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Kansas City gives $7.5 million tax break to Fidelity Security Life for new offices on prime real estate

27th and Grand Fidelity Security Life Insurance rendering
Economic Development Corp. of Kansas City
/
Economic Development Corp. of Kansas City
Fidelity Security Life Insurance is seeking a $7.5 million property tax abatement from the city for its new offices at 27th and Main Streets. The eight-story building would sit atop five stories of parking.

Kansas City Council approved a $7.5 million tax break for the local company, which is moving less than a mile away, despite opposition from neighbors and the public school system.

A proposed office tower on one of Kansas City’s most attractive pieces of empty land will get tax breaks from both the city and the state of Missouri — despite objections from neighbors and tax-funded organizations.

Fidelity Security Life Insurance, a Kansas City-based company, asked for the tax break to move less than a mile from its current location at 3130 Broadway. On Thursday, Kansas City Council approved a 15-year property tax abatement worth about $7.5 million for the development, which includes eight stories of office atop five stories of parking.

“We as a council have talked about and taken some action to show our dedication to not incentivizing big business on behalf of our kids, but here is another opportunity that we have to make the right decision on behalf of our students,” said Councilwoman Ryana Parks-Shaw.

Parks-Shaw was the lone "no" vote on the project. The development has drawn widespread criticism from the neighborhood association as well as the city’s taxing jurisdictions — organizations that would receive funding from the tower's property taxes had the city not approved an abatement.

Opponents cite three key issues with the project: a lack of adherence to transit-oriented development guidelines, the need for incentives on what is likely one of Kansas City’s most prime development parcels, and the duration and amount of incentives.

Fidelity Security Life Insurance will also get about $3 million through the Missouri Works program, a state incentive that grants companies state withholding tax breaks for retaining or moving jobs to Missouri.

Tax abatements are one tool that cities use to entice developers to build projects that proponents say would not be built otherwise. They offer a way cities can prioritize certain types of development, or build up certain neighborhoods that developers and financiers consider too risky for investment.

Abatements work by allocating a certain amount of future tax revenue generated by the project back to the developer, which they use to pay for any financing associated with the project. Normally, those future tax revenues would go to the city’s taxing jurisdictions, which in Kansas City include the Kansas City Public School system, the Community Mental Health Fund and the Kansas City Public Library.

The taxing jurisdictions and neighbors didn’t comment during Thursday’s City Council meeting, but expressed concern through letters and testimony as the project was debated in committee.

“The taxpayer-funded streetcar extension along Main Street runs through downtown and will also go past this building,” said Kathleen Pointer, senior policy strategist for the school system, during last week’s meeting. “Every time we don’t make a developer find a shared parking plan, we’re asking Kansas City’s kids to give up dollars that could be supporting their socio-emotional needs, improving their school buildings or adding educational resources to their classrooms.”

Dave Frantze, an attorney with Stinson LLP who is representing Fidelity Security Life Insurance, said the project would not be completed without incentives. When asked if the development team was concerned about the opposition, Frantze said they hoped to address that through the building-approval process.

“We intend to meet all of the zoning requirements and all of the land requirements discussed, and we hope that will satisfy those concerns,” Frantze said.

An independent financial analysis conducted by Chicago-based S.B. Friedman Development Advisors showed that the project would be viable with only 10 years of tax abatement, not the 15 years requested by the developer. The analysis also showed the two main reasons the building required incentives: a high-end design with a curvature in the building’s facade, and the five-story parking garage.

Parking has become a point of contention, with incentive opponents saying the company should have further explored a shared parking agreement with nearby Crown Center, given empty spaces in their garage and the proximity to the streetcar line.

“Why is a garage necessary when there are approximately 3,750 unoccupied spaces in two garages nearby and the site is on the streetcar track?” said Jan Parks, from Kansas City TIF Watch, in submitted testimony.

Councilman Eric Bunch voted "yes" on the ordinance but called the project another example of how the city incentivizes parking when it’s not necessary.

“I know that there are literally thousands of parking spaces within two blocks of this project, and here we are incentivizing a project with 400 parking spaces,” Bunch said.

The project echoes one of Kansas City’s most controversial recent developments: the Waddell & Reed tower.

When what was formerly Waddell & Reed Financial Inc. made its request to the city council in 2019, it also sought a property tax abatement as well as state incentives for bringing jobs to Kansas City from Overland Park. The move was widely panned, given the relocation was still within the metro and didn’t attract new residents to Kansas City, and put a multi-story parking garage near the streetcar line.

The deal, which was also negotiated by Frantze, allocated $35 million in future taxpayer dollars to the building. However, the project fell apart after the incentives were approved and construction began. Waddell & Reed was sold to another company, and it announced in March that it would no longer plan to move into its new headquarters.

Despite being on the market since June, the building currently has no anticipated tenants.

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