Question 1: 50% Cap on Tax Incentives
Shall the City of Kansas City cap the amount of ad valorem real property taxes that may be utilized in furtherance of economic development projects through the Land Clearance for Redevelopment Authority of Kansas City, Missouri, the Planned Industrial Expansion Authority of Kansas City, Missouri, the Kansas City, Missouri Port Authority, the Tax Increment Financing Commission of Kansas City, Missouri and the City of Kansas City, Missouri, by prohibiting the abatement, exemption or redirection of more than fifty percent (50%) of the ad valorem real property taxes that would have been due and payable but for the utilization of economic development incentives?
A vote “yes” means you will vote in favor of a 50 percent cap on economic development incentives. A vote “no” means you are against a 50 percent cap.
In 2017, the city implemented a 75 percent incentive cap on property tax incentives for economic development. Question 1 is a citizen initiative designed to enact a more restrictive cap of 50 percent on the amount of property taxes that the city may use toward economic development incentives.
KC TIF Watch is leading the campaign to increase the cap from 75 to 50 percent. For proponents of the measure its as simple as the age-old story of taking money from the poor to feed the rich. In this case, it’s the schools and libraries that take the hit.
When the city uses tax incentive funding (TIF) to lure developers to build in an area, they may grant them a period of time with no taxation. This period can last as long as 25 years. While the developer appreciates the discount, the schools and libraries get no funding from the multimillion dollar property during that time. It is only after the abatement period has ended that taxes begin to flow into the schools. In the meantime, schools and libraries will look to other means of raising funds, such as bonds and levies that are passed on to the citizen taxpayer. Or they may begin to close schools to save money.
TIFs have been controversial in Kansas City since Mayor Kay Barnes introduced them to develop the Power & Light District in the 90s.
According to KC TIF Watch’s website, the “City of Kansas City, despite objections from citizens and taxing jurisdictions, continues to give generous incentives for development in areas that no longer need it, while neglecting areas of the city where development is truly necessary.
Twenty-year, 100% tax deductions have been freely awarded to both local and out-state developers on a consistent basis for many years.
Originally, those incentives were needed. Past development has allowed for a desolate, abandoned downtown area to become a vibrant exciting one.”
Proponents believe a 50 percent cap, as opposed to the 75 percent, will ensure that schools, libraries, and mental health services–recipients of property taxes–will be better funded.
Question 1 also allows for uncapped incentives (100%) to be utilized in truly distressed areas of the city rather than parts already flourishing. Exceptions can be made to Question 1 through different processes: a new ordinance to create exceptions and the option of taxing jurisdictions having a say on incentives on various projects.
- A new ordinance can be used to create exceptions for economically distressed areas.
- Taxing jurisdictions can opt in to various projects, granting a larger incentive to developers, without any ordinances at all.
The biggest fear among opponents to Question 1 is the competitive disadvantage it would give Kansas City in bringing in businesses and job creation. Surrounding cities such Lee’s Summit, Lenexa or Liberty, have no cap on tax incentives.
Opponents acknowledge the hardships borne by the schools and libraries due to the tax abatements. But they also point out that if there was no development to an area, there would also be no tax revenue for them. “At least with [the incentives] there is revenue coming in once the taxation is in place,” says Vickie Wolgast, CEO of South Kansas City Chamber of Commerce.
Wolgast doesn’t believe a 50 percent cap is a solution. “A taxing jurisdiction that includes schools and libraries should have a say in the process of who gets those tax incentive and who doesn’t,” she says.