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 Lowe’s 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.
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Sadia,
Are you telling me that you actually believe everything that David Martin has written in this article? David Martin has his own agenda and telling people only the parts of a story that support his agenda is one of his favorite topics. Articles that cast TIF and/or the EDC in a negative light attract readers, whether they are true or not. If the PITCH ever decides to become a serious newspaper with real reporters, things will change. Until then, all we get is this biased drivel.
Sadia, Are you telling me that you actually believe everything that David Martin has written in this article? David Martin has his own agenda and telling people only the parts of a story that support his agenda is one of his favorite topics. Articles that cast TIF and/or the EDC in a negative light attract readers, whether they are true or not. If the PITCH ever decides to become a serious newspaper with real reporters, things will change. Until then, all we get is this biased drivel.
Insidebubby: sounds like you are missing the point, especially as you are accusing David Martin of being biased, unethical and unbalanced. Sounds like you should direct your accusations towards the folks at EDC who seem to be conveniently leaving out half of the equation of their analysis.
Insidebubby: sounds like you are missing the point, especially as you are accusing David Martin of being biased, unethical and unbalanced. Sounds like you should direct your accusations towards the folks at EDC who seem to be conveniently leaving out half of the equation of their analysis.
realerist & fine print, you both seem to have missed the point. The various economic models being used all have limitations and my point was that David Martin chose to focus on the cost-benefit analysis prepared by the EDC without mentioning the flaws of the City's fiscal impact model. The tone of your comments tells me that neither of you are interested in getting all of the story, just the parts that support your point of view. I'll admit that I'm not a big fan of City staff, but what I want David Martin and the PITCH to do is to handle the story in a professional, balanced and unbiased manner like the journalists they claim to be are supposed to do.
realerist & fine print, you both seem to have missed the point. The various economic models being used all have limitations and my point was that David Martin chose to focus on the cost-benefit analysis prepared by the EDC without mentioning the flaws of the City's fiscal impact model. The tone of your comments tells me that neither of you are interested in getting all of the story, just the parts that support your point of view. I'll admit that I'm not a big fan of City staff, but what I want David Martin and the PITCH to do is to handle the story in a professional, balanced and unbiased manner like the journalists they claim to be are supposed to do.
Interesting article. Interesting comments, especially by InsideBub. You certainly sound like an insider and have an axe to grind with City staffers. I am more interested in Realerist comments though as they seem to be more in line with the point of the article - EDC staff fudging the numbers. If the EDC estimates were so reliable for these projects, why arent they being verified against actual performance?
Interesting article. Interesting comments, especially by InsideBub. You certainly sound like an insider and have an axe to grind with City staffers. I am more interested in Realerist comments though as they seem to be more in line with the point of the article - EDC staff fudging the numbers. If the EDC estimates were so reliable for these projects, why arent they being verified against actual performance?
David Martin,
Did you think you were exposing something ne or did you and the editor figure you could just run another TIF story to bump up readership numbers? Either way, this story would've been much better if you had actually done some real research and approached the story in a balanced and unbiased manner. Instead, you opted for your usual half-assed hatchet job.
For the benefit of your readers, lets discuss the issues raised in your article. The EDC, which provides staff for KCMO's TIF Commission, prepares a cost-benefit analysis is run on an ecconomic model jointly-selected by the EDC and the City, so it's more than slightly ironic that the City is expressing concerns about the projections it is producing.
City staff, on the other hand, produces a fiscal impact model for those same TIF Plans. It, too, has its limitations. It purports to show the public costs (City only) associated with the TIF Plan, although City staff can't run the model without a consultant's assistance, nor can they explain the cost numbers assigned to the public services. Oh, and the fiscal impact model recognizes no revenues - only costs. This hardly seems like a fair or honest assessment.
So, is either approach the right one? Probably not. It is also important to remember that both produce projections, not cold, hard facts. Together, they provide information for the decision-makers. The vantage point of history will ultimately show us what happened.
You also raised the issue of displacement. The transfer of economic activity from one place to another is a reality; the question is how much displacement will take place. That question is, however, much hardr to answer. As far as sales tax revenues being displaced from one community to another is concerned is also a reality. It happens whether TIF is involved or not. The point is that when TIF is involved, 50% of the new sales tax revenues in the TIF Plan are captured by the TIF and are made available to pay for eligible project costs. This may include sales tax revenues displaced from other taxing jurisdictions, but would be very difficult to measure. For practical purposes, the best that can be done is to assume a percentage will be displaced sales and discount by that amount.
The next time you do a story, do your homework and cover the whole story in a balanced and unbiased manner. I know this will be quite a challenge for you, but try for your readers' sake.
garbage in, garbage out seems to be the name of the game since economic development "expert" kachmarek strolled into town from whatever "hot" city he came from. i guess numbers rigging to influence (more like dupe) tif commissioners and councilmembers has never risen to the level of ethical scrutiny in this town but if it did maybe the folks at edc wouldnt be around. this is a disturbing article and obviously hits a sensitive spot with insidebub. so where do you work? and, before you try to divert readers' attention, how about addressing the real story: its not the model, its the people who are using the model to come up with the results they want. you have to actually estimate costs to make a cost/benefit model ;)
David Martin, Did you think you were exposing something ne or did you and the editor figure you could just run another TIF story to bump up readership numbers? Either way, this story would've been much better if you had actually done some real research and approached the story in a balanced and unbiased manner. Instead, you opted for your usual half-assed hatchet job. For the benefit of your readers, lets discuss the issues raised in your article. The EDC, which provides staff for KCMO's TIF Commission, prepares a cost-benefit analysis is run on an ecconomic model jointly-selected by the EDC and the City, so it's more than slightly ironic that the City is expressing concerns about the projections it is producing. City staff, on the other hand, produces a fiscal impact model for those same TIF Plans. It, too, has its limitations. It purports to show the public costs (City only) associated with the TIF Plan, although City staff can't run the model without a consultant's assistance, nor can they explain the cost numbers assigned to the public services. Oh, and the fiscal impact model recognizes no revenues - only costs. This hardly seems like a fair or honest assessment. So, is either approach the right one? Probably not. It is also important to remember that both produce projections, not cold, hard facts. Together, they provide information for the decision-makers. The vantage point of history will ultimately show us what happened. You also raised the issue of displacement. The transfer of economic activity from one place to another is a reality; the question is how much displacement will take place. That question is, however, much hardr to answer. As far as sales tax revenues being displaced from one community to another is concerned is also a reality. It happens whether TIF is involved or not. The point is that when TIF is involved, 50% of the new sales tax revenues in the TIF Plan are captured by the TIF and are made available to pay for eligible project costs. This may include sales tax revenues displaced from other taxing jurisdictions, but would be very difficult to measure. For practical purposes, the best that can be done is to assume a percentage will be displaced sales and discount by that amount. The next time you do a story, do your homework and cover the whole story in a balanced and unbiased manner. I know this will be quite a challenge for you, but try for your readers' sake.
garbage in, garbage out seems to be the name of the game since economic development "expert" kachmarek strolled into town from whatever "hot" city he came from. i guess numbers rigging to influence (more like dupe) tif commissioners and councilmembers has never risen to the level of ethical scrutiny in this town but if it did maybe the folks at edc wouldnt be around. this is a disturbing article and obviously hits a sensitive spot with insidebub. so where do you work? and, before you try to divert readers' attention, how about addressing the real story: its not the model, its the people who are using the model to come up with the results they want. you have to actually estimate costs to make a cost/benefit model ;)
David,
Another piece of "fair and balanced reporting" - NOT!
I will admit that the cost-benefit model used by the EDC is not perfect; however, it is the economic model that the City and the EDC jointly purchased and agreed to use. I'm sure that Jeff Yates failed to mention that little pertinent fact!
Of course, I'm also sure that you didn't ask too many questions (if any) about the City's fiscal impact model. Not that Jeff Yates or anyone else on his staff could explain it since it is both out-dated and so complicated and arcane that they had to have a consultant run it because they didn't know how to use it! The City's model acts as though money only comes in and goes out once; it does not reflect the possibility or reality of any "off-site benefits." This is the same model that City staff used to oppose doing anything with the Hawthorne at a PIEA meeting a couple of years ago - they said it would be better for the City financially if no rehabilitation took place!
So, either you're a journalist and bound by the code of ethics to be fair and unbiased or you're an editorialist who can say whatever they want. But, please don't masquerade as a journalist if you don't even want to try to do some real reporting!
David, Another piece of "fair and balanced reporting" - NOT! I will admit that the cost-benefit model used by the EDC is not perfect; however, it is the economic model that the City and the EDC jointly purchased and agreed to use. I'm sure that Jeff Yates failed to mention that little pertinent fact! Of course, I'm also sure that you didn't ask too many questions (if any) about the City's fiscal impact model. Not that Jeff Yates or anyone else on his staff could explain it since it is both out-dated and so complicated and arcane that they had to have a consultant run it because they didn't know how to use it! The City's model acts as though money only comes in and goes out once; it does not reflect the possibility or reality of any "off-site benefits." This is the same model that City staff used to oppose doing anything with the Hawthorne at a PIEA meeting a couple of years ago - they said it would be better for the City financially if no rehabilitation took place! So, either you're a journalist and bound by the code of ethics to be fair and unbiased or you're an editorialist who can say whatever they want. But, please don't masquerade as a journalist if you don't even want to try to do some real reporting!
Wtf, why is the city's head of economic development publically saying KC is not hot?! I say bring in Paris Hilton to run those clowns at EDC; she knows what's hot!
Wtf, why is the city's head of economic development publically saying KC is not hot?! I say bring in Paris Hilton to run those clowns at EDC; she knows what's hot!
Wtf, why is the city's head of economic development publically saying KC is not hot?! I say bring in Paris Hilton to run those clowns at EDC; she knows what's hot!
Wtf, why is the city's head of economic development publically saying KC is not hot?! I say bring in Paris Hilton to run those clowns at EDC; she knows what's hot!
The city can't create wealth out of thin air with TIF projects. They can only shift the tax burden to other parts of the city while drawing business away from those same parts. It's a zero sum situation. It's just that the cost of these projects is spread out so they're hard to recognize. Development should be self sustaining, and worth the investment by entrepreneurs, and not just the whims of the city council playing with taxpayer's money.
"others complained that cuts in the Finance Department would remove a line of defense between the EDC and the City Council members, who make the ultimate decision on TIF plans. 'We need to have our checks and balances,' Councilman Terry Riley tells me."
I think we've just discovered the real reason why Marcason and Herrman want to end Finance Department oversight of TIF projects. I wish I could look at the cost-benefit analyses for all TIF projects. How often does the finance department say "thumbs down" when the EDC says "thumbs up". I'll bet it rarely happens the other way around.
"Critics think the tool has been used too liberally"
Not too liberally, just for the wrong purposes. TIF in Kansas City is used primarily to line the pockets of wealthy, well-connected developers and their political patrons. If it were being used for its intended purpose of battling blight, you wouldn't hear nearly so much griping about it.
TIF's idea of "blight" is a project on the Country Club Plaza, one of the least "blighted" areas in the city. Is anyone seriously making the argument that the Plaza requires government handouts to make development worthwhile? Please.
If you want to see real blight, drive east from the Plaza. You won't have to do very far. Where's the TIF money to fight THIS blight? You won't see any, because there's no way for anyone to get rich off fighting that kind of blight.
The city can't create wealth out of thin air with TIF projects. They can only shift the tax burden to other parts of the city while drawing business away from those same parts. It's a zero sum situation. It's just that the cost of these projects is spread out so they're hard to recognize. Development should be self sustaining, and worth the investment by entrepreneurs, and not just the whims of the city council playing with taxpayer's money.
"others complained that cuts in the Finance Department would remove a line of defense between the EDC and the City Council members, who make the ultimate decision on TIF plans. 'We need to have our checks and balances,' Councilman Terry Riley tells me." I think we've just discovered the real reason why Marcason and Herrman want to end Finance Department oversight of TIF projects. I wish I could look at the cost-benefit analyses for all TIF projects. How often does the finance department say "thumbs down" when the EDC says "thumbs up". I'll bet it rarely happens the other way around.
"Critics think the tool has been used too liberally" Not too liberally, just for the wrong purposes. TIF in Kansas City is used primarily to line the pockets of wealthy, well-connected developers and their political patrons. If it were being used for its intended purpose of battling blight, you wouldn't hear nearly so much griping about it. TIF's idea of "blight" is a project on the Country Club Plaza, one of the least "blighted" areas in the city. Is anyone seriously making the argument that the Plaza requires government handouts to make development worthwhile? Please. If you want to see real blight, drive east from the Plaza. You won't have to do very far. Where's the TIF money to fight THIS blight? You won't see any, because there's no way for anyone to get rich off fighting that kind of blight.
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