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Letter to Mayor Quinton Lucas and Member of City Council regarding Project Decoy

It is important to Kansas City Public Schools to release information that not only pertains to our school district but that also pertains to the city and community as a whole. Because we are all invested in the betterment of our school district and city, it makes sense that we have a strong interest in the future of partnerships, employers, building projects within our city and revenues that get passed to our students. The following letter, which KCPS submitted to the Mayor and City Council, provides context and information for KCPS’s point of view in relation to current incentives being considered for the Waddell & Reed HQ relocation within the city of Kansas City.

 

December 3, 2019

 

Mayor Quinton Lucas and Members of the City Council
City of Kansas City, Missouri
414 E. 12th Street
Kansas City, Missouri 64106

 

Dear Mayor Lucas and Members of the City Council:

 

On behalf of Kansas City Public Schools (KCPS), I am writing to provide our feedback regarding Project Decoy – the relocation of Waddell & Reed’s headquarters from Overland Park, KS, to downtown Kansas City, MO. While we see tremendous value in additional office development and growing the employment base in downtown, we have concerns regarding the level of local incentives (more than $44 million – see attachment for details), and specifically, how much future property tax revenue schools, libraries and other tax-supported agencies must forgo in order to construct a build-to-suit office tower for Waddell & Reed, a company with a net worth of $1.14 billion.

 

The current proposal that you are being asked to consider includes abatement of more than $28 million in property taxes, almost $13 million in redirection of earnings taxes/economic activity revenues and $2.7 million in sales tax exemption on construction materials (totaling more than $44 million in loca incentives). Combined with the more than $62 million in Missouri state incentives, Waddell & Reed, and the office developer would receive more than $100 million in state and local incentives. This is more than 20 times the level of local incentives for the USDA relocation and almost 5 times the total level of incentives, when factoring in the state incentives.

 

We understand that this project qualifies as “high impact” and thus not subject to the Lucas Ordinance (Ordinance 160383). However, if the incentives were limited to the Lucas Ordinance level in years 11-15 (37.5%), the school system would receive more than an additional $500,000/year. This could fund 4 Pre-K classrooms, expand our Early College Academy and expand vital services our schools provide to Kansas City children. If the incentives were limited to 10 years, the school system would receive $1 million/yr more in property tax revenue. When we look at the impact that these additional revenues can make for public school students, it’s imperative that we ensure that projects aren’t overincentivized.

 

As this project has gone through EEZ and Chapter 100, no 3rd party analysis has been conducted to determine whether this is the lowest amount of incentives that is needed to make this project viable. No analysis has been conducted to evaluate the construction costs or merit of incenting a 1,000 car parking garage (based on our estimates, it would be at least $30 million, which is approximately, the same as the value of the property tax abatement). We’ve asked Waddell & Reed’s representatives which site/which developer will be constructing/owning the office tower to present these questions to the developer directly. As of Monday, they indicated that they had not selected a site, nor a developer. Without this information and without the ability to determine if we are contributing the lowest level of incentives necessary, how can any of us feel comfortable that the proposal before us is in the best interest of our students/constituents?

 

Please know that KCPS is not opposed to this project in concept and believe Waddell & Reed would be a good addition to downtown Kansas City. We are concerned, though, with the lack of analysis that has been conducted before KCPS and charter schools are asked to forgo almost $15 million in property tax revenue. When KCPS expressed our support for the Lucas Ordinance in 2016, we indicated that we would be closely evaluating exemptions to the ordinance, and that we “believe the establishment of a 75% maximum incentive level is an improvement over current policy and practice; however, we maintain that not all projects that pursue incentives will justify a 75% incentive level. As such, KCPS will continue to evaluate the merits and needs of each project and advocate for lower incentive levels when appropriate.”

 

For your review, I have attached our analysis of this project, based on the limited amount of information that we have been provided. We are hopeful that a compromise can be reached so that this project can be a win-win for Kansas City families and Waddell & Reed. Unfortunately, to date, our requests to conduct a 3rd party analysis to determine the minimum level of incentive necessary, and our requests to reduce the incentive levels after year 10, have fallen on deaf ears. We hope that the members of the City Council push for a better incentive structure for this project, similar to what the Council did with Project Strata and the USDA relocation.

 

If you have any questions, do not hesitate to contact me at 816-418-7616 and mbedell@kcpublicschools.org.

 

Yours in education,

Dr. Mark T. Bedell
Superintendent of Schools
Kansas City Public Schools

 

Cc:
Drew Solomon, Executive Director, EEZ
Kerrie Tyndall, Assistant City Manager

 

Attachment: Project Decoy Analysis