After Compromise With Kansas City Schools, Waddell & Reed Will Get Fewer Tax Breaks To Move Downtown
Kansas City officials agreed to a scaled-back tax incentive package Thursday for financial services firm Waddell & Reed to build a new $140 million headquarters in downtown.
It’s the second time in recent months the Kansas City Council has been able to renegotiate fewer incentives, and a sign it may approach economic development deals with higher scrutiny than councils in the past. The council also took action Thursday to curb the ability of the Kansas City Port Authority to grant incentives.
After weeks of debate and pressure from Kansas City Public Schools, Waddell & Reed agreed to a compromise that shaves nearly $9 million from its original request to move from its current headquarters in Overland Park, Kansas.
Public schools, as well as the Kansas City Public Library and the county mental health services fund, rely on property taxes for a significant portion of their revenue and had been opposed to the incentive package until Thursday.
Following the vote, KCPS released a statement praising Mayor Quinton Lucas and the council.
“When Kansas City Public Schools and our elected officials can work together to serve kids, it demonstrates the willingness to support not only public education but the well-being of our students, families and the entire community,” the statement read.
A watered-down incentive deal
Under the deal, which passed 8-4, Waddell & Reed will receive a 15-year property tax abatement — 75% for the first six years and 37.5% for the remaining nine years. It will also receive a sales tax exemption for construction materials and other tax redirections.
Lucas said reaching the compromise was no small task.
“I’ve had personally the chance to spend a good amount of time with (KCPS superintendent) Dr. (Mark) Bedell, including this Tuesday. I talked to him last week and I also understand that he has a lot of other jobs to do,” Lucas said.
He acknowledged that in future deals, stakeholders like schools should be brought into discussions earlier.
Waddell & Reed already has been awarded $62 million by the state of Missouri for the project, which includes an office tower and parking garage at 1400 Baltimore Ave. Under the proposed agreement, the firm's lease at that building is for 15 years.
Thursday's vote came in the shadow of a letter that a former executive at the financial services firm sent to councilmembers, urging them not to do business with the company.
In the email, Waddell & Reed's former Senior Vice President Rick Perry said he was “appalled” that the company was seeking incentives. Citing declining stock prices and a shrinking workforce, Perry said the company has a “questionable” future.
“I would caution the KC Council and others to be very careful in entering into any long term financial arrangement with Waddell & Reed,” Perry wrote. “The company may have been something in the past that it is not now.”
Waddell & Reed did not immediately respond to KCUR's request for comment.
Not everyone is happy
Despite KCPS support for the new deal, not all councilmembers are happy with the outcome. Third District councilwoman Melissa Robinson, a former KCPS board president, said schools will still forego millions in revenue, money the district can’t afford to miss out on.
“We talk about homicide in this community — there is a direct correlation between our ability to educate children and the homicide rate that we have … we have a responsibility to think about the interest of all of our taxing jurisdictions when we do these deals,” Robinson said.
Councilman Brandon Ellington said Waddell & Reed hasn't shown its committment to Kansas City, because there is no plan to stay at its downtown location longer than the 15 year duration of the tax abatement and no agreement to hire locally. Plus, he said, he doesn't believe companies need incentives to build downtown, which is "already attractive for people to come down here.”
Instead, he said, incentives should go to developers who plan to invest in distressed parts of Kansas City.
A shift in policy?
Waddell & Reed’s move is one of the last projects that was allowed to proceed before a truce in the so-called economic border war. Missouri and Kansas sought to end the practice of awarding generous tax breaks to induce companies to move across the state line.
As part of that truce, Lucas said, he would limit tax abatements in Kansas City, Missouri, to 10 years, which would fall in line with Kansas’ rules. The council's vote on that measure has been tabled until next year.
The council also has lessened the Kansas City Port Authority's ability to grant incentives after the agency took advantage of free rein to incentivize projects anywhere in the city without council approval.
The resolution voted on Thursday confines KC Port Authority's projects to areas that would be reasonably considered ports, such as Kansas City International Airport, the downtown airport, the Missouri and Blue Rivers, Richards Gebaur Memorial Airport and railroads. Anything else must get specific approval by the city council.
Lisa Rodriguez is the afternoon newscaster and covers Kansas City, Missouri, City Hall for KCUR 89.3. Follow her on Twitter @larodrig.