July 16, 2015

From The Kansas City Business Journal

By Rob Roberts

 The City Council on Thursday voted 11-2 to approve The Kansas City Star’s request for a 15-year extension of a property tax abatement for its downtown printing plant.

Council members Jermaine Reed and Cokethea Hill cast the no votes.

The item came to the council with a 4-0 committee recommendation for passage on the previous Thursday, but Councilman Russ Johnson moved to delay action for a week.

Johnson said the delay would allow time to pursue an agreement whereby The Star would allow some public use of its parking facilities to help alleviate a public parking shortage in the Crossroads Arts District. However, there was no mention of parking in the abatement ordinance approved Thursday.

The ordinance, which was tweaked after last week’s meeting, extends for 15 years the 10-year Chapter 353 abatement The Star sought and was granted in 2002 for the plant, which opened in 2006.

The extension calls for a 100 percent abatement, but The Star will make annual payments in lieu of taxes totaling $303,538 a year to the taxing jurisdictions that are forgoing revenue as a result of the abatement.

Before it was amended, the ordinance called for annual payments of $337,000, including the PILOTs, to the taxing jurisdictions, plus any special assessments on the plant property. The Star pays an assessment for being located in the transportation development district helping to finance the city’s new downtown streetcar line.

That assessment, currently about $33,000 a year, is based on a Jackson County agreement to lower its valuation of the printing plant’s market value from $42 million to $22 million for two years.

Because the county probably will raise that valuation, which would raise the amount of the special assessment, city officials amended the abatement ordinance to require The Star to continue paying $303,538 a year to the taxing jurisdictions. That will prevent a reduction in the PILOTs from offsetting an increase in special assessments.

The original 10-year abatement had limited The Star’s annual property tax payments for the printing plant property to $79,000, said Roxsen Koch, a Polsinelli PC attorney representing the newspaper. But with the abatement winding down last year, she said, The Star discovered that the amount would leap to $1.3 million this year based on the county’s valuation of the plant at $42 million.

The two-year agreement The Star was subsequently able to work out with the county assessor’s office requires the newspaper to pay $700,000 in property taxes on the plant this year and next based on the $22 million valuation.

But The Star sought further savings, plus protection from future valuation increases, by asking the Chapter 353 Advisory Board to advance the 100 percent abatement extension plus the $337,000 in annual payments.

Koch said the $337,000 amount was what The Star would pay, without any abatement, based on a $10.6 million valuation recently placed on the printing plant by its consultant, BKD LLP.

According to the amended ordinance passed Thursday, the $303,538 PILOT amount will be raised to an amount based on a $14.5 million valuation if The Star vacates the printing plant during the next 15 years.

The ordinance was approved despite a recommendation for denial by the Chapter 353 Advisory Board.

Michael Duffy, chairman of the Chapter 353 Advisory Board, made the June 24 recommendation to deny the request for two reasons. For one, he said, Chapter 353 abatements are intended to spur blight-removing redevelopment, “not as a bailout provision for a troubled business.” Second, he said, The Star’s request appears to be “an end run around an adverse county determination of fair market valuation.”

The council’s Planning, Zoning and Economic Development Committee subsequently recommended approval, with some members saying The Star made a mistake in not asking for the full 25-year abatement to begin with.

Councilman John Sharp, a member of the PZED Committee, added that “the real thrust of 353 is eliminating blight — and not temporarily just to see it come back.”

That could happen, he said, if the printing plant’s property tax bill forces the plant to close, leaving vacant a building that would be hard to retrofit for another use.

View the article here.