Archive for Monday, April 6, 2015

2014 Economic Development report highlights results from various incentives

April 6, 2015

Whether they are tax abatements, Tax Increment Financing Districts, Transportation Development Districts or Community Improvement Districts, tax incentives given to developers come with projected economic growth.

On Tuesday, the city of Shawnee along with the Economic Development Council produced a report that highlights what those projections were, and what they actually produced in terms of new jobs and tax revenue for the city in 2014.

The results are varied in terms of developers meeting those projections for job creation and tax revenue but overall, the city increased its overall commercial value in the city from 22.9 percent in 2013 to 23.7 percent in 2014. The city's goal in its comprehensive plan is to reach 30 percent.

Shawnee's jump in commercial real estate as a percentage of overall value in the entire city was the largest jump when looking at cities like Lenexa, Overland Park, Olathe and Leawood. However, cities like Lenexa's commercial base is already much larger than Shawnee's with 47 percent of their assessed value coming from commercial and industrial properties.

Each incentive is considered by the city's governing body once a cost-to-benefit study is performed by the Economic Development Council which shows projected assessed values for each property, new taxes for all jurisdictions and projected jobs to be created.

Here'a a look at the city's results on tax incentive projects over the last year:

Tax Abatements

Tax abatements are agreements between the city and a developer or lessee of a industrial or office development to use a portion of their property taxes to pay for their own development.

Three properties were listed as completed tax abatements in 2014: Bayer Warehouse, Renner West offices and the Kraft Tool addition. The Bayer Warehouse abatement was projected to create 150 new jobs and actually created a total of 392 new jobs, 180 of those being direct new jobs and 212 being indirect new jobs. The Renner West offices fell short of its projected jobs number of 77 and only created a total of 50 new jobs. The Kraft Tool addition added 47 new jobs to the area while their projection only called for 40.

Bayer's project and the Renner West offices received a 50 percent tax abatement and generated a cumulative total of more than $486,000 between the two in new taxes for the City of Shawnee since the abatements were approved in 2014. Now that the abatement period is over, those properties will begin paying full property taxes.

Currently in Shawnee, there are 15 active tax abatements. That number is higher than Lenexa, which has six, and Overland Park, which has five, but is much lower than Olathe which has a total of 61 abatements.

Two of the biggest current abatements in Shawnee are the Courtyard by Marriott project and the WestLink building project. WestLink's job creation totals are, so far, the farthest from the projected number of any of the abatements in the city. The initial cost to benefit analysis of the WestLink Business park estimated that the entire complex would create about 2,000 jobs. The first building, which was completed in 2014 and is now fully occupied, was projected to created 320 jobs. Last year, it only created a total of 103 jobs.

Council Member Neal Sawyer requested that the city perform this annual report on the city's incentive programs several years ago so that the city could see a "report card" on each project.

"These things are hard to estimate and we can see that now," Sawyer said.

Overall, the abatement projects created 704 new jobs in Shawnee in 2014, shy of the projected total of 930. That number is low because of Perceptive Software's move to Lenexa. The company was projected to create 170 jobs in Shawnee before it left the city.

If each development would have chosen Shawnee without the tax abatement incentive, the city would've received more than $13 million in assessed value for property taxes since 2006.

The Economic Development Council's Executive Director Andrew Nave has called the abatement programs a "differentiator" for Shawnee, and his council's report says that abated properties have generated significantly higher property taxes after their development, even before they are fully on the tax rolls.

KNRA Districts

Kansas Neighborhood Revitalization Act districts is a rebate program for commercial and residential properties enacted by the state to spur economic growth. At the end of 2014, there were 17 commercial and 15 residential active properties in Shawnee.

Five of the KNRA districts will become fully taxable this year, and they include the Sharon Lane addition and four residential properties. With the KNRA rebate program for the Sharon Lane addition, that property's value went from $143,000 in 2003 to $339,000 last year.

In total, all of the KNRA projects resulted in an increase of more than $2.5 million in property values over the last 12 years, and the city has received more than $168,000 in revenue from the projects.

Community Improvement Districts

Ten Quivira Plaza, the 180,000-square-foot shopping center at Shawnee Mission Parkway and Quivira Road, was a Community Improvement District and sold for $24.8 million last year. The CID created an additional sales tax of half of 1 percent at the shopping center that helped pay for updates to the shopping center. The redevelopment agreement with 10 Quivira Plaza provided up to $1.3 million to be used for "base improvements" to the facade and other exterior improvements.

The CID tax generated $156,118 in 2013 and $180,175 in 2014, and the city was able to generate more than $365,000 in additional sales tax revenue in 2014 that the city keeps. Maureen Rogers, the city Finance Director, said that the city would have raised an additional $25,000 last year if the new pavement sales tax had taken effect earlier. Rogers, who put together the development report along with the Economic Development Council, said she monitors each store as the shopping center gets new tenants to make sure they charge the appropriate amount of sales tax.

Transportation Development Districts

TDDs are tax incentives that also use sales tax at a given property to pay for certain portions of the development.

Shawnee Plaza at Shawnee Mission Parkway and Pflumm Road is the city's only active TDD and is projected to generate enough money through the sales tax to cover any debt incurred on the $3.5 million bond that paid for the relocation of Midland Drive and improved access and pad sites for the development.

Tax Increment Financing

TIFs use a portion of the existing sales tax to cover development costs, and the incentive has been used around the Kansas City metro since the 1990s.

Shawnee currently has three approved project plans for TIF districts at Cobblestone, Shawnee Plaza and Prairie Pines.

Cities can establish TIF districts by defining the area and determining that the development within the district would be unlikely "but for" the use of TIF revenue.

The Cobblestone Project, at 62nd Street and Pflumm Road, is estimated to cost $63 million with up to $7.9 million in reimbursements from TIF funds. The project was scheduled to begin in 2014, but the developer is looking for a new developer to purchase the property and complete the project.

Shawnee Plaza's estimated projects costs are $16.56 million with the city offering $7 million in TDD and TIF incentives. The TIF agreement at Shawnee Plaza states that revenue generated through the TIF over the 20-year term of the project plan is capped at $3.25 million. If the development generates that amount in less than 20 years, the city can then terminate the TIF plan. If the developer does not raise that amount, the plan terminates automatically.

Council Member Jeff Vaught made a point when reviewing the report to answer some critics' questions about tax incentives. Critics have claimed that the city has been giving away taxpayer money to special interests and developers through the various incentives it offers.

Vaught asked Rogers if the city is "giving away millions to developers. We are not giving away checks, right?" Vaught asked.

Rogers responded by saying, "You can't lose money that was never there."

Most members of the governing body have agreed that tax incentives are a necessary part of attracting development to Shawnee.


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