COMMENTARY

To TIF or not to TIF

Lee's Summit JournalMay 2, 2014 

Should Lee’s Summit taxpayers subsidize a private developer to ensure the developer receives a 10 percent return on their investment?

That is the basic question facing the Lee’s Summit City Council next month. RED Development is requesting an “extraordinary subsidy” in the form of Tax Increment Financing (sales tax subsidies) for their third phase of retail development located at I-470 and Pryor Road in Lee’s Summit. The proposed Summit Place would join previously built and very successful retail developments called Summit Woods and Summit Fair.

TIF’s were approved for the first two phases, but this request for Summit Place is far different than the previous ones. For this project, RED wants their private construction and development costs to be funded by taxpayer subsidies. They are requesting a TIF of $18.5 million of the total project costs of $72.8 million, roughly 25 percent.

What is new is that they want subsidies totaling $13.5 million to $16 million in private development costs to pay for building construction, curbs and sidewalks, retaining walls, rock removal, grading and power construction. Further, they want taxpayers to pay $2.3 million of their professional services such as attorney fees, architects, engineering and finance. These are private costs paid by any developer in the private sector.

This would establish a new precedent for TIF uses in Lee’s Summit. Private developers historically have paid their own development costs in Lee’s Summit. Hundreds of individuals and companies have invested in Lee’s Summit and have paid their own construction costs without using tax dollars. It is called free enterprise. An investor takes the risks of investment and reaps the rewards or failures of creating a business. Even companies and developers (including RED for Summit Wood and Summit Fair) who have been awarded TIF subsidies have been required to use those funds for public improvements.

We subsidize developers to fund roads, bridges and storm water improvements when those items have a public purpose. Never have we paid a developer to build their projects with tax payer dollars without a public benefit. We don’t ensure a private developer will receive a rate of return on their investment. We should not start now.

This developer insists that the project can not be profitable without public subsidy of their private development costs. In their prior two developments, they have made profitable operations with Summit Woods Crossing and Summit Fair without public subsidies. So, why can’t they do the same with Summit Place?

Some suggest the answer lies in the major anchor tenant rumored to be locating there. (If you don’t know the name of the anchor, ask around. It is not a well kept secret) Apparently, that anchor tenant is known to demand virtually free lease and land arrangements from the developer and city who want to entice them to locate at their site. They refuse to pay their fair share which causes the developer to request public subsidies to make their project economically feasible. I call it “corporate welfare” and will not support it. Lee’s Summit is a retail gold mine with 100,000 citizens with disposable income. We no longer have to beg for companies to locate here and should shun companies unwilling to pay their fair share.

I oppose this project as devised because:

The City should not subsidize private development costs with public tax dollars without a public benefit

Existing Lee’s Summit businesses, which compete with businesses receiving millions of dollars in public subsidies, are at a competitive disadvantage.

Approval of this TIF, as proposed, will set a dangerous precedent for all future development projects who will demand the same. We can not say yes to some developers and no to others.

If a private project can not be profitable with public subsidies, perhaps it should not be done.

The developer has projected a $1 million dollar windfall in new tax dollars to City coffers. That projection is vastly overstated and unsubstantiated.

The developer has refused to give details of their project including lease agreements, the identity of their third party investors, and details of their development costs. Their repeated answer is, “We have to have $18.5 million to make this project work”

The school district will receive virtually nothing from this development.

If this project is defeated, this prime location will be developed in the future, perhaps with a project better suited to this area, and one willing to pay its own costs without taxpayer subsidies.

I encourage you to join this debate. Read and research this project. Look at the benefits and liabilities, the pros and the cons and then let the council know your opinion.

 

Derek Holland is the District 3 council member for the City of Lee’s Summit.

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