RideKC dissolves its controversial tax incentive-approving nonprofit arm, moves development in-house
Kansas City's transit agency put an end to RideKCDC, the development nonprofit it used to give tax incentives to some controversial projects. Now, the transit agency will directly oversee transit-oriented development, which it says will make the process "better, stronger, faster."
The Kansas City Area Transportation Authority (KCATA) voted unanimously on Wednesday afternoon to dissolve the RideKC Development Corp. But the move does not mean that the agency is ending its foray into transit-oriented, tax-subsidized development.
RideKC Development Corp. (RideKCDC), the transit agency’s development arm, was formed as a nonprofit in 2018 to explore opportunities for increasing housing density along transit corridors, such as the Main Street streetcar line and the Troost MAX bus line.
Since RideKCDC’s creation, leaders of taxing jurisdictions such as Kansas City Public Schools, along with some city officials and advocates of affordable housing, have criticized its use of tax incentives for developers to create pricey housing units.
At the Wednesday KCATA board meeting, CEO Frank White III said the development projects will be handled by a department of the region’s transit authority.
“This decision is not in any way showing a lack of support…This is doubling down on our support” for transit-oriented development and transit-oriented communities, White said. “We’re maturing now, and we could call it ‘2.0,’ I guess. I think we can make it better, stronger, faster. I’m very excited about what we can do.”
The short, turbulent life of RideKC Development Corp.
When RideKCDC was created, the KCATA, headed by then-CEO Robbie Makinen, was less friendly to development. For this reason, transit-oriented development was outsourced to the nonprofit, which would make nonbinding recommendations to the KCATA board.
White was chosen as the vice president of development at RideKCDC, with Brien Starner as president.
Soon after RideKCDC began offering tax incentives to developers through its START program, it drew the ire of local taxing jurisdictions, whose leaders were concerned that the agency was redirecting revenue away from schools, libraries and mental health services.
START, which stands for Sustaining Transportation and Reinvesting Together, is a tax incentive program through RideKCDC that offers tax exemptions to developers based on a number of transit-oriented criteria.
In his last weeks as superintendent of Kansas City Public Schools, Mark Bedell strongly cautioned the KCATA that its overuse of tax incentives could disproportionately impact students of color. He also urged the agency to pursue more development projects east of Troost Avenue, the historic economic and racial dividing line in Kansas City created by racist housing practices.
In the year since then, RideKCDC has taken on more projects east of Troost.
However, it attracted more controversy for a proposed project in the Waldo neighborhood that lacked affordable housing.
And in February, RideKCDC sparked widespread outrage by pursuing a tax-subsidized project at Main Street and Armour Boulevard that the Kansas City Council had previously rejected for a $10.5 million subsidy.
Councilwoman Melissa Robinson, who represents the 3rd District, called it “insulting” that the transit agency would consider a project that had been “candidly denied” public assistance by elected officials.
When it came time for the KCATA board to approve RideKCDC’s recommendation, opponents packed the room. The agency backpedaled and voted to deny tax incentives for the project.
Why the agency is dissolving RideKCDC
Since the founding of RideKCDC, CEO Makinen has left the KCATA. White took over the leadership role earlier this year.
With a more development-friendly leader in place, the KCATA decided it was time to absorb RideKCDC into the transit agency. According to officials, this was an amicable decision supported by RideKCDC staff.
“Basically, the functions of the development corporation will continue,” said Richard Jarrold, deputy CEO of the KCATA. “But they will continue as a department of the KCATA rather than a wholly separate nonprofit corporation.”
The RideKCDC board is expected to approve the dissolution at its final meeting on July 12.
From there, RideKCDC will move into the KCATA headquarters, and the KCATA will take ownership of all of its assets.
What happens next?
As a department of KCATA, the development arm of the transit agency will shift its direction slightly. Officials said they plan to put into place two policy recommendations that arose following the Main and Armour controversy in February.
For one, the agency will start to require third-party “but-for” financial analysis for projects receiving tax incentives through the START program.
This kind of study is conducted by an independent financial analyst to determine the amount of assistance necessary in order for a developer to break even. In other words, “but for” this level of assistance, the project would not be financially feasible.
Organizations including KCPS, KC Tenants and the Community Mental Health Fund have long advocated for requiring this kind of financial analysis for projects being considered for tax incentives in Kansas City. At this time, all other economic development agencies have this requirement, with the exception of RideKCDC and the Port Authority of Kansas City.
“We think third-party financial analysis is necessary at the barest minimum,” said Kathleen Pointer, the senior policy strategist at KCPS. “It’s difficult to even have a conversation about the merits of a project if we don’t have an independent financial analysis about the need for public support.”
In addition, White said the KCATA will close its application for unsolicited proposals.
“Personally, I would like to look more east of Troost, utilizing our very robust tools for areas of great need,” said Michael Riley, the KCATA’s director of transit-oriented development and transit-oriented communities. “So instead of getting any type of request, we can be more selective and strategic in how we use our financial tools.”
Pointer said the school district will be watching to see how the decision to dissolve RideKCDC will play out in practice.
“The things we have been vocal about and concerned about from the beginning still hold true,” Pointer said.