Katz on Main

[earthling]

IThe streetcar itself is the incentive.

The streetcar is a transportation amenity for public benefit. It is funded by a value capture mechanism that assumed zero growth.

It's only an incentive if you consider other infrastructure an incentive, like streets, sidewalks, and gutters.

That's fair and understand why you'd clarify but the streetcar is a unique service that doesn't exist elsewhere in the metro, streets/sewers/etc do. It's a free fare horizontal elevator ride to many amenities/entertainment, huge benefit to developers and long term investment of the property. Pretty good chance the value of projects will be higher in the long run along streetcar vs. similar project not (even after factoring higher property tax). In that context, the streetcar is the incentive in that it should boost value of their investment in the long term at a higher % than say the value of the 39th/State Line project going in.

Piling on more incentives because the presence of streetcar is increasing land value is an awful precedent to set. Let the market play out in context to what has been laid down. But developers also shouldn't be buying up what locals consider historical worthy and then hold it hostage for incentives. This developer really does have good intentions and have shown that from the start. But at this point they are also milking what they can given they now have the support from historical orgs.

[flyingember]

Sure, the streetcar should be an input that makes a difference, but one should always ignore that the streetcar exists, it's all just numbers.

The above post shows a lack of understanding of economics while trying to make an economic argument.

KC KC posted some number
https://twitter.com/kckansascity/status ... 44135?s=20

Take any given location and you have to put all the inputs in. This parcel isn't next to a park but it is near an entertainment district. You could argue the presence of a streetcar stop is a positive and negative. Drunk people outside your front door all hours of the night isn't inviting for many so it could keep rent down and make the project more of a risk for the owners.


I don't care what the project is worthy of as a building. It's not about one project, if $30 million in incentives could raise dozens of surrounding properties by 10% that's a lot of taxes coming in without new incentives for them. This one project may receive incentives, but the snowball effect on the environment should be far larger to be worthy of receiving them. That's what matters, the network of money moving around the neighborhood.

It's 200 residents, but that also could be 200 new urban core jobs for them and producing ~20 new jobs for others as well.

Imagine the value to the city from needing new retail spaces to serve 200 people, and then the retail driving demand for more residential in turn.

The school district doesn't lose money, the Hancock Amendment requires them to lower their levy rate as taxable value goes up. What they do lose is the ability to lower the rate for SFH property owners and have a new apartment building owner pay more.

[DaveKCMO]

BTW, my only defense of the Katz deal is historic preservation.

[CrossroadsUrbanApts]

Tax abatements continue to be misunderstood, in my opinion. The developer does not receive any cash from a tax abatement. No city money is re-directed to a development project from something else. No taxing district loses a single dollar. A tax abatement deal actually increases the tax revenue flowing to the city and school district on Day 1, in part because there is generally a significant PILOT (this particularly applies in the case of this Katz project, where current property taxes are zero). Yes, there is a difference between the property taxes paid for 10-15 years and "full market taxes". This allows the developer to benefit from (1) a degree of certainty over what taxes will be paid in the early years of the project - i.e., less subject to the illogical whims of the Jackson County assessor's office - and (2) increased cash flows in those early years to get to market-levels of expected returns to investors.

Tax abatements are a no-brainer win-win to me. Who is hurt? Not the taxing districts who see increased taxes right away. I agree that if a development project can't "stand on its own" and pay full taxes after 10-15 years, then it is a badly managed project. But what's the harm in waiting 10-15 years before full taxes kick in? It is a poor feature of how taxes are assessed and collected in this country that if a developer takes a chance on improving vacant land or severely underperforming buildings, their reward is a massive increase in taxes owed. (A land value tax would be way better, but good luck overhauling the tax system to put one in place). Also, Dave made a good point that the tax abatements don't even apply to the streetcar assessment.

[flyingember]

(A land value tax would be way better, but good luck overhauling the tax system to put one in place). Also, Dave made a good point that the tax abatements don't even apply to the streetcar assessment.

For clarity, we have a land value tax in place today. Our assessment system isn't wrong, it's based on land use, not surrounding property use.
It enables the county to assess a parking lot differently from a highrise.

I've posted this before but you're talking about a multiplier method so a parking lot surrounded by 8 story buildings pays some minimum of the average assessed value of surrounding properties. A proxy for zoning as a source of parcel value.

A land tax would work within the appeals system, like being able to show it's a steep slope and has different characteristics. It would encourage more formal designations to reduce value of empty land, like voluntary conservation easements so it could be a method to encourage more green land uses

[CrossroadsUrbanApts]

I mean more that taxes on land are too low and taxes on improvements are too high. Low land taxes allow delinquent owners/landlords to let their parcels sit way underutilized for far too long. Taxes on land should go up so owners need to do something with their property to create value to pay those taxes. Taxes on improvements themselves should then be reduced commensurately.

[earthling]

Tax abatements continue to be misunderstood, in my opinion. The developer does not receive any cash from a tax abatement. No city money is re-directed to a development project from something else. No taxing district loses a single dollar. A tax abatement deal actually increases the tax revenue flowing to the city and school district on Day 1, in part because there is generally a significant PILOT (this particularly applies in the case of this Katz project, where current property taxes are zero). Yes, there is a difference between the property taxes paid for 10-15 years and "full market taxes". This allows the developer to benefit from (1) a degree of certainty over what taxes will be paid in the early years of the project - i.e., less subject to the illogical whims of the Jackson County assessor's office - and (2) increased cash flows in those early years to get to market-levels of expected returns to investors.

Tax abatements are a no-brainer win-win to me. Who is hurt? Not the taxing districts who see increased taxes right away. I agree that if a development project can't "stand on its own" and pay full taxes after 10-15 years, then it is a badly managed project. But what's the harm in waiting 10-15 years before full taxes kick in? It is a poor feature of how taxes are assessed and collected in this country that if a developer takes a chance on improving vacant land or severely underperforming buildings, their reward is a massive increase in taxes owed. (A land value tax would be way better, but good luck overhauling the tax system to put one in place). Also, Dave made a good point that the tax abatements don't even apply to the streetcar assessment.

^They are of great use to kickstart areas that have been struggling or provide direct public benefit but not appropriate for every project that asks for it because construction costs are going up. The streetcar is the kickstart incentive for the area in a roundabout way. The developer should have had historical aspect as part of project budget before making a jump. Is reasonable to receive any existing historical tax credits at appropriate level. I like everything about this developer and they have good intentions but it's pretty clear they are milking this because costs are going up, not because they have unexpected historical issues.

[herrfrank]

Ad valorem taxes are supposed to derive from the fair market value of a property. A parking lot downtown would have a higher market value than an identical parking lot in Dodson. However, a good part of market value has to do with the use of the property. The Plaza gets top rents for its retail spaces along, say, Nichols Road. The same square footage at The Landing along Troost does not. The property taxes reflect this.

I think property taxes are one of the most "progressive" (meaning non-regressive) taxes in the US. Changes to the property taxation system might have unanticipated consequences, probably negative.

[flyingember]

I mean more that taxes on land are too low and taxes on improvements are too high. Low land taxes allow delinquent owners/landlords to let their parcels sit way underutilized for far too long. Taxes on land should go up so owners need to do something with their property to create value to pay those taxes. Taxes on improvements themselves should then be reduced commensurately.

Everything you wrote here goes against the fundamentals of capitalism.

A property owner doesn't need to pay taxes from the economic output of a specific piece of land. They can use existing capital or economic output from elsewhere. Land can be a form of stored value utilized to serve as collatoral. So taxes shouldn't force uses or assume a best possible use of their property.

So a land tax shouldn't be touched but maybe something more akin to a one time special assessment equal to 10% the value of the final structure(s). But backwards from your idea.

The city has zoning standards. If you're a developer you should pay more to build a neighborhood at or below the average density level of the surrounding area.

So if a developer sees the average of the area is one home per 0.1 acres, if they build smaller homes on smaller lots they don't pay the fee. Or if they put an apartment complex in too they can bring their average down and still build on big lots. Or they can build row homes. Or any number of ideas to increase density and thus taxable value. The same idea would apply downtown but with units per acre.

Incentives should work the same way where you get incentives for building 200 units per acre in a neighborhood where the average is 50 per but not vice versa

A 10% increase in housing would go a long way to helping with affordability by creating a glut on the market.

You have a carrot and stick. Build small and pay more. Build big and get handouts.

[shinatoo]

I think the problem comes from the only tool the county has for assessment is recent sales of similar properties. What should probably be done is an assessment of areas rather than individual lots. That would lessen the impact of improving your property, which we want, and increase the cost on unimproved lots, with the thought being that you would have to improve your property to cover the tax rate.

[beautyfromashes]

It's only an incentive if you consider other infrastructure an incentive, like streets, sidewalks, and gutters.

If it was an incentive like any other incentive it wouldn't be funded in the way that it is. It shouldn't be seen differently and should be funded in a way similar to all other transportation, but in this city it's still seen as 'other'.

[CrossroadsUrbanApts]

I mean more that taxes on land are too low and taxes on improvements are too high. Low land taxes allow delinquent owners/landlords to let their parcels sit way underutilized for far too long. Taxes on land should go up so owners need to do something with their property to create value to pay those taxes. Taxes on improvements themselves should then be reduced commensurately.

Everything you wrote here goes against the fundamentals of capitalism.

A property owner doesn't need to pay taxes from the economic output of a specific piece of land. They can use existing capital or economic output from elsewhere. Land can be a form of stored value utilized to serve as collatoral. So taxes shouldn't force uses or assume a best possible use of their property.

So a land tax shouldn't be touched but maybe something more akin to a one time special assessment equal to 10% the value of the final structure(s). But backwards from your idea.

The city has zoning standards. If you're a developer you should pay more to build a neighborhood at or below the average density level of the surrounding area.

So if a developer sees the average of the area is one home per 0.1 acres, if they build smaller homes on smaller lots they don't pay the fee. Or if they put an apartment complex in too they can bring their average down and still build on big lots. Or they can build row homes. Or any number of ideas to increase density and thus taxable value. The same idea would apply downtown but with units per acre.

Incentives should work the same way where you get incentives for building 200 units per acre in a neighborhood where the average is 50 per but not vice versa

A 10% increase in housing would go a long way to helping with affordability by creating a glut on the market.

You have a carrot and stick. Build small and pay more. Build big and get handouts.

I guess I don't follow how anything I said goes against the fundamentals of capitalism, whatever that means. My point is that land taxation is inherently less distortionary because it cannot be created or destroyed. Taxation is all about incentives, so I don't agree that taxes shouldn't force uses. Their point is to incentivize productive use for the community.

Back on the topic of tax abatements, I do understand the popular distaste arising from a perception that developers of large multi-family projects just use the tax abatement to provide fancier pools or amenity areas for their high-income tenants. Hard to get around that one. But generally pools and amenity areas are just a tiny portion of an overall project budget. The bigger costs are structured parking, remediation of bad or unstable soils, demolition of older buildings (or conversely, preservation of older buildings like Katz), and ever more costly building and fire code standards.

In my ideal world, tax abatements would be freely available and subject to only administrative approval for projects below a certain size. Call it 100 units. Anything below that is presumed to lack enough economy of scale to be buildable without incentives. Above that threshold, incentives are subject to discretionary approval like they are today. Sure, you might get a bunch of buildings that are 95-100 units, but that seems like a positive outcome not a bad one.

[herrfrank]

Taxation is all about incentives, so I don't agree that taxes shouldn't force uses. Their point is to incentivize productive use for the community.

Taxation used to incent outcomes (or nudging as Cass Sunstein calls it) is a relatively new function, and not a primary nor historic function.

The primary and historic reason for taxation was to match governing revenue to governing expenses, mostly by use. Moreover, taxation was frequently adjusted so that (for example) spending on roads was closely matched to income from road tolls, etc. When things get out of balance (US liquor levy revenue by 1900 as a percentage of total general revenue) a new form of taxation that spreads the burden more evenly is often developed (US income taxation -- see also the LCTU for rationale).

The modern idea to tax in order to encourage or discourage some behavior or outcome is not universally accepted -- and I suspect a lot of tax professionals would consider it only a marginal rationale. Taxes for civic services (fire, schools, police), are therefore derived from property taxes; highways from gasoline taxes; SSA pensions from wage taxes; military and federal functions from individual income taxes.

[Chris Stritzel]

Project on very shaky ground now. Council meeting didn't make it seem like a good path this is taking.

[normalthings]

Developer asked for 10 years at 75% with a re-evaluation for a potential 5 years at 50% extension (or less). Incentives would have solely gone towards renovating the Katz (and would have covered just a portion of that renovation cost).

Amendment to add minority retail requirement, public parking, and affordable housing was introduced. 7-6 vote on that.

O'Neill continue the "lie" that the streetcar is an incentive the city is paying for to support downtown. IMHO its a basic infrastructure investment not unlike the ones we have prioritized over the past 70 years in the suburbs. Its a basic investment that only downtown and the federal government is paying for at that.

Developer said that they can not save Katz and move forward with the project. Shields said to go ahead no instead of approving something that doesn't work.

Ordinance lost 13-0

[beautyfromashes]

O'Neill continue the "lie" that the streetcar is an incentive the city is paying for to support downtown. IMHO its a basic infrastructure investment not unlike the ones we have prioritized over the past 70 years in the suburbs. Its a basic investment that only downtown, Midtown and the federal government is paying for at that.

Totally agree. FYT anyway.

[beautyfromashes]

But money for Northland soccer....

[Chris Stritzel]

One point made by Shields tonight is that the developer said it would cost them $4 million more to preserve and renovate Katz than to demo and build 60 more apartments there that bring in another $1.5 million a year for them. They (Lux) made an effort to save Katz and now it appears that effort is coming to an end.

The point was also made that if this went back to committee, or restarted the process, that the sale contract for Katz to Lux would fall through.

So one of two things will happen now, either Lux walks away, putting Katz in danger again, or they restart the process and attempt to extend the sale contract. From there, either they could propose demolishing Katz for that extra $1.5 million a year or repropose the same plan that we've all seen.

[Chris Stritzel]

Project confirmed dead by developer. Will not resubmit

[Anthony_Hugo98]

I hate the council now. It’s official.