, Udris urged TIF commissioners to invest tax money in projects without such obvious risks of financial shortfall: “The question you have before you today is, ‘Does it belie public policy to fill a gap the size of the Grand Canyon?'”

Finally given the chance to speak, Fenley disputed the TIF staff’s findings and promised to show TIF commissioners the truth in another hearing.

Fenley then received a lashing from TIF chairman Peter Yelorda, who criticized the executive for suggesting the current plan is the same as the one approved last November. “To characterize it as if it has been approved is a mischaracterization,” Yelorda said, citing a $10 million jump in project costs. “Clearly you are looking at a new project.”

Fenley then implied that the TIF commission might be losing an opportunity to develop the historic and blighted property, which has sat vacant for 22 years.

But Yelorda kept the executive on the defensive, accusing him of taking an adversarial tone. “These little innuendoes, these little threats are not necessary,” Yelorda said.

Calm for most of the meeting, Fenley snapped back after numerous questions about his plan’s validity. “I have never, ever not told the truth to this commission,” Fenley said. “I want all of this dealt with.”

When the argument ended, Yelorda requested that voting be delayed a month — making sure to tell a beleaguered Fenley that the postponement was in his best interest. “If a vote was taken right now, the commission’s not going to support this,” Yelorda said. “You would at best have one yes vote. You don’t want that, do you?”

Fenley replied wearily, “I didn’t expect you to vote on anything today.”

The TIF commission’s tough act contradicted its reputation as the cash-carrying weakling to bully developers. The metamorphosis seemed to result from at least three factors:

· Two city auditors were in the meeting last Wednesday doing research for a report that their boss, Mark Funkhouser, will release this fall. Funkhouser’s audit is expected to reveal that several of the city’s TIF projects are performing below projected revenues.

· The Park Lane controversy showed the commission how developers — in that case, Highwoods Properties — will try to radically change their TIF plans. Fenley had first told city hall that the real estate company intended to make a boutique hotel from the apartment building, only to later seek a parking garage on the site to complement an adjoining office building.

· The Kansas City Council, which has final approval on TIF projects, has put pressure on the commission. Councilman Evert Asjes in particular has urged the TIF commission to be more judicious in what it recommends to the council, which tends to respect all endorsements from the TIF commission.

In theory, the approval of a TIF tax break should work in three stages. Accountants and planners on the TIF staff look at a proposal and send a yes-or-no opinion to the TIF commission. The commissioners decide whether to recommend the project to the city council. Then the council votes on the plan.

But last Wednesday, even TIF commissioners were questioning whether that procedure was being followed, given that developers apparently negotiate directly with the city’s finance department before receiving approval.

The Hotel President is a perfect example of confusion in the process. In the morning, TIF commissioners nearly killed the plan, yet the project was already on the afternoon agendas of two city council committees. Later that day, the Finance and Audit Committee, chaired by Asjes, approved a resolution to continue negotiations with the Hotel President developer.

Immediately after the vote, council members received a memo from the TIF commission. Asjes appeared puzzled as he read that the “TIF staff does not recommend the $49 million project as now proposed.”

Asjes shook his head at the belated report. “We’re kind of sitting here with egg on our face,” he said.

Then he introduced a resolution for another TIF plan.