Lee’s Summit City Council approves extending TIF district

rpulley@lsjournal.comMay 21, 2014 

The Summit Place shopping center made it past the first hurdles with the Lee’s Summit City Council.

RED Development wants to build a 355,000-square-foot shopping center northeast of its Summit Fair and SummitWoods Crossing centers near U.S. 50 and Interstate 470.

After lengthy discussion a the May 15 council meeting which concluded public hearings, the council voted 5 to 3 to add about 40 acres of land for Summit Place to the tax-increment financing and community improvement districts already existing for Summit Fair.

That amendment allows the TIF to pay for construction for parts of Summit Place.

According to the plan, only revenues from Summit Place will be used to pay for $18.5 million of public and private costs financed by the TIF.

The entire project’s estimated cost is $72.8 million.

Before the project can be built the council also needs to approve zoning, Summit Place itself and a TIF contract between the city and developers. That contract is still being negotiated. It will set rules for making sure the developer doesn’t get a windfall from the TIF, like extra money if costs are less than expected, and will set a cap on the developer’s return.

A date hasn’t been set for those votes.

Councilman Derek Holland and others challenge whether the city should grant incentives when public costs for roads, storm drainage, etc. is about $5 million of the $18.5 million of TIF funding.

The council heard a report it requested on how frequently TIF projects finance private improvements. Lawyer David Bushek, with the city’s bond counsel, Gilmore & Bell, said he studied a Missouri document on TIF and cases handled by his firm.

In short, he said TIFs in Missouri had funded about $1 billion in private costs.

“Most TIF plans fund a mix of public and private costs, very few TIF plans fund just public improvements,” Bushek said.

In Lee’s Summit, the Hartley Block, Summit Fair and Longview TIFs each financed some private costs.

Holland speculated that one of the reasons RED Development is asking for so such a high incentive is giving land to the anchor tenant.

He said he doesn’t dismiss Summit Place totally but has serious questions about it.

From Holland’s comments about other locations belonging to the unnamed anchor store, he believes it will be a Sam’s Club store, owned by Wal-Mart Stores Inc.

“Refute me if I’m wrong,” Holland said. “It looks like the anchor is cutting a big, fat hog in free land and site development.”

Jeff Haney, vice president with RED Development, said his company has confidentiality agreements and didn’t identify the anchor store. He said “it’s not a free deal at all, guaranteed.”

Haney, who was raised in Lee’s Summit, told the council he’s proud of the company’s accomplishments at SummitWoods Crossing and successful opening of Summit Fair, even during a tough recession.

He said the TIF should pay off in 14 years, and even while it is in place will generate about 1.25 million in sales taxes annually for the city.

RED Development would spend the initial $72.8 million building the center and be repaid $18.5 million when bonds are issued.

“There’s no risk to the city,” Haney said.

The council also heard testimony from Tom Kaleko of Springsted Inc., hired by the city to analyze the return RED Development could make on the project. Kaleko compared estimated costs for development, projected rents and pad site sales.

The developer’s return would be only about 2.17 percent, well below a “reasonable” return of 10.4 percent that could be possible with the incentives, Kaleko said. Development like Summit Place wouldn’t occur on the site without a subsidy in today’s market, he said.

Councilman Bob Johnson asked about “cannibalization” of existing Lee’s Summit stores losing sales to stores in Summit Place.

Haney agreed some of that will happen, but said Summit Place’s market area is expected to be much larger, reaching west to Martin City (in Kansas City) south to Harrisonville, north to Independence and east to Warrensburg.

“That’s where our tenants tell us our customers will come from,” Haney said.

Councilman David Mosby and a few other members are troubled by RED Development’s unwillingness to negotiate a smaller for subsidy. They say it will undermine the city’s efforts to write a policy on incentives for economic development.

“We will open Pandora’s box with this,” Mosby said.

Haney said his company needs that amount to be successful. “I’d love to tell you I could snap my fingers and it could go away,” Haney said.

Supporters of the project, council members Rob Binney, Trish Carlyle, Diane Forte, Allan Gray and Diane Seif prevailed on the adding the property to the TIF.

Gray said that it would encourage other development of nearby.

“It’s a good thing for this particular property,” Seif said.

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