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Kemper Arena Renovation Threatened By Possible Cuts To Missouri's Historic Tax Credits

Elle Moxley
KCUR 89.3
The Foutch Brothers got final approval from the Kansas City Council to convert Kemper Arena, re-named Mosaic Arena, into a regional hub for youth and adult sports. That project is on hold because Missouri has reached its cap on historic tax credits.

The Missouri historic tax credit program, a development tool that’s revived scores of landmark buildings, is facing its most serious challenge in years, putting such major projects as the redevelopment of Kemper Arena in jeopardy.

“After several years of raising alarms and nothing coming to pass, this year the tenor has really changed,” says Elizabeth Rosin, a Kansas City architectural historian. “We’ve seen several bills introduced that would really harm historic tax credits among other tax credit programs.”

The program enacted in 1998 provides tax credits for 25 percent of the eligible cost of renovating buildings certified as historic by federal and state officials. Those credits then can be sold or transferred by developers to raise cash to help finance projects.

When combined with the 20 percent federal historic tax credit, Missouri’s program has contributed to the state’s reputation as being one of the more progressive in the country when  it comes to historic preservation.

But the historic program, along with other tax credit programs, has been a perennial target for lawmakers seeking more revenue. And with Missouri facing a potential $456 million budget shortfall next year, those programs are facing renewed scrutiny by the legislature and newly-elected Gov. Eric Greitens.

Greitens has appointed a tax reform committee to report back to him by June. Backers of historic tax credits say it’s stacked with opponents, noting that when Greitens announced his appointments, he touted their anti-tax credit credentials.

“There are folks on this committee who’ve prejudged the program,” says Megan Werner of the Missouri Growth Association, a lobbying group. “We feel there’s a value that’s being overlooked and it would do more harm than good by gutting investments and jobs.”

Front and center on the endangered list is the $30 million plan to redevelop the historic Kemper Arena into a new amateur athletic complex. The project, which has been approved by the city, already is facing financial uncertainty.

Steve Foutch, the developer of  what would be renamed Mosaic Arena, says his deal relies on $6 million in state historic tax credits. 

Due to reforms enacted in 2010 that capped the annual historic tax credits at $140 million, the Kemper project already has missed this year’s allocation. The 2017 cap was reached March 1 and the 2018 program won’t begin until July 1--that is, if the current state law isn’t changed.

“We are very concerned,” Foutch says. “Our whole business the last 14 years has been with historic tax credits involved...We didn’t make the current cut. I’m not saying we’re on hold, but we can’t start the project until the new allocation in July.”

Should Missouri lawmakers and Greitens decide to substantially curtail or even eliminate the historic tax credit program, the future of Kemper along with many other projects in Kansas City and across the state will be in question.

“I wouldn’t say it’s a 100 percent deal-killer,” Foutch says, “but we’d need to find other sources and that would be very hard to do.”

Foutch describes the state historic tax credits as an “upfront loan” for his project that will be more than repaid by the additional taxes it will generate. He estimates it will yield $1.6 million in new taxes based on the construction payroll, and almost $1 million annually once in operation.

He also observes it would have cost the city $6 million just to demolish the old arena.

Credit Kevin Collison / KCUR 89.3
KCUR 89.3
Developers plans to renovate the "Flashcube" building with the help of $10 million in historic tax credits.

Another current project that would be threatened if the program was scrapped or experienced deep cuts is the planned $50 million redevelopment of the historic “Flashcube” building at 720 Main St. It’s reflective glass exterior was the first glass-curtain wall building in Kansas City.

Developer Paul Worcester says his plan to redevelop the now-vacant building into retail, office and residential space relies on $10 million in state historic tax credits.

“It’s critical to our plan and the viability of the project to get those state credits,” he says. “The project will just sit there if we can’t get those dollars.”

Rosin says critics of the historic tax credit program often ignore the negative cost of allowing vacant buildings to deteriorate.

“The flip side is blight,” she says. “You have buildings that sit vacant and take everything around them down.”

Credit Kevin Collison / KCUR 89.3
KCUR 89.3
Corrigan Station was renovated with the help of historic tax credits.

Gib Kerr, a real estate broker and vice president with Cushman & Wakefield who has helped to put together many downtown development deals, says critics of the program also overlook the new jobs and investment created. He points to the recent renovation of the historic Corrigan Building at 1828 Walnut St.

The 10-story building, renamed Corrigan Station, was renovated at a cost of $41 million. It already has landed two office tenants and a new firm, WeWorks, released leased space for what’s expected to be 750 jobs.

“We’re trying to make the case that these programs result in new jobs and revenue for the state,” Kerr says.

Jon Copaken, whose firm, Copaken Brooks, co-developed Corrigan Station, says the project would not have been done without the help of state historic tax credits. He adds the program has been instrumental in the revival of downtown Kansas City.

“About every project that’s been rehabilitated has needed that program to come to fruition,” he says. “That’s allowed us to finally get to the economics needed where new construction is happening.”

Kevin Collison is freelance contributor to KCUR 89.3.

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