You know a shopping center is in distress when the Big Lots moves out.
Big Lots is a closeout store. It left Brywood Centre last year. Hollywood Video is gone, too.
But the strip mall, at East 63rd Street and Blue Ridge Cutoff, is poised to make a comeback. Last year, the City Council in Kansas City approved a plan to assist its redevelopment with $5.6 million. Help arrives in the form of tax-increment financing, a mechanism that plows tax revenue back into the developments from whence they came.
TIF is the subject of frequent debate in Kansas City. Critics think the tool has been used too liberally, and, as a result, the city has given away tax money it needs to pay for cops and sidewalks. TIF supporters, meanwhile, say we'd be Wichita without it. "Kansas City, to be frank with you, is not considered a hot city," Jeff Kaczmarek, the chief executive at the Economic Development Corporation, which administers TIF, said in 2007.
TIF has been around for a while, and it seems fair to say that the evidence favors the opposition. TIF plans tear off an increasingly large share of the city budget, casting real doubt on their powers to rejuvenate the economy.
Why do TIF plans promise more than they deliver? Partly because of the goofy way bureaucrats analyze their merits.
As TIF plans go, Brywood Centre's is pretty straightforward. The City Council OK'd the plan with the idea that Kansas City would make out in the end, even after the developer walked away with his incentives. Analysts at Kaczmarek's EDC — an agency that receives city funding but operates outside of City Hall — performed a cost-benefit analysis showing that the city would be richer for having approved the TIF.
Slight problem, though. The analysis took into account good things that happen when development occurs but omitted some of the bad things.
Allow me to illustrate: There's a Price Chopper at Brywood Centre. In the plan that the developer, Chicago-based Tri-Land Properties, submitted to the TIF Commission, the supermarket would expand. Let's say the expanded supermarket hired a new butcher. We'll call him Sam.
Under the terms of the TIF statute, the city and the developer would split the 1 percent tax on Sam's income. But Sam's importance to the local economy doesn't stop at his earnings. He's also a consumer.
The economic activity that Sam would generate when he's not behind the meat counter — when he's eating out or buying clothes — is called "off-site revenue." But there's also a cost to having Sam around. His trash needs to be picked up. His tires chew up the streets. His girlfriend, Alice, uses the free health clinic.
Manish Patel, a financial analyst at the EDC, performed the cost-benefit analysis for Brywood Centre. Patel's report accounts for the tax revenue that off-site employees like Sam create. But it also determines that the cost of providing city services to these workers will be ... zero.
"We don't think that balances out," says Jeffrey Yates, the city's finance director.
A cost-benefit analysis without any costs is bound to be a crowd-pleaser. Sure enough, the EDC's analysis of Brywood Centre showed a net benefit of $5.7 million.
The numbers team at the EDC has played hide-the-costs with other plans, too. A 2007 vetting of the proposal to attract Lowes and other retailers to North Oak Trafficway counted tax revenues from off-site employees but discarded the costs. Ditto for the new J.E. Dunn headquarters downtown.
This type of optional accounting has led to tension and confusion. The most striking example occurred when the owners of the Kansas City Wizards introduced a plan to redevelop the land underneath the old Bannister Mall.