KC TIF Watch Exclusive Interview
Updated: Dec 18, 2021
We sat down with the director of a local health fund for the uninsured to ask about proposed
property tax abatement for the Fidelity Security Life Insurance 2700 Grand project. Doc, thanks for your time. First, what is the mental health fund? Thanks for the opportunity to talk about this. The Community Mental Health Fund is a Missouri property taxing jurisdiction approved by voters. It has been around since 1980. It uses a property tax levy to make grants to non-profits that serve about 18,000 uninsured and underinsured residents. The funding comes entirely from a property tax levy.
Why are you involved in this issue? Because tax incentives divert public funding. That reduces our ability to do our job: provide health care to Kansas City residents. So here we are. It's a major issue in Kansas City.
We hear Fidelity Life will pay millions in taxes that aren’t being paid now. What is the problem? Payments in lieu of taxes are actually required. Fidelity Security Life promises, I think, five percent more than the minimum. That is good but there is a pretty long list of serious questions that can’t be dismissed. More than optics, corporate welfare in Crown Center and drastically reduced taxes without public benefits are issues. These payments are often cast as an all-or-nothing, or take-it-or-leave-it proposition. This part of the developer’s gambit and the public shouldn’t believe it. Either way, if that is the developer’s attitude the better decision would be no development until there is a socially responsible deal.
Why does Fidelity want the tax subsidy? Well, nobody likes paying full retail! The developer, and the developer’s lawyer cases for this level of tax incentives, and for this duration, are pretty thin. At 10 years, the hypothetical sale price of the building is claimed to be less than the cost of construction. Considering the Crown Center location, that the office building next door has appreciated handsomely, and the streetcar location, the claim is unsupportable. But without it, the numbers don't justify a tax subsidy. It is an insidious proposition that a project that claims to be a poor investment in its own right, should then use that claim to seek a large tax subsidy. The company promises it will stay in the building for 50 years, again rendering the hypothetical 10 year sale price meaningless as a justification. A third-party analysis found that the rate of return after 10 years of tax subsidies was little different than the 15-year return rate, again highlighting the excessive level of the request. No one wants to pay full retail, but ten years of tax subsidies would accomplish the goals of the project. They won’t negotiate, which is a typical MO of this particular lawyer.
Any other top issues? The same third-party analysis found the high costs of luxury design and parking were the drivers of their supposed financing gap. Unfortunately, this is typical in Downtown development subsidies. So I have to ask, what is the value of the project for Kansas Citians whose public services are diminished? Here is something else. I spoke with the owner of Fidelity Security Life Insurance on earlier. I asked about whether his company had a social responsibility program or internal DEI policies. He really had no idea I was talking about. He said they don’t sell products to the public, so public benefit doesn’t apply. Ouch! I asked about the benefit for mental health patients who would forgo service, his answer made no sense except maybe through a rich person’s entitlement perspective. He said, and this is almost verbatim, the benefit for mental health patients was that the company would not move without incentives. So we’d be happy with them not doing the deal and going somewhere they would be willing to pay for.
Numbers are really the crux of the issue. We read the incentive is $9m. Right, but with the developer’s PR focus on FSL's payments in lieu of taxes (PILOTS), it’s easy to be sidetracked from what FSL gets in return: 70% property tax abatement for 10 years, 30% for five years, and a sales tax exemption on construction materials. So here is the cost of not paying taxes. Public services that would ordinarily be fully funded include community colleges, mental health for the uninsured, public and charter schools, public libraries, services for persons with developmental disabilities, County parks and services, and the City of Kansas City. Costs for public services increase over time, but the PILOTs are frozen for the term of the abatement. Kansas Citians at large won’t benefit from the company’s swank building. As a public service who pays for public safety and urgent things like mental healthcare and suicide prevention.
Nate Duvall interviewed Dr. Bruce Eddy of the Mental Health Fund on November 4, 2021.