The Bryan Cave law firm makes a tidy keep from its work representing the Tax Increment Financing Commission of Kansas City.
From fiscal years 2010 to '13, the firm's lawyers (primarily partners Wesley Fields and Stephen Sparks) have billed $3.758 million to the agency that administers the often-used TIF development incentive. Those billings range from a low of $636,530 in 2010 to a high of $1.2 million in 2011. And those price tags have some TIF commissioners wondering if the agency should hire its own lawyer to reduce how much it spends on legal fees.
The TIF Commission vets requests for new TIF projects and changes to existing ones. It sends a recommendation to the Kansas City, Missouri, City Council for approval. The commission is under the Economic Development Corporation of Kansas City, a quasi-governmental agency that receives its funding partially from City Hall but also from a portion of revenues from the TIF projects that it endorses.
A TIF district is often used to spur development as it takes increases in property and economic activity (sales, utility and earnings) taxes that would otherwise go to local government and instead helps defray project costs. It's revered by Kansas City's politicians, bureaucrats and business interests as a means to replace the city's deteriorating land plots with gleaming new office buildings and shopping districts.
The concept plays less well among neighborhoods and other political subdivisions like library and school districts, all of which want to see tax money spent for basic services as well as for their own coffers, only to see that money siphoned off by development projects in parts of town where their need is dubious.
But the TIF Commission's spending isn't the only rub that commissioners from non-city taxing jurisdictions like Jackson County and the Kansas City Public Library have with their legal representation. In recent months, they've raised questions about their lawyers' actions and positions on a strange TIF plan known as the Southtown TIF.
Southtown is a sprawling TIF plan that stretches from just south of Union Station up along Main Street, stops before the Plaza, then leapfrogs several other TIF plans before resuming along 63rd Street. Southtown is such a big TIF that it's actually a collection of various projects within the same plan.
One of these was the Citadel Plaza, once considered a site for a grocery store - anchored development at 63rd and Prospect that devolved into an asbestos-laden strip of barren land, thanks to incompetent developers.
Another is known as Project I, which is where the Federal Reserve Bank of Kansas City moved from downtown to near Liberty Memorial. The Fed didn't want TIF to grease the skids for its new building, but a district was approved anyway. The TIF Commission issued $11 million in bonds in 2007 to finance $9.6 million in construction for those projects.
TIF revenues from Project I didn't go toward paying for the construction of the new building, but rather improvements and upgrades to infrastructure along Main Street and Penn Valley Park.
The way bonds work is, they're sold to investors so a project can have money up front to start construction, then those investors are paid back (plus interest) over time with TIF revenues. Bond issuances make sense for big projects - such as when the city issued $295 million in bonds for Kansas City Power & Light District - but not for relatively small projects like sprucing up Penn Valley Park. For one reason, there's a big cost associated with issuing bonds.
In the case of the TIF district around the Federal Reserve, the cost to issue the $11 million in bonds was about $4.3 million of tax money. Bryan Cave's lawyers, in addition to representing the TIF Commission on the transaction, also served as counsel to the bond underwriter, which seemed to put them on both sides of the transaction.
In addition, Wesley Fields, the Bryan Cave lawyer representing the TIF Commission, is a trustee for Research Medical Hospital, which is owned by HCA, the developer of the Southtown TIF. Fields has said that his work as a Research trustee doesn't involve legal advice, so there isn't a conflict of interest.
TIF Commissioners representing the taxing jurisdictions have made it clear in commission meetings for almost a year that they had misgivings about how bonds for Project I were issued and managed. On July 10, they scored something of a victory, when the majority of the commission agreed to start defeasing (finance-speak for early termination) that $11 million in bonds, which would return the money to bondholders.