Summit Place stalled over tax incentives

rpulley@lsjournal.comMarch 12, 2014 

Several Lee’s Summit council members flinched at providing subsidies for buildings to house retail stores at the proposed Summit Place shopping center.

Council members Derek Holland, Bob Johnson and Brian Whitley objected to those costs being put onto taxpayers. David Mosby was absent at the March 6 meeting, so five votes needed to pass ordinances for the project weren’t available. The council voted to table the issues until the March 20 council meeting.

During the interim, city staff and the developer are to discuss a lower amount for subsidies.

“I like the project, I want it to go forward,” Holland said. “However, when we see it in black and white, it gives me heartburn ... we’re taking the city into a whole new spectrum of incentives.”

Whitley objected to the developer including costs for buildings. He said cutting that line item of about $1.78 million in tax-increment financing would let him support the project.

RED Development is asking for an $18.5 million subsidy for building a $72 million shopping center at 1301 NW Ward Road.

In the TIF being proposed, a portion of the new tax revenue raised would be used to repay bonds that finance construction. Approval for the project involves a rezoning, amending a current TIF and a Community Improvement District and improvements for Ward Road.

The council stopped short at the request for subsidizing private improvements.

In previous TIFs, the money was used for public infrastructure. SummitWoods Crossing’s TIF, for example, financed exit ramps and flyovers for Intestate 470, said Conrad Lamb, city finance director.

The lone exception is the recently approved TIF for Price Chopper at U.S. 50 and Todd George Parkway where the subsidy is paying for an oversized storm water detention pond.

That pond, however, is being built extra large to stop flooding that was a problem not related to the store’s construction. So it is also serving public purpose, Lamb said.

The Summit Place project’s TIF is a departure because it’s asking for subsidy of buildings for stores and for curbs, and other costs typically borne by developers.

Testifying during a public hearing Jeff Haney, vice president of RED Development, said his company had tried several years to work out a plan for financing without subsidy, but it wasn’t feasible.

The topography of the site, with a large drainage ditch that would need filling, was adding to the costs, he said.

Haney said reasons to support the project included adding more shops that will support commerce the U.S. 50/Interstate 470 corridor and add about $1 million annually to the city’s revenue. (The amount would about double when bonds issued are repaid by the TIF).

It would create 500 construction jobs and, when open, 500 retail jobs.

During the hearing, Dave Kemp, who owns a deli in downtown Lee’s Summit, testified against more TIF subsidy in the same area as SummitWoods Crossing.

“Are we trying to help Lee’s Summit grow as a whole, or trying to help Lee’s Summit grow only on one little edge of the city,” Kemp asked. The public improvements won’t help draw customers to downtown, or help the Missouri 291 corridors where vacant retail building sit, he said.

Haney said the $18.5 million was the amount needed for the company to meet its desired return on investment of about 10 percent.

He said the amounts for specific costs could be moved around, but the total RED requests would still be $18.5 million.

Johnson said he didn’t think the city is committed to giving developers a certain return.

“Who has assigned your rate of return as gospel?” Johnson said.

Whitley noted that he gets much of a less return on his investments, but agreed RED was bearing risk for the project, so a reasonable rate might be higher.

He said was hoping for a number less than $18.5 million, saying he’d support the project if the developer cut out $1.78 million allocated to buildings.

Haney said the added expense for builidngs comes from is city requirements for “four-sided” architecture aesthetics. Johnson said the developer should be responsible for costs that would normally paid for by other developers.

During the interim city staff and the developer are to discuss a lower amount for subsidies.

Rob Binney, Allan Gray, Ed Cockrell and Kathy Hofmann supported the project.

“I’d hate to see a hole in that crescent,” Gray said, referring to the center’s location near SummitWoods Crossing and Summit Fair shopping centers. He proposed tabling the vote so more negotiations could be made on the project.

He told Haney not to walk away thinking the council doesn’t want the project, but to “see if we can’t get to a number we’re all comfortable with.”

Cockrell said the council had committed itself to the project, when it agreed to accept $50,000 from RED to finance analysis of the project.

“They brought us a project and now we’re pounding them,” Cockrell said.

Other members disagree, saying they didn’t have enough information to make a decision until the analysis and details were submitted.

Hofmann said that Summit Place would bring retailers currently absent from Lee’s Summit and that the council should approve it for the sales-tax revenue.

“We cry we have money problems,” Hofmann said. “Sometimes the only way to get the money is to invest the money.”

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