Economic Development Tax Breaks Cost Kansas City Public Schools $2,000 Per Student
A proposal that would allow school districts in Kansas City to recoup their tax revenue faces an uphill battle at City Hall.
Editor’s note: The property tax redirection statistics released by Kansas City, Missouri included enrollment at all of the Kansas City Public Schools except charter schools within its boundaries.
Kansas City Public School students missed out on more than $28 million in 2018 due to development deals that redirected property taxes, a loss of more than $2,000 per student in a district where more than 80% of the students are Black or Latino and nearly all students qualify for free or reduced lunch.
In the Park Hill school district in the Northland, where nearly 70% of students are white, the loss per pupil is $97.
The Kansas City Council is considering major reforms to its tax incentive policy that would allow school districts across the city to choose whether to allow their property tax abatement.
“We must address the issue of how tax abatements exist to the detriment of some of our students,” said 5th District Councilwoman Ryana Parks-Shaw.
Under the proposed change, a developer seeking a tax exemption would have to first obtain written permission from the affected school district, unless the project is in a continuously distressed census tracts or the project falls within a designated area, all of which are located on the east side of Kansas City.
The city’s Neighborhood Planning and Development Committee discussed the measure for the first time Wednesday, but a final vote is not scheduled for weeks.
Kansas City, Missouri, offers several different kinds of tax breaks aimed at attracting developers. Many come in the form of property tax abatements or redirections — the developer either doesn’t pay the full property tax or that money comes back to them for construction costs, which impacts schools, libraries and public health programs that rely heavily on property taxes.
Terry Ward, a longtime member of the North Kansas City Schools board and a researcher on tax incentives, said not all incentive deals are bad. They often create jobs and boost sales, earnings and property taxes.
But while the city benefits immediately from sales and earnings taxes, Ward said, the other jurisdictions must wait anywhere from 10 to 23 years to benefit from property taxes. He compared the annual loss of revenue to Kansas City’s current budget crisis.
“You’ve been wrestling, because of COVID, with what to do with a $50-million hole remaining in the city budget. But every year for the last 15 years, and for the foreseeable future, more than that is being diverted or withheld from public education to support economic development in Kansas City each and every year,” Ward said.
In the Kansas City school district, Ward said the difference of $2,000 per year for each student is massive.
“With just one year of those funds, that would provide every student in the district with a computer to access virtual learning and the cost of that learning connection,” Ward said.
Dr. Kenny Southwick is the executive director of the Cooperating School Districts of Greater Kansas City and spoke to council members on behalf of the 14 school districts that are either fully or partially within Kansas City, Missouri.
“I want to make sure that you know that we would like to be at the table to have meaningful discussion, to work through compromise, to not kill economic development, but at the same time not place our communities in peril as a result of the dollars that we give away,” Southwick said.
The proposed policy change received a cool reaction from some members of the committee.
Kansas City Councilman Lee Barnes wondered what the net effect of returning millions of dollars to the property tax rolls would be, and whether that would affect the funding schools receive from the state.
Shannon Jaax with Kansas City Public Schools said if local property taxes increased, it would not impact state funding.
“We would not be losing revenues from another source, it would be a net benefit to us,” Jaax said.
Third District Councilman Brandon Ellington said tax matters should be determined by the city council — not by school boards overseen by the state.
“We’re literally talking about being able to leverage taxes or property to increase value in certain areas, which, again, should fall to the local municipality and not the school district,” Ellington said.
Councilman Dan Fowler say he was in favor of incentive reform broadly — particularly because Kansas City has a complex system involving more than half a dozen incentive-granting agencies.
But he argued, under the ordinance, Kansas City Public Schools will continue to be impacted more heavily because most of the exempted areas also fall within their school boundaries. And he worried the additional restrictions would cause developers to look elsewhere.
“If somebody is going to get a better deal to do the same thing somewhere else, we need to try to be able to compete with them because ultimately it brings economic activity to Kansas City,” Fowler said.
But Councilwoman Melissa Robinson said it was about giving schools a voice at the beginning of a development deal, rather than trying to renegotiate deals that are already in the works.
“What the school district is essentially saying is, ‘City, do whatever you want to do with your funds, but these are funds that are supposed to come to the school district, so allow us to have a conversation on the front end,’” Robinson said.
The Neighborhood Planning and Development Committee will discuss the issue again next month.