Tuesday, May 13, 2014

Kansas City Council expected to pass incentives for Burns & McDonnell's expansion this week

Posted By on Tue, May 13, 2014 at 11:58 AM

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The current City Council has never said no to Burns & McDonnell.

The prodigious $2 billion engineering firm with headquarters in south Kansas City has been before the Kansas City, Missouri, City Council 21 times since 2011, mostly to have public works contracts approved. Each one passed.

All told, those contracts since the current council assumed power have committed at least $36,459,018 from Kansas City to Burns & McDonnell in the last three years. Those public contracts, along with untold others across the United States and abroad, have fueled the engineering company's rapid growth. Burns & McDonnell employs 2,600 in Kansas City now, and plans to add another 2,100 in the next five years.

To make room for that growth, Burns & McDonnell, along with its well-heeled development partner VanTrust Real Estate, plans to tear down the old Congregation Beth Shalom building at 9400 Wornall and replace it with a gleaming new building. The expansion is within a five-iron shot of the engineering company's current headquarters.

Large companies rarely do real-estate deals in Kansas City without some type of incentive. Burns & McDonnell's expansion will be no different. 

The City Council this week will take up, and likely pass, a tax increment financing plan that will let the company keep half of the earnings taxes its new employees generate over the next 23 years. While most Kansas City companies would pay the full one-cent tax for every employee, Burns & McDonnell will keep nearly $42 million in earnings taxes from now until 2037 if the council passes the TIF plan.

Burns & McDonnell also requested a property-tax abatement for the next 25 years. The abatement doesn't mean that Burns & McDonnell will pay zero real-estate taxes, but it will pay far less than what the property is worth. While the property will transform into a top-of-the-line corporate office building, the Jackson County tax collector will still see a shabby, abandoned synagogue at 9400 Wornall for tax purposes.

To be fair, Burns & McDonnell could have sought more incentives, and city officials probably wouldn't have batted an eye. The firm could have obtained something similar to the inducements Kansas City offered to Freightquote, a shipping brokerage that relocated from Lenexa. Kansas City, sick of seeing big companies move to Johnson County for the promise of tax incentives, pulled all the stops and offered one of the biggest taxpayer giveaways for the company to occupy a building that replaced a grass field at Interstate 435 and State Line.

But Burns & McDonnell CEO Greg Graves told his staffers and lawyers to fetch only enough incentives for the new building's lease rate to equal $26 a square foot, which matches what they pay on their current headquarters.

Still, the plan will be a money loser for some tax-funded institutions, mainly the Mid-Continent Library, which, according to a third-party analysis, stands to lose nearly $2 million from foregone tax revenue in the Burns & McDonnell plan. 

Why should anyone care what Burns & McDonnell gets? For one thing, Graves was a leading proponent of keeping the earnings tax when it came up for renewal in 2011. Next time the earnings tax comes up for a vote, city and civic will implore voters to retain the tax to fund basic city services, but voters should also know that it's a money pool for corporate tax incentives.

A City Council committee will take up the Burns & McDonnell request at 1:30 p.m. Wednesday on the 26th floor of City Hall. The full council may vote on it on Thursday afternoon.

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