The Unified Government’s Economic Development and Finance Committee voted 5-2 on Monday, Nov. 2, to have the UG staff resume negotiations with Eastside Innovation on Midtown Station, a proposed $1.1 billion development at the former Indian Springs Mall site. The motion leaves open one for negotiation of the main sticking points, the tax increment financing (TIF).

The recommendation goes to the full commission, possibly Thursday, Nov. 12. The committee also endorsed a sales tax exemption for 31 townhomes off Leavenworth Road, heard that $1.8 million in federal home repair money for storm victims has drawn almost no applications, and tabled a plan to turn community benefits money into storm relief grants.

Consultant: UG’s terms fall short of financing goal

The committee voted in June to end talks with Eastside Innovation. That decision was stayed, and the developer agreed to pay for an independent feasibility study, Interim County Administrator Alan Howze said. PGAV Planners, a St. Louis-based development consulting firm, presented the results Monday.

The project has changed since the state drew its STAR bond district for the Chiefs, leaving STAR bonds off the table. The revised plan keeps 2,117 homes, but would cut the number of income-restricted units reserved for lower-income renters to 697, down from 828 in the original plan. It also cuts about 107,000 square feet of commercial and attraction space and more than 40 percent of the parking. The total cost rose from $1.057 billion to $1.145 billion.

Cristen Hardin, a senior project manager with PGAV, said the original plan would not have met the state’s STAR bond test. The firm estimated 18 percent of visitors would come from more than 100 miles away, short of the 30 percent standard, also though 38 percent would come from outside Kansas, due to visitors from the Missouri side of the KC metro.

Andy Struckhoff, PGAV’s president, said a project starts to look feasible at a 7 percent return, but the developer has set an 8.5 percent goal to line up financing. The developer’s request, 100 percent property tax TIF on phase one, 95 percent on later residential phases, 90 percent on commercial, and 75 percent of local sales tax, would yield about 8.58 percent return. The UG’s 75 percent position would yield about 8.32 percent, short of that goal. Under the UG’s terms, local taxing districts would receive about $146 million while $207 million went to the project. Under the developer’s terms, they would receive about $90 million while $264 million went to the project.

Developer pitches walkable neighborhood

Erik Murray of Eastside Innovation and Jonathan Arnold of Arnold Development Group, the developer of Second and Delaware in KCMO, described a dense, walkable district with a central green, a grocery store, a 167-room hotel, and an innovation center. Murray said the developer has asked the UG for no new cash. Arnold said phase one alone would bring the UG about $15 million in its first 10 years and, over time, more than repay the roughly $24 million the UG has already spent on the site.

Murray said the developer has agreed to pay the land’s appraised value of about $6 million in five equal installments, one per phase, a change from its previously proposed graduated payment schedule. Todd LaSala, an attorney with Stinson who represents the UG, said that matched what the UG asked for in June.

Shelley Kneuvean, the UG’s chief financial officer, said other deal points, including the payment schedule for each phase, are still open.

“You’re not necessarily saying yes to the project because there’s other terms that still need to be negotiated,” Kneuvean said.

Answering a question from Mayor Christal Watson, LaSala said staff made no formal recommendation, although Kneuvean added that the 75 percent figure has long been seen as the staff position, and LaSala agreed.

During the public comment period, KCK resident Corey Hall urged the committee to move on a project in the northeast. “There is so much out west and there is basically nothing down here for us,” he said.

Greg Kindle, president of the Wyandotte Economic Development Council provided a note of caution. He said the site’s opportunity zone status signals that the market alone hasn’t delivered a solution there, and he also warned that the deal is not a clear-cut one. “The margins are thin, the returns are modest,” Kindle said.

Doubts over batteries and the capital stack

The project includes a large battery storage component that depends on a buyer for the power. Asked by Commissioner Bill Burns (District 2), Murray said the team last spoke with the BPU about a year ago about purchasing the power.

Commissioner Melissa Bynum (At-Large District 1), the committee chair, said she likes the project, especially the first phase, with its housing, grocery, and retail. Going beyond the usual TIF policy is “not giving me heartburn specifically,” she said.

Commissioner Andrew Davis (District 8) later returned to the batteries.

“BPU is not aware and right now is not interested in this battery storage site,” Davis said. “That’s what we have been told kind of behind closed doors.”

Arnold said the batteries could sell power on the regional grid if the BPU passes. PGAV said it had not modeled the project without a BPU contract.

Burns asked whether the developer has investors in hand. Arnold said investors commit when a project offers the right return, and Murray said capital waits until a project is ready to move. “We do now need the confidence from the market that comes from the approval and the development agreement,” Murray said.

Commissioner Carlos Pacheco (District 5) asked what the UG risks if the financing falls apart. LaSala said the property would sit tied up while the developer tried. “It’s an opportunity cost, I would say,” he said.

Vote leaves TIF open

Commissioner Jermaine Howard (District 1), who toured Second and Delaware, moved to resume negotiations.

“It is one thing to talk about a project. It’s one thing to conceptualize about it, but it’s one thing to actually go out and actually see it,” Howard said.

The motion directs staff to negotiate a development agreement covering all five phases, with payments, timelines, and benchmarks. Howard and Bynum agreed that the TIF level should be explored in negotiations rather than set by the committee.

LaSala noted that the gap between the two TIF positions amounts to about $11 million, or roughly a 0.2 percentage point difference in the developer’s return. “With great respect, you’d kill a project of this magnitude over $11 million,” Murray answered.

During the discussion, Pacheco said he would support the motion despite some concerns. “I don’t represent the Unified Government Wyandotte County. I represent the people of Wyandotte County,” he said. “I do have my doubts about this capital stack.”

Davis said two years of negotiating had not settled the TIF question, and the committee should settle it now. He said he favored holding to 75 percent.

“Moving forward to me doesn’t sound like go back and negotiate,” Davis said.

Bynum then seconded. Pacheco added that he thought a deal below 100 percent TIF was possible.

Howard, Bynum, Pacheco, Commissioner Chuck Stites (District 7), and BPU Board Member David Haley voted yes. Burns and Davis voted no.

Committee backs sales tax break for Crystal Ridge townhomes

The committee voted 7-0 to recommend a resolution of intent to issue up to $8.5 million in industrial revenue bonds for Crystal Ridge, a 31-unit rental townhome project at the northeast corner of Leavenworth Road and I-435. The bonds would only exempt construction materials from sales tax. There would be no property tax abatement.

The lots, on a steep slope above a lake, have sat vacant since 2003, said Gavri Schreiber, an attorney for Prieb Homes. Preparing each one costs $65 thousand to $80 thousand, compared with $40 thousand for a typical lot.

Jud Knapp, interim economic development director, said the $7.4 million project would raise the annual property tax on the site from about $3,300 to about $78 thousand, with about $33 thousand going to the UG. The UG would give up at most $68 thousand to $143 thousand in sales tax, which it would recover in about two to four years.

Kindle called the request “a no-brainer.” Pacheco moved to approve, and Davis seconded.

Few apply for $1.8 million in storm repair money

Kay Sharp, interim director of community development, said her division has about $1.8 million in federal HOME and CDBG funds to repair homes damaged in the Aug. 18 and 19 storm. About $824 thousand in HOME money is available now, and the CDBG money should be ready around Dec. 3.

Her office took 40 applications to Village Initiative two days after the storm and has received one back, plus two direct phone calls. Agreements with Build WyCo and Habitat for Humanity, which were to help with repairs, remain unsigned.

“We’re sitting on a lot of money, but not a lot of applications,” Sharp said.

Because there was no federal disaster declaration, applicants must meet the normal income and ownership rules, Sharp said. The aid is a grant structured as a 24-month forgivable loan, and homeowners owe nothing if they stay in the home that long.

Davis asked for a bilingual flyer and a marketing push. He said residents have been left unsure where to turn.

“We have to own that, right?” Davis said. He added that the UG needs to “get ahead of the communication and lead the activity as opposed to playing catch-up.”

Bynum noted that the UG had published the state’s long-term recovery number and asked whether residents should now call community development instead. Sharp said she didn’t know the recovery effort was being set up until it was in place, and she called that a failure on her part. “All anybody needs to do is just pick up the phone and call community development,” she said. The number is 913-573-5100.

Davis later asked for an update in April. Tamara Arredondo of Eastside Opportunity Ventures, who works with the long-term recovery group, said it has more than 100 open cases and a little more than $150 thousand in identified home repairs, with more homes awaiting assessment.

Howze said the federal money is “not designed as storm repair money,” and the recovery group pools several funding sources. Sharp disagreed on speed. “HUD money in something like this is the fastest money,” she said.

Committee tables storm relief grants

UG attorney Jeff Conway presented an ordinance change and resolution that would let the UG use community benefits money for storm relief grants of up to $2,500 per household. In September, the committee held back about $283 thousand of this year’s community benefits money while commissioners discussed using it for storm relief.

With $1.8 million in federal money available, Bynum suggested the balance might instead repair the entrance of the Beatrice L. Lee Community Center, whose upper level is closed. The repair would cost $175 thousand to $250 thousand. “I’m feeling rather passionate about fixing Beatrice Lee, frankly,” she said.

Davis said residents should use the federal money first, since unspent HUD funds can mean smaller allocations later. The advisory board had recommended the parks money for a playground at Klamm Park and sports courts at Welborn Park.

Haley said community benefits money should not prop up UG departments. “I do want to see community benefits monies go to specific purposes and not necessarily to fueling departments that are already inside of the UG,” he said.

Stephanie Pujol-Burch, a member of the advisory board, said many storm victims lack computers, documents, or insurance. “Doing a podcast or marketing something like this is not going to get to these people,” she said.

Eva Garcia Meza of KCK said Parks and Recreation already has other funding sources. She said unused storm repair money points to a bottleneck, and an admission of fault alone is “simply not acceptable because these issues fall directly on people’s livelihoods.”

The committee voted 7-0 to table the item to Nov. 30, when Parks and Recreation is to discuss the advisory board’s recommendations and the Beatrice Lee repair.