Kansas City Council Rejects Incentives For A Company That Threatened To Move Across State Line
The vote came after a scathing letter from the superintendent of Kansas City Public Schools, who said allowing the Australian-based BlueScope Construction to not pay property taxes contributes to educational inequalities that are tantamount to racism.
Faced with scathing criticism about a controversial development incentive request, the Kansas City Council on Thursday rejected a proposal designed to help retain a global construction company in the West Bottoms.
The council voted 9-4 against a parking deal that is part of a larger subsidy proposed to keep BlueScope and its 339 high-paying jobs at 1540 Genessee St.
The council faced a tradeoff: approve the incentive that Kansas City school officials and others said was too costly, or risk losing a successful company in the midst of a pandemic and serious economic downturn. The council majority said the broader incentive, extending a 20-year deal that was supposed to expire next year, was a reach too far.
“We’re talking about something that was 20 years ago and if we extend it, now we’re talking about 33 years,” said Councilman Brandon Ellington. “That’s utterly ridiculous.”
BlueScope is an Australian construction company with global operations that acquired Butler Manufacturing in 2004 and located its U.S. headquarters in Kansas City. An original 20-year agreement by the city provided a 100% property tax exemption for the West Bottoms development and is set to expire in 2021. BlueScope is asking for a 13-year, 75% property tax abatement and 10 years of free parking for its employees at an adjacent parking garage.
BlueScope’s total incentive package is valued at $14 million, including $5.6 million in tax credits from the state of Missouri. The tax breaks by Kansas City and other local taxing jurisdictions would total $8.4 million, including the $2.4 million parking cost reduction that was the subject of Thursday’s council debate. The property tax abatement is before the Planned Industrial Expansion Authority but has been tabled.
BlueScope has said if it doesn’t get what it wants from Kansas City, it is considering relocation options, including to Kansas or Texas. Kansas City development staff said they understood Kansas’ offer to move totals more than $20 million.
Those voting in favor of the parking deal were council members Teresa Loar, Heather Hall, Dan Fowler and Katheryn Shields. Those voting against were Mayor Quinton Lucas and council members Ellington, Melissa Robinson, Kevin McManus, Eric Bunch, Andrea Bough, Ryana Parks-Shaw, Lee Barnes, and Kevin O’Neill.
Proponents of keeping BlueScope pointed out that it currently employs 339 workers at an average annual salary of nearly $110,000, and the company expects to add 90 new jobs over the next six years.
Supporters pointed out that if BlueScope moves out of the city, it could leave a large office building and parking garage vacant for years. They wanted to avoid that at a time when the city’s economy is reeling from the COVID-19 pandemic and City Hall faces huge budget cuts.
Shields pointed out that the company generates about $500,000 per year in earnings taxes for the city. If the company moves, she warned, “We lose it all.”
Fowler said the only thing before the council was the 10 years of free parking, which he said he could live with to retain a successful company. He said the broader incentive before PIEA wasn’t really up for discussion.
But critics said the company has already benefited from 16 years of tax breaks and should not get a lengthy extension.
Ellington noted that when Butler Manufacturing first got the incentive 20 years ago, the West Bottoms was a very different, struggling place.
“The West Bottoms is now viable,” he said, adding that if BlueScope chooses to move, “I say, let them leave.”
Critics also argued that BlueScope has already captured $7 million in redirected taxes that without incentives would have gone to schools and libraries and other taxing jurisdictions.
On Wednesday, Kansas City School Superintendent Mark Bedell excoriated the idea of granting further tax incentives to BlueScope.
“A Kansas City company, believing they can bring forward an additional request that diverts resources away from our students, speaks loudly to the systemically racist real estate practices we have allowed to exist here,” Bedell wrote.
“Financial decisions can be moral ones and this request is a violent economic practice that would never be inflicted on the majority-white districts in the Northland. I am confident my Superintendent colleagues in those districts would agree.”
Tax-incentives in the Northland frequently involve retail establishments, and the taxes redirected back to the developments are often sales taxes. Meanwhile, developments south of the Missouri River more often involve property tax abatements, and property taxes are what fund school districts.
Several council members lamented that the BlueScope proposal has generated accusations of institutional racism and could heighten tensions between north and south of the River. Bunch suggested the council should seize this opportunity to pursue further tax incentive reform and try to make it more equitable for all school districts, both north and south.
Both Bunch and Hall said developers work more closely with Northland school districts before they bring proposals forward.
“We have a good example of creating a more equitable incentive reform, incentive policy with the Northland,” Bunch said. “I think that’s laudable. I think we need to look at that as an example of how we can give more power to the school districts.”
Bunch agreed development doesn’t look the same south of the river as it does north. “But we have to make sure we are giving the same level of deference to our urban school districts, particularly those serving Black and brown students,” Bunch said.
Lucas, who worked on tax incentive reform as a councilman before he was elected Mayor in 2019, agreed more work needs to be done. He said these incentive deals were “not supposed to be in perpetuity,” and said the Council needs to grapple with the question of when enough is enough.
In a related move, Council members Robinson and Parks-Shaw introduced an ordinance Thursday that would establish a policy limiting the use of property tax abatements as an economic development incentive tool within the boundaries of the Kansas City, Independence, Center, Hickman Mills, Grandview, Raytown and Lee’s Summit school districts.
Their policy proposal is slated for Council committee debate in July.