Overhaul of Kansas City incentive policies

[CrossroadsUrbanApts]

Hey Raggers,

Who wants to help me crowdsource some revisions to the city's development incentive policies? Despite what some think, I do think there is appetite at the Council level (even Eric Bunch) to amend the various incentive policies into a more cohesive and effective whole.

What are the specific policy changes do you think would be most effective in spurring infill development?

Here are a few I would suggest as a start:

1) Currently, any project using LCRA or PIEA incentives (or similar) that is 12 or more units needs to set aside 20% of the units as affordable to households at the 60% AMI level. I would increase the number 12 to be 100 units before the set aside requirement kicks in. This would help make smaller infill projects pencil, while still asking larger institutional-sized projects to contribute to affordable housing needs. Maybe there could be a phase-in rather than a hard cut off at 100. But bottom line, no 12-unit or similar-sized project can afford to set aside such a high percentage of units at such a low rent.

2) Currently there are conflicting ordinances that say when prevailing wages are required on a development project. I would suggest that development projects with incentives (>100 units) should be able to either (1) agree to 100% prevailing wages or (2) set aside affordable units. Let developers choose which is best for their project. Prevailing wages generally makes a typical wood-frame building uneconomical to build. Conversely, for steel or concrete buildings, the wage premium is more workable.

3) MBE/WBE participation goals have stealthily crept up over the last 10 years, with current "standard" being set by the relevant city staff at 14% MBE and 14% WBE. This adds a ton of cost to projects because there are still very few qualified firms in the industry. The few that exist can charge exorbitant prices because they are often in high demand on big projects like the airport as well. Especially for smaller projects, finding qualified MBE subs that work on sub-institutional scale projects is tough. I would reduce the participation goals back to something like 10% MBE/5% WBE, like what it was in the early 2010s.

What else would help?

[langosta]

Length and % amount of the abatement.

[CrossroadsUrbanApts]

How would you approach adjusting the length and % of the abatement?

One thought I had is to make the abatement process less subject to negotiation. The more discretion and negotiation, the more it matters who your lawyer is, or how your relationship with a certain council member is, etc. If it was clearer what was available, you'd see more smaller developers take advantage of the program.

Consider a flat rule where you could get 100% abatement in continually distressed census tracts, and maximum 75% elsewhere. With no more than 15 years of abatement (perhaps with step up at year 11). If that was the clear standard, I think you'd see more take up on the program.

Politically, I could see this as being a little difficult, as council members tend to like being able to extract deals (as do taxing jurisdiction representatives).

[langosta]

How would you approach adjusting the length and % of the abatement?

One thought I had is to make the abatement process less subject to negotiation. The more discretion and negotiation, the more it matters who your lawyer is, or how your relationship with a certain council member is, etc. If it was clearer what was available, you'd see more smaller developers take advantage of the program.

Consider a flat rule where you could get 100% abatement in continually distressed census tracts, and maximum 75% elsewhere. With no more than 15 years of abatement (perhaps with step up at year 11). If that was the clear standard, I think you'd see more take up on the program.

Politically, I could see this as being a little difficult, as council members tend to like being able to extract deals (as do taxing jurisdiction representatives).

100 and 25 in distressed or for historic.

75 and 20 for rest

Realistically need max flexibility for those harder to complete projects. I agree a standard base package of 75% for 15 would help drum up excitement.

[smh]

How would you approach adjusting the length and % of the abatement?

One thought I had is to make the abatement process less subject to negotiation. The more discretion and negotiation, the more it matters who your lawyer is, or how your relationship with a certain council member is, etc. If it was clearer what was available, you'd see more smaller developers take advantage of the program.

Consider a flat rule where you could get 100% abatement in continually distressed census tracts, and maximum 75% elsewhere. With no more than 15 years of abatement (perhaps with step up at year 11). If that was the clear standard, I think you'd see more take up on the program.

Politically, I could see this as being a little difficult, as council members tend to like being able to extract deals (as do taxing jurisdiction representatives).

This was, until recently, the situation in Philadelphia. IIRC, it was 100% abatement for 10 years. A highly successful policy that resulted in a significant amount of construction in the city. The program was ended last year as public opinion turned against it.

[KC_Ari]

Thoughts on a system for unlocks of pre-determined incentives?
(I'm by no means associated with development, just throwing out ideas.)
Some examples might be:

• If the site requires these types of environmental remediation you get X.

• If you use MBE/WBE at certain percentages you get sales tax on construction material rebates.

• You get scaling tax abatement periods based on the degree of meeting affordability requirements.

These are just examples and someone with more knowledge of the process could better hammer down specific requirements.

[TheBigChuckbowski]

As much of the process needs to be taken away from the politicians and handled by staff as possible. An achievable set of groundrules that if you meet them, you get the incentives, at least for projects under a certain number of units. Let city council set their goals in one guiding ordinance, not on a project-by-project basis. If that leads to too mmuch lost tax revenue because there's too much development, then adjust the rules, not enough development, then adjust the rules. The concept that every single project has to go through multiple approvals including city council, that can change their minds/criteria for every different project depending on the political winds at any point in time, is just patently absurd and makes it so there's no guarantee of success, which makes it a lot harder to justify the time/effort and financing.

[Cratedigger]

Thoughts on a system for unlocks of pre-determined incentives?
(I'm by no means associated with development, just throwing out ideas.)
Some examples might be:

• If the site requires these types of environmental remediation you get X.

• If you use MBE/WBE at certain percentages you get sales tax on construction material rebates.

• You get scaling tax abatement periods based on the degree of meeting affordability requirements.

These are just examples and someone with more knowledge of the process could better hammer down specific requirements.

Agree. As an outsider, it seems like having pre-defined rules and levels of incentives is a no brainer.
Your project does x and y? ok you're guaranteed $$

Understanding what exactly the rules are seems like it would remove one barrier to development.

I wish Ordinance 220701 hadn't stalled out

[taxi]

Exempt certified historic rehabs from most or all of those restrictions (WBE/MBE, prevailing wage, affordable housing). We need to do everything we can to save our historic structures and it's not very safe to count on MO state historic tax credits.

[FangKC]

We need to do something to speed up the renovation of empty buildings. Allowing them to sit unoccupied for years at a time rotting away only adds to the expense of returning them to use.

https://www.google.com/maps/@39.0688079 ... ?entry=ttu

https://www.google.com/maps/@39.0666316 ... ?entry=ttu

https://www.google.com/maps/@39.0681187 ... ?entry=ttu

There also needs to be a faster way to get some of the decommissioned schools converted to housing.

https://www.google.com/maps/@39.1117939 ... ?entry=ttu

[CrossroadsUrbanApts]

1) I like the idea of automatically exempting all historic renovations from affordable housing set aside. Which actually may be the case now, I'm not sure. But an automatic 100% for 20 years (or even 95% for 20 years) seems great. Exempting them from MBE/WBE would be great but could be a hard sell. But MBE/WBE needs to be recalibrated back to a much lower level.

2) Tying percentages of abatement to various goals is promising though I think it smart to keep it as simple as possible. There is no way to pre-determine what kinds of issues require what kind of subsidy. Better to just live with a broad brush approach.

3) Abatements will still require a blight study (state law), so there is still a minimum threshold to meet that should rule out greenfield. This needs to be targeted at infill only.

[Cratedigger]

There also needs to be a faster way to get some of the decommissioned schools converted to housing.

https://www.google.com/maps/@39.1117939 ... ?entry=ttu

I believe this requires a committed and realistic partner in KCPS

[FangKC]

KSPSD does seem to drag the process out for much too long.

[im2kull]

KSPSD does seem to drag the process out for much too long.

Correction: KC Tenants board member who's job is also to speak at city development meetings on behalf of KCPS drags out the process for too long. For obvious reasons.

[bspecht]

Introduced by O'Neill today, makes some changes to prevailing wage policy.
https://clerk.kcmo.gov/LegislationDetai ... FullText=1
https://www.diffchecker.com/l4WZVpNx/

[Metro]

Whatever happened to giving the power to mayor/city manager?

[Cratedigger]

Whatever happened to giving the power to mayor/city manager?

Ordinance 220701. It was continuously held off the agenda and stalled in NPD. Hasn't been an update in almost exactly a year. https://clerk.kcmo.gov/LegislationDetai ... s=&Search=

[CrossroadsUrbanApts]

Introduced by O'Neill today, makes some changes to prevailing wage policy.
https://clerk.kcmo.gov/LegislationDetai ... FullText=1
https://www.diffchecker.com/l4WZVpNx/

This is not unsurprising but still disappointing. There was always a weird loophole where prevailing wages only applied to very small projects seeking tax incentives. This would seem to apply to every tax-incentivized project greater than $1 million that doesn't also meet some other criterion (like an affordable housing set aside or being located in a very distressed census tract). This reads to me as consistent with the Council's de facto policy for the last 5 years to make incentives unusable except for non-profit developers or very large national/regional developers. To a small project, requiring prevailing wages (and affordable set-aside!) more than wipes out any value from the tax abatement. KCT and its council allies expand their successful effort to make incentives unusable by any but the largest developers.

I feel like even if I tried I couldn't write a city development incentive policy that is better targeted to large, well-connected developers and shuts out smaller players. Large concrete/steel projects can pay prevailing wages because those trades are largely unionized in any case. But small projects, typically built from wood, can't afford to pay the labor premium.

The only KCMO project I have broken ground on in the past three years was a 10-unit apartment project [because at 12 units the affordable set-aside kicks in!]. It has an LCRA incentive. Requiring prevailing wages for labor on this project would have definitely killed our budget.

OK, looks like I need to start scouting projects in NKC or NE Johnson County from here on out.

[im2kull]

Whatever happened to giving the power to mayor/city manager?

I REALLY wish we could get this put into effect. Wish.

[im2kull]

The only KCMO project I have broken ground on in the past three years was a 10-unit apartment project [because at 12 units the affordable set-aside kicks in!]. It has an LCRA incentive. Requiring prevailing wages for labor on this project would have definitely killed our budget.

This is the exact kind of story that everyone needs to know about. Perfect example of how things are going, and what got us here.