Developers Want Kansas City To Kick In $63 Million For A New Office Tower Without Tenants
A new office tower and parking garage may be on the way to the Power & Light District after the Kansas City Council's Finance and Governance Committee passed a development financing agreement.
The tower would be built on the southwest corner of 13th and Main, above current retailers like Yard House. The concept of the development originated with a 2004 ordinance that gave H&R Block the right to build a second tower after the construction of their headquarters at 1301 Main Street.
H&R Block has since partnered with commercial real estate companies Copaken Brooks and Jury & Associates to develop the 250,000 square-foot office tower.
“Jobs are being lost in Kansas City, opportunities are passing us by because we don’t physically have the space created,” developer Jon Copaken said during Wednesday’s committee meeting.
If approved by the full city council, the city would pay $27 million in exchange for a 28% stake in revenue from the building. It would also be responsible for the $36 million, 750-space parking garage underneath the high-rise.
The original 2004 agreement required the city to finance the construction of almost twice the amount of parking spaces at an estimated cost of $85 million. The committee heard the revised development proposal in December 2018 and accepted it on the condition that the developers come back with a financing proposal.
To avoid having the debt on the city's books, Kansas City would use private financing for the construction, said committee chairman Scott Wagner.
The three companies behind the project have proposed a variety of avenues to pay off the city's debt. The options could include using parking garage revenue or a program that which allows the city to redirect up to 50% of state income tax from new jobs from the development.
Any profit for the city above repaying the debt could be applied to affordable housing initiatives.
“There’s not a tenant that has been designated for this tower, but the idea is that the last class A tower that was built in Kansas City was about 30 years ago,” Wagner said. “And there have been potential tenants we have missed out on because there was not an opportunity or a location to put them in.”
Bill Dietrich, president and CEO of the Downtown Council of Kansas City, told council members that the development would inject millions of dollars into the local economy by creating jobs and helping to make Kansas City a business destination.
Shannon Jaax, director of planning and real estate for Kansas City Public Schools, advocated for consideration of payment in lieu of taxes (PILOT) arrangements during the meeting. She said the committee should hold off because of controversy over tax incentives.
The ordinance to approve the development agreement will be considered by the full city council in two weeks. In the interim, there is the opportunity to adjust the proposal to include PILOT arrangements or alternative financing options.
If H&R Block does not implement the development in the next seven years, they will lose their rights to The Cordish Companies, which built the One and Two Light Luxury Apartment towers.
Correction: An earlier version of this article stated that the city would pay $27 million in exchange for a 28% stake in the tower. The city will guarantee the $27 million for a 28% revenue stake in the tower, not an ownership stake.
Christina Elias is an intern at KCUR 89.3. You can reach her at email@example.com or on Twitter @eliaschristina4.