Elsa Pagán sees weeds where she used to have neighbors.
A few years ago, the homes on the south side of Pagán’s street in Kansas City, North, met the push of a bulldozer. So did the trees behind the homes, where deer liked to congregate.
The houses and the woods made way for an ambitious project off North Prospect Road, near Maple Woods Community College. The developer’s plans called for the construction of homes, apartments, and half a million square feet of retail and office space.
The project, called Renaissance North, aimed for sophistication. A sign on the property promised “contemporary living with classic flair.”
Workers built roads, laid sewer pipes, dug basements.
Then the money ran out. Work stopped.
Standing outside the split-level that she shares with her husband, Santos, and two grandsons, Pagán surveys the abandoned site with the aid of thick eyeglasses. Skeptical of the project to begin with, she says she misses the trees and the animals.
“It’s a shame that after they tore everything down, it’s just going to sit there,” she says.
Pagán’s view isn’t the only thing to be disturbed. The city will spend almost $1 million to service bonds that paid for those roads and sewers running through the unfinished project.
The money to pay the bonds was supposed to come from taxes that the residences, shops and offices would spin off once the project was completed. But sagging silt fences and half-finished homes don’t produce any revenue.
Renaissance North was also supposed to create jobs — 889 new ones, according to the developer’s projections.
The actual number is zero.
Renaissance North is a disaster by any measure.
But less-obviously dismal economic-development projects have also failed to create the jobs they promised.
In April, Kansas City’s acting city auditor, Gary White, released the results of a much-anticipated study showing what sort of return the city was getting on projects assisted by tax-increment financing, or TIF, a tool that lets developers skim some of the taxes produced by their projects. The audit found that in 78 percent of the deals the city had made with developers, revenues fell below projections.
White’s audit focused on financial performance. Another performance measure is job creation. Each year, the developers who take advantage of TIF have to report their job numbers to the state of Missouri.
The numbers are not encouraging. One plan missed its job-creation target by 97 percent.
What’s interesting about the job data is where the jobs aren’t being created. Some of the biggest underperforming deals are in the Northland, a fast-growing and relatively prosperous area unburdened by the poor reputation of the Kansas City, Missouri, School District.
On July 20, Jeff Kaczmarek, the executive director of the Economic Development Corporation — the city-funded agency that administers TIF — showed his board of directors a presentation he had made to the task force that Mayor Mark Funkhouser appointed to study the city’s economic-development policy. The presentation amounted to a defense of the way business has been done in Kansas City — which is to say, when in doubt, give the developer what he or she wants.
Kaczmarek put up a slide that showed the Economic Development Corporation’s primary objectives. Providing good job opportunities was first on the list.
It’s another hot morning in Kansas City. Charles Garney approaches a section of sidewalk soaked by errant water sprinklers. Rather than turn back, Garney presses ahead, swerving into the slick grass in order to avoid a direct hit.
The money and brains behind Briarcliff, a controversial development between U.S. Highway 169 and Missouri Highway 9, Garney is a dauntless individual. He built Briarcliff on top of an abandoned rock quarry. The man who sold him the property said it would cost about $1 million to make the land fit for development. “He was wrong by about a factor of 10,” Garney says.
Garney took on the project in 1988, after selling a successful construction company to his employees. (“Guys with shovels in their hands are getting to be millionaires,” he says.) Garney has lived in the southwestern pocket of Clay County for almost 50 years. His ambition was to create an upscale development that Johnson County might envy.
“I thought it would be a fun retirement project,” he says. “It got to be a lot more than I ever dreamed.”
The quarry, Garney discovered, had been sloppily excavated, increasing the costs to stabilize it. He also faced neighborhood opposition and a 1986 change in federal laws that sent office construction into a slump.
Undeterred, Garney began reshaping the property. He built a $5 million interchange just north of the Parkville/Riverside exit. With the market for office space in the dumps, he put up luxury homes, saving the lot with the best view of downtown Kansas City for himself and his wife, Patricia.
In 2000, Garney built his first office building. Now there are three. Last year, a Tuscan-flavored retail strip opened at Briarcliff, bringing Country Club Plaza-style merchants to the Northland.
“This project is a friggin’ home run,” Garney says.
Not quite. When the city approved the Briarcliff TIF, it was projected to create 5,000 new jobs. The count filed with the state is 563.
Garney disputes the number, saying it doesn’t reflect the ever-changing nature of the development. His project manager, Nathaniel Hagedorn, says 1,200 to 1,300 people work in the office buildings alone. Garney says the numbers will continue to grow because more construction is planned.
Garney is 75 years old, but he moves like a man 15 years younger. Without appearing to strain, he climbs a steep hill to reach his house, a 12,500-square-foot number surrounded by flourishing impatiens.
Garney enters his garage and gets behind the wheel of a green Jeep (mileage: 690). He drives out of the residential portion of the development onto Briarcliff Parkway, pointing out wild roses he planted around the interchange. On the east side of U.S. 169, he finds some trees that were saved with a little creativity.
Paying attention to aesthetics helped Garney win the support of the Claymont subdivision. At first, residents opposed the interchange, which joined their neighborhood with raffish Riverside. Garney says the critics are now thrilled with all that’s been created between their homes and the Missouri River. “You got a developer with a heart here,” he says of himself.
Briarcliff became a source of controversy during the city elections this past spring. In January, Garney asked for what’s called a “super TIF” on top of his existing TIF. Garney’s representatives said they needed the more potent form of TIF to make the numbers work on a $91 million hotel-and-office complex to be built on a bluff at the south end of the development.
Mark Funkhouser, a frequent TIF critic as city auditor, spoke against the Briarcliff TIF during the mayoral race. Candidate Funkhouser went to City Hall and blasted the request during a meeting of the Finance Committee. The appearance enabled Funkhouser to differentiate himself from three rivals in the race who sat on the committee and voted to approve Garney’s plan.
Parking his Jeep on the future site of the hotel, Garney says the super TIF will help the existing development perform to its full potential and will create a place for groups to meet in Clay County without having to go to a casino. Garney says he doesn’t expect to profit much from this phase of the development because he gave the land to the hotelier.
He is optimistic that Briarcliff will reach its job projection someday. FCStone, a commodities brokerage house in Des Moines, Iowa, has agreed to move its company headquarters to Briarcliff when a nine-story office tower opens next summer.
“We’re going to do exactly what we said we’re going to do,” Garney says.
At the Wal-Mart Supercenter in Platte County, parents clutching lists of school supplies cram the skinny aisles. Wal-Mart always has low prices, but these parents are also taking advantage of Missouri’s annual sales-tax holiday on school items.
In one aisle, two mothers wonder aloud whether they’ve selected the correct package of dry-erase markers. One suggests that they’re supposed to feel tormented by the supply lists sent by the schools. “I don’t know whether the teachers do this because the kids drive them crazy all year or what,” she says.
The Wal-Mart is in a development on Boardwalk Avenue, a street near the Interstate 29 and Missouri Highway 152 cloverleaf. The R.H. Johnson Company built the Wal-Mart and a neighboring Lowe’s home-improvement store with the help of a TIF plan that the city approved in 1999.
The plan is producing twice the amount of revenue originally forecast. Bob Johnson, the chairman of R.H. Johnson, tells the Pitch that it has created 1,002 jobs — two more than were promised.
Having done its job, the R.H. Johnson Company sold the property to another real-estate company. “We completed our task and moved on,” Johnson says.
Still, the project might not be as successful as it looks.
For one thing, numbers filed with the Missouri Department of Development in 2006 indicate that it created only 745 jobs — not 1,002.
By Johnson’s count, the Wal-Mart employs 570 individuals. If so, the store employs a couple of hundred more people than the average Supercenter, which has 350 “associates,” according to a Wal-Mart Web site.
The Boardwalk Avenue TIF also raises concerns about the kinds of jobs that TIF is creating. Wal-Mart, for instance, is a notoriously stingy employer. In 2004, the staff of a California Democrat in the U.S. House determined that Wal-Mart workers earn such paltry wages and benefits that the average store costs the federal government $420,750 in Medicaid reimbursements and the like.
The TIF-assisted retail boom may be contributing to the Northland’s changing demographics. Paul Harrell, the chief financial officer of North Kansas City Schools, tells the Pitch that the number of children receiving free and reduced lunches, a leading poverty indicator, now stands at 36 percent — a substantial increase over the last decade.
Most economic-development projects, Harrell says, have been good for the schools and the Northland. But a generation of children can pass through the school system before a TIF expires. This year, TIF plans will divert $5 million in property taxes from North Kansas City schools to developers.
School officials want more balance. TIF, Harrell says, should be “a true incentive rather than an expected entitlement.”
The school districts within Kansas City’s borders get to vote on projects when they come before the TIF Commission. But for the past eight years, the schools and other taxing agencies were always outnumbered by appointees of Kay Barnes, a mayor who seemed to think that developers and their attorneys walked on water and healed the blind.
In 2005, a proposal to build a new shopping center where Antioch Center stands came before the TIF Commission. The schools opposed the TIF request, as did representatives from Clay County and other taxing jurisdictions. But with the political appointees in the majority, the proposal went to City Council with the TIF Commission’s recommendation. The council approved the project, which provides a $24 million subsidy for the developers.
The plan, incidentally, promises to create 517 jobs.
“Maniac,” the song from the movie Flashdance, is blaring at Dick’s Sporting Goods, reminding shoppers of synthesizers and leg warmers. The store at Zona Rosa is large enough to require escalators. Seemingly every brand of golf club and fishing rod is on display and reasonably priced.
Tim and Shannon Cunningham, a couple from Holt, Missouri, leave Dick’s with their hands full. She found a pair of turquoise Crocs she liked, and he grabbed a beverage cooler from a sale rack.
The Cunninghams used to shop at the Dick’s at Barry Towne, a center near U.S. 169 and Barry Road. The Dick’s at Barry Towne closed after Zona Rosa opened in 2004. The new Dick’s adds four miles to the Cunninghams’ drive — a fair distance to go for the pleasure of shopping at Zona Rosa, a “lifestyle center” with more stores, restaurants and flourishes (like red phone booths) than a dull big-box center like Barry Towne.
“It’s more convenient because there are other shops around,” Shannon says before she and her husband toss their merchandise in their truck and go exploring.
By moving from Barry Towne to Zona Rosa, Dick’s Sporting Goods — a national chain of 250 stores — jumped from one city-assisted project to another. Barry Towne is a TIF project, while the city issued tax-exempt bonds to help pay for roadwork around Zona Rosa.
The city created the Barry Towne TIF in 1996. The main attraction is a Target store. Most of the taxes captured by the TIF pay for road and bridge expansion.
Mindful that building a Target and a Kohl’s on pastureland hardly represented cutting-edge economic development, city officials reduced the depth and the length of the TIF payouts.
Still, in City Auditor White’s report on TIF, Barry Towne came out as one of the real duds. The audit showed that the project is generating $24 million less than original projections.
The project cost $292 million and was supposed to create 3,900 jobs. But according to paperwork filed with the state, it has added only 1,749 jobs.
In 2001, the city extended the life of the TIF to give the developer, MD Management, a better chance to recoup its investment. The extension means the city will have to wait an additional eight years before the development pays full taxes.
MD Management owns Metro North Shopping Center and other properties along Barry Road. It’s possible that Barry Towne will reach its original goal of 3,900 jobs. The most recent development plan calls for more retail and the construction of six office buildings.
But Dick’s’ departure after just five years at Barry Towne seems an ominous sign. A new tenant has yet to fill the space left since the sporting goods were packed in trucks and moved four miles down the road.
Richard Ringer drives a Ford Explorer over gravel. The rough road causes his Ozarka water bottle to bang against the mobile-phone cradle bolted to the cup holder.
Ringer has veered off Parvin Road onto land owned by Hunt Midwest, a real-estate and mining company owned by the family of Chiefs founder Lamar Hunt. A California native, Ringer has worked for Hunt Midwest for 14years. His office is inside SubTropolis, an underground city scooped out of a limestone mine. Now, nearly 1,400 people work there, handling coffee beans, film canisters and postage stamps in stable humidity.
Ringer is driving over the ground above SubTropolis, with the Mamba roller coaster at Worlds of Fun in the distance. Ringer has taken his vehicle off-road to illustrate the difficulty of developing the rugged ground east of the amusement park. The constant jostling makes his point.
The city approved Hunt Midwest’s plan in 2000 to improve the mine surface. TIF money has paid to extend Parvin Road and build a new cross street, Kentucky Avenue. Hunt Midwest put up a business center along Kentucky where 100 people work. On the west side of Interstate 435, townhomes are springing up around cul-de-sacs built on top of a former ditch.
“Without the TIF, none of the projects would work,” Ringer says.
The Parvin Road TIF plan was expected to create 7,367 new jobs within 10 years. After seven years, though, the plan is nowhere near its goal.
Records filed with the state indicate that it has brought in just 240 new jobs, 7,127 jobs short of the projection.
Ringer admits that the plan is behind schedule. “We’re not where we want to be, but we’re way ahead of where we’d be without it,” he says, it meaning the TIF.
The Hunt Midwest plan, which covers more than 1,000 acres, reached into the isolated community of Minneville. A bustling rail stop in the 19th century, Minneville had only a couple of dozen homes when Hunt Midwest looked to expand in its direction.
The company wants to enlarge North Arlington Avenue, Minneville’s main thoroughfare, and connect it with Parvin Road. The plan required buyouts of several homeowners. The houses are gone, but Arlington Avenue is the same as it has always been.
While he acknowledges the slow progress, Ringer makes no apologies. He notes that Hunt Midwest — not the city — paid for the roads that have been finished. The company hopes to recoup most of its investment from TIF reimbursements.
“For the public, no harm, no foul,” says Hunt Midwest President Lee Derrough. “They’ve got no skin in the game.”
TIF believers argue that it’s harmless because it uses public money that didn’t exist before a given TIF deal. But often the development doesn’t create new business as much as steal it.
Michael Block represents the owners of Executive Park, an industrial park near the Parvin Road TIF plan. Block says he’s pro-development. But he worries that what may be good for Hunt Midwest may be bad for him.
“It does make it hard to compete because they don’t have to pay as much for their buildings and they can charge lower rents,” Block tells the Pitch.
Block suggests that the city needs to be more discerning about the difference between development that needs to happen and development that simply can happen. In his view, the Costco/Home Depot project in midtown had social value and was justified.
He’s less certain that Hunt Midwest needed a helping hand to spruce up land it has owned since the 1960s. “Does it [the development] need to be there?” Block asks. “Are there disadvantaged people in that area?”
If there are, they’ll be waiting a long time for those promised 7,127 jobs.
Ten miles from SubTropolis, two white statues meant to evoke the days of Michelangelo face each other. Flanked by wilting shrubs and peeling columns, the forms look like remnants of a lost civilization.
The statues — a male and female, built to approximately 70 percent scale — stand on pedestals in the median of Maple Woods Parkway, a road that bisects what was supposed to become Renaissance North.
Developer Ed Barth proposed the original plan in 1999. He envisioned a development where homes, apartments, offices, beauty salons and a Starbucks would share a dense, 96-acre plot. “This project will be like turning back to the older times, when everything was within walking distance,” Barth told the Kansas City Star.
The city approved a TIF plan and issued bonds to pay for streets and other improvements. But the project ran into problems. Homeowners who lived on Northeast 82nd Street didn’t want their homes demolished. (Elsa Pagán and others on the north side of the street were able to stay.) A bridge needed to be redesigned. Barth withdrew for health reasons and later died.
A new development team, led by Barth’s partner, Kurt Degenhardt, came forward with a plan that tripled the city’s financial participation. The city approved the amended plan in 2004, prompting Degenhardt to say the project had “no more excuses,” according to an account in the Star.
Two years later, a bank foreclosed on the property.
Three homes were under construction when work stopped. The foreclosure meant that contractors couldn’t get paid.
Gary Bringus, a home builder, tells the Pitch that he worked on the project for two months. He’s not entirely sure what happened. Degenhardt never seemed to have any answers. “It’s hard to know what the truth is with him,” Bringus says.
To pay his subcontractors, Bringus has reached into his own pocket. Excavator Carey Halley agreed to take 40 cents on the dollar for work he performed. “He just got blindsided,” Halley says of Bringus.
The project is now a mess for the courts to sort out. Fogel-Anderson, which was managing the construction, is suing Degenhardt and his companies for $650,000.
Degenhardt is no stranger to legal action. Since 1996, he’s been sued for failure to pay rent, a credit-card balance, a gas bill and a $25,000 note to an asphalt company. (Degenhardt, who lives in a house near Tiffany Springs Golf Club that he’s listed for sale at $648,950, did not respond to requests for comment.)
Bank officials who now own the property told the city last year that they would try to bring the development back to life. But the only activity appears to be vegetation growth. The uncompleted houses are beginning to disappear behind weeds.
In addition to missing out on the 889 jobs that were promised, the city pays $955,071 a year to cover the bonds that built the pointless streets and fire hydrants.
The bonds won’t be paid off until 2021.