Little Blight Lies
Think of blight, and you probably think of poverty and crime and broken windows and raw plywood siding and cats with no collars and dogs with no manners. You think of empty lots with large slabs of broken concrete and weeds that cause hay fever. You think of dictionary definitions — of “deteriorating conditions” and “injury marked by withering.”
And when someone says the Country Club Plaza is susceptible to blight, your reaction falls somewhere between amusement and anger. Of all places, you ask, the Plaza? It vexes you. Blight? Only slums have blight, and only slumlords profit from it.
But you’re wrong, so terribly, terribly wrong. Blight is everywhere, and that’s not necessarily bad. Everyone can benefit from blight: investors, cities, laborers, lawyers, taxpayers.
Everyone except Paul Nickols.
It’s 1993, and Nickols sits in a boardroom in downtown Kansas City for a hearing, but it feels like a mugging — one with no gun, no stickup and no panty-hose masks. In fact, the host is a Kansas City government agency, something called the Planned Industrial Expansion Authority.
At this hearing, the PIEA is taking away Nickols’ land and handing it over to an Ohio company because the property is in the West Bottoms and is therefore blighted, end of story.
Blighted? After the work he’d done to the property since 1982? That’s when Nickols branched off from his father’s West Bottoms business, a massive warehouse of restaurant and bar supplies. Nickols had shopped around before borrowing $200,000, and soon he owned a little corner just across the street from Kemper Arena.
He cleaned out the building and attracted tenants. Some bands rented units for $350 a month for rehearsals. The third-floor went for $750 a month. The guy who peddled popcorn during the Big-8 basketball tournaments moved in and paid $500 a month for his space.
Nickols made a go of it, but more than half of his monthly gross went toward paying off the loan. A chunk of the rest went back into the property. Furnaces. Boilers. Paint. Windows. Gravel for the parking lot.
Then a real estate agent paid a visit and told Nickols “someone” wanted to buy him out for $60,000. Nickols said no.
Later, the offer jumped to $140,000. Still no.
Nickols received a letter from the PIEA. He learned that in 1976, the city had declared the West Bottoms blighted, which gave the PIEA power to condemn and sell any land therein to a new developer. Nickols needed to write a development plan, and he had to hurry because that Ohio company had already filed a plan for Nickols’ property.
Cincinnati-based JBC & Associates wanted to build a country-themed restaurant and a boutique hotel beside Kemper Arena. The PIEA gave Nickols one month to come up with something better.
Now, Nickols sits in the boardroom. He hears JBC present its case for his property. He cringes when committee member Ed Drake accuses him of doing nothing with it for ten years.
Nickols wants more time to draw up a development plan, but the committee says he had just as much time as JBC. Bullshit, he thinks. Hope flickers when committee member Ron Posey agrees with Nickols: Obviously, JBC’s real estate agent had ideas for the property when he’d made the original offer months before.
But more time for Nickols would mean more work for the PIEA staff, so the committee takes mercy and votes. Posey abstains. The seven remaining committee members unanimously give Nickols’ development rights to JBC.
Of course, the U.S. Constitution requires the PIEA to pay Nickols something, so it condemns the parcel and offers $140,000. Disgusted, Nickols ignores the offer and stops paying property taxes in protest.
Then disaster strikes. The bank that holds Nickols’ note goes belly-up. His loan on the now-condemned property suddenly belongs to a bank that wants the entire balance, which is secured by a mortgage on his house. Nickols can’t get a loan on the condemned property and can’t pay off the old loan. The bank says, “Fine. We’ll take your home.” And suddenly Nickols has no property, no condemnation payment from the city and no house.
He moves in with his parents. He works in his father’s West Bottoms warehouse. Every so often, he leaves work in the evening and starts driving toward Midtown. He damn near gets to his house before he realizes: I don’t have a house.
It eats at him constantly. “I think about it every day,” he says later. “It pisses me off every day.”
So now you feel sorry for Paul Nickols. But it’s time for you to embrace reality: For Kansas City to prosper, to stay competitive, just about anything standing above-ground can be considered blighted. Anything built before the 1970s is old. Even that struggling mall that’s younger than a college graduate, the one with cracked parking lots on Bannister Road — even that’s blighted.
This definition of blight has been fifty years in the making. As early as 1954, the Supreme Court let Washington, D.C., take a clean, well-lighted department store from its owner to clean up other people’s blight surrounding the store. That same year, the Missouri Supreme Court let Kansas City condemn four blocks of downtown, including the 38-year-old Kay Hotel at Ninth and Main, which plaintiffs opposing the city called a safe and sanitary building “of sound brick construction.” Twice in the following decades, the state Supreme Court rejected arguments that Kansas City was condemning the wrong properties for blight.
In 1982, Missouri legislators jumped on the tax-increment-financing bandwagon. A slick California development tool created in 1952, TIF essentially allows developers to skim from their own property taxes to help pay for construction costs and new infrastructure. In two decades, Kansas City’s TIF commission has approved kickbacks to developers totaling more than $2 billion in tax money for 42 projects.
To qualify, developers were expected to build on property that was blighted, at risk of becoming blighted or totally undeveloped. Sounds good. But legal scholar Christina G. Dudley predicted abuse: “If an area does not have to be a slum to be blighted under the law … the range of areas in which [TIF] can be used is greatly expanded,” she wrote in a 1985 UMKC Law Review critique.
To its credit, Kansas City’s TIF commission at first targeted old-fashioned blight. The commission came to the rescue of a Northland neighborhood that lacked sewer service. The neighborhood’s waste was contaminating Searcy Creek until TIF funded proper sewers and an improved street layout.
It didn’t take long for developers to realize you didn’t need feces in a creek to get TIF tax breaks. Savvy developers began hiring real estate appraisal firms to conduct “blight studies” that could be included with their TIF proposals, and those appraisal firms hectored the Kansas City TIF commission with English lessons.
“You should note the term ‘blight’… does not necessarily coincide with the generic or common definition of the word,” said one such study from 1996. “In order to be blighted under the statutory definition of the word, it is not required that a property meet the Webster’s definition.”
For instance, a billboard without an advertiser was blighting a piece of property at 13th and Washington, according to students of blight at Nunnink & Associates. Four one-way streets prevented “convenient ingress and egress” to the property. Cracks in the parking lot were further evidence of blight.
That same year, UMB Bank threw away the dictionary completely. In a TIF proposal, UMB took note of the new federal courthouse, the new civic mall and the new Federal Aviation Administration offices — all proposed or planned near property the bank wanted a tax break to develop.
Those projects actually proved the existence of blight, wrote Jim Fern of the Metropolitan Appraisal Company. “All of this new development is government-sponsored and indicates an unwillingness within the private sector to invest in the area without government encouragement.”
If that seems strange — if you wonder how TIF can cast out blight when developers say that TIF projects can be the face of blight — then you, like Paul Nickols, just don’t get it.
A property is a blight if it’s not all that it can be. If houses sit in a high-traffic area, bulldoze them. Put in a Home Depot. The property taxes go up. Everyone wins.
Just ask Jim Fern. In his first TIF study, he found blight on property south of the Plaza, though initially he’d thought it wasn’t possible. “When you got to looking at it, it was very viable land,” he says.
So it became blighted not for what it was but for what it could be.
Because you can always do better. Houses can be mansions; businesses can be racetracks. There’s no limit to improvement and therefore no limit to blight. The question is …
“Where do you draw the line?” Fern asks, reading your thoughts. “I don’t know if there’s an answer.”
A few years ago, state Representative Henry Rizzo tried to draw a line. The definition of blight under TIF is “so easy to meet that many areas qualify which do not deserve or need this type of financing,” Rizzo wrote in a 1997 column published in the Kansas City Business Journal.
Two days later, Rizzo introduced a bill that would revise Missouri’s TIF law, but the general assembly deleted his blight reforms before passing it.
In December 2000, Rizzo headed a legislative committee that addressed TIF. Mayor Kay Barnes, former chairwoman of Kansas City’s TIF commission, lauded the development tool in her testimony. Other speakers demanded a stronger definition of blight. They wanted developers to have a burden of proof, to show that blight actually exists “beyond a reasonable doubt.”
Again, nothing came of the effort. Rizzo’s report simply recommended that the General Assembly continue discussions on the issue.
But outside St. Louis, in the suburb of Des Peres, a group of citizens became impatient. They sued after their TIF commission approved $30 million to help a shopping mall lure department stores away from other suburban malls. The citizen group noticed that the commission declaring blight also called the mall the “economic engine” of Des Peres.
Even the Missouri Court of Appeals struggled with the incongruity of a blighted economic engine, calling it “illogical to label as an economic liability a commercial enterprise that is indisputably [the city’s] greatest economic asset.” Yet the courts still refused to limit cities’ powers to define blight haphazardly.
Today, Henry Rizzo says there’s nothing to worry about, nothing wrong with TIF. At least not in Kansas City, where Rizzo is campaigning for a promotion to the Missouri Senate. “Honestly, I don’t think Kansas City has ever abused commercial TIF,” he says.
This month, the Kansas City Council will look at two new TIF plans. Both claim blight, but of considerably different sorts.
The first is the vacant Hotel President downtown. In the 22 years since the hotel closed, the structure has become a mess. Though the grand, handsome brick facade stands elegantly in the shadows of the Power and Light building, the interior is rubble. Walls, ceilings and floors have been torn apart. The hotel’s blight study doesn’t even need to address the one-way streets that surround the hotel: “The structure displays signs of dilapidation, obsolescence, deterioration, lack of ventilation, light or sanitary facilities, depreciation of physical maintenance as well as presence of conditions below modern minimum code standards.”
Yet Overland Park developer Ron Jury intends to clear the interior, put in a 200-room hotel and then start on the rest of the block. He plans 220 new apartments, a parking garage and more than 45,000 square feet of new retail space. In short, he means to rebuild the dormant block around the Hotel President’s historic exterior.
The TIF commission called it a deal and granted Jury $20 million in TIF for the $85 million project. In June, Jury secured $14 million in private investments for the project. With the city council’s rubber stamp, the hotel could be finished in late 2003, the apartments in 2004.
Many miles from downtown languishes poor Bannister Mall, which has also recently received a TIF blessing.
Seventy-six years younger than the Hotel President (the hotel closed the year the mall opened, in 1980), Bannister Mall has its own problems. Tenants have left. Competitors have opened malls in Leawood and Olathe. Some problems are nearly invisible. “Various blighting factors present at Bannister Mall may not be obvious to the casual observer,” a study written by Development Strategies Incorporated study admits. “No glaring physical defects are readily apparent.”
A section titled “Poor and Dangerous Mall Conditions” notes the shortage of elevators in the two-story mall. “The only elevators are located within the department stores and are typically not easy to find.” The study bemoans a shortage of signs outside the mall as a situation that could confuse first-time shoppers. They could get lost in the parking lot, which has potholes. The mall’s owners will get millions from TIF for such blights as litter and cracked curbs.
Tragically, the mall’s blight dates back to the original drawing board, according to the report. “The mall’s obsolete platting, for example, makes it difficult to address the problems and needed improvements of the mall in a comprehensive and efficient manner,” the report continues. So TIF will pay for part of the mall to be destroyed to make way for mighty Bass Pro Shops, which promised in a pitch included with the mall’s proposal to bring in “three football fields of shopping fun, including the largest fishing department stocked with 3,500 rods and 14,000 lures, a hunting department with more than 200 kinds of bows and a camping department with over 50 kinds of tents.”
The mall’s TIF plan proposed 380 new jobs and an annual payroll of $46 million. The city signed on. Bannister’s management will receive $25 million in TIF.
Of course, one of these things is not like the other. The Hotel President is blighted in that age-old, dead-animals-in-the-ventilator-shaft sort of way. Bannister Mall has trash and insufficient signs and a glaring inability to stay competitive in a market system.
But say no to Bass Pro? To all those jobs? To the increase in property taxes? To 14,000 lures? As Greater Kansas City Chamber of Commerce President Pete Levi wrote in The Kansas City Star, “Companies are wooed by any number of cities, each offering incentive packages to locate (or stay). Without TIF, Kansas City would be at a disadvantage.”
And with conservative definitions of blight, TIF would be useless in attracting such companies. So the definition is liberal, the interpretation friendly — but surely not subjective. Right?
“Sometimes blight is a combination of conditions,” says TIF director Laura Whitener. “Litter, by itself, in my personal opinion, should not be blight. One-way streets by themselves are not blight. But if you take each of these conditions and put them together, each of them might be minor, but the sum total is that there is something wrong here, and it adds up to blight. So that’s one of the things you will have in a blight study. And what blight-study folks will do — it’s partly selling their case — they will go through street layout, obsolete zoning and platting, the different conditions you see set forth in the statute, and they will address each of those.”
Sometimes, they turn in shady studies. Whitener offers as an example Barry Towne, a stretch of big-box retail stores in the Northland. Barry Towne’s developers initially tried to call farmland blighted. The TIF commission said no. “We had our attorney write an opinion that said blight is essentially the deterioration of existing man-made conditions,” Whitener says.
Barry Towne still got $35 million in TIF, but not as a blight project, so the money could be spent only on public infrastructure — such as roads and sewers — instead of on monster drug stores.
But Barry Towne was a no-brainer; hay growing on a cornfield does not constitute blight. Other situations are less clear. A developer writes an intriguing plan. The word blight comes up in the proposal, and it’s a sketchy argument. But the development would be lucrative. So what’s the problem? Why squabble? What is blight, anyway?
“You have to be able to honestly respond to the criteria, but you’re also looking at what’s the public outcome, what’s the public good, and sometimes there may be a little bit more leeway,” Whitener says. “It’s still blight, you can still make the case, but some people might be a little more generous in what they call blight. If the public outcome is so strong, so desirable from the public body’s standpoint, then they will say, ‘Yes, it’s blight.’ Could the case have been stronger? Yes, possibly. But yes, it’s blight.”
That subjectivity troubles people who would prefer that tax breaks be granted based on objective criteria rather than on an essay-writing contest. In 1999, real estate giant DST tried to purchase a building within a redevelopment area near Bartle Hall. The plan was listed under TIF’s “conservation” category, meaning that most of the area’s buildings were older than 35 years and risked becoming blighted without TIF help. (The Country Club Plaza is another “conservation area” — see sidebar.) When the building’s owners rejected DST’s offer, the TIF commission stepped in to condemn the property for the public good. But DST wouldn’t pay the building’s assessed value after condemnation commissioners said it was twice as valuable as DST’s offer or the TIF commission’s “just compensation,” so the condemnation plan fell through.
Rhonda Smiley, the attorney for DST’s foe, a now-deceased Californian named Allan Carpenter, calls DST’s relationship with the TIF commission incestuous.
“It doesn’t seem to be at arm’s length,” Smiley says, describing the problem with subjective decisions. “The development that is going forward is initiated by the public entity or close friends of the public entity.”
Smiley echoes a concern raised in a 1998 report by city auditor Mark Funkhouser. “Staff that are involved in the development of TIF plans cannot be objective in evaluating or monitoring work done to implement those plans,” Funkhouser wrote.
Big shots such as DST can wave a proposal in front of the TIF commission — or the PIEA, for that matter — and the concept of “public good” becomes as meaningless as that of blight. And if you don’t have the money to fight them, you’re screwed.
In fact, even with money, you’re probably screwed. Lawsuits taken to the U.S. Supreme Court have only liberalized the definition of blight. The legislature has backed down from reform. (“The real decision is going to have to be made at the local level,” Rizzo says.) It’s best just to sit back, smile at all the new construction and hope you’re not the next Paul Nickols.
Maybe Paul Nickols had it coming. After all, the city council declared the entire West Bottoms blighted five years before he even bought his property across from Kemper Arena. The whole area has been under threat of condemnation since 1976.
So he lost his property. So he lost his house. At least the city and the taxpayers would get a cowboy-themed restaurant and a small boutique hotel out of the deal.
Hold the order on that steakburger, cowpoke. The property fell into real blight after Nickols lost it. Because he had failed to pay property taxes once his property was condemned, it was auctioned off on the courthouse steps. JBC & Associates figured that it didn’t even need to bid. The Ohio company had the development rights. The PIEA said so. Any other bidder would be buying into condemnation.
A cranky old man named Ed Young thought otherwise. On a whim, he bought the property for $155,000. Then he unleashed his lawyers. In a letter sent to the company and the PIEA, Young’s attorney accused JBC of using the PIEA “as a vehicle to take private property for private use in contravention of the Missouri Constitution.” He detailed a history of events, dating back to the real estate agent’s first contact with Paul Nickols, that suggested unfair and unethical business practices. “[JBC has] simply tried to intimidate the owner, his tenants, the mortgage holder and prospective purchasers,” the letter reads.
The PIEA was spooked. By December 1994, the city attorney was writing to JBC to ask that the company resubmit its proposal. The following April, JBC pulled out completely. The project died, followed eventually by Young — but not before he sold the property, reportedly for $30,000 more than he paid on the courthouse steps.
At age 53, Nickols continues to work in his father’s West Bottoms warehouse and still lives at his parents’ home. Now he sees his old West Bottoms property standing dormant and more blighted than ever, and he thinks, I lost my house for that.