Kansas City firm wants millions in tax breaks to move a mile into new, $83M offices
Kansas City may award millions in incentives to help a local insurance company relocate blocks away into a new $83.4 million office tower.
Fidelity Security Life Insurance is seeking tax breaks on an office building it plans to build at 2700 Grand Boulevard, near the Liberty Memorial and the Federal Reserve Bank of Kansas City. It proposes an eight-story office building set atop a five-floor garage that will house 400 parking spots.
The insurance firm is currently headquartered less than a mile away at 3130 Broadway Boulevard.
During a City Council committee meeting on Wednesday, several residents of nearby Union Hill opposed the project, saying it’s an ill fit for one of the most desirable development sites in the city. The plot of land sits steps away from the extension of the Kansas City Streetcar, which is expected to spark new development up and down the line.
Jim Edson, a 20-year resident of Union Hill, described the proposal as a suburban-style development aimed for the heart of the city.
“I would expect to see this kind of design proposed in Corporate Woods,” he said, referring to the sprawling office park in Overland Park.
Neighbors also questioned why a profitable company long rooted in Kansas City would need public support for building new offices. Fidelity Security is seeking a 15-year property tax abatement that would cut taxes in the first decade by 70%, and by 30% for the following five years. That’s estimated to be worth $7.5 million.
The company is also seeking a sales tax exemption on construction materials and $3 million from the Missouri Works program, which is aimed at encouraging business expansion and retention.
Representatives from Kansas City Public Schools and the Kansas City Public Library opposed the property tax abatement, which will deprive those agencies and other taxing jurisdictions of potential revenue for 15 years.
School officials noted that the length of the incentive exceeds what would be available to a firm coming into Kansas City from across the state line. As part of the economic development border war ceasefire in 2020, Kansas City agreed to limit tax abatements to 10 years for Kansas companies hopping the border to match the incentives available under Kansas law.
An independent financial analysis said incentives were needed to make the project financially viable. But it also showed the company could achieve similar returns on its investment with just a 10-year abatement.
“This ask is yet another example of a developer asking for whatever they want,” said Kathleen Pointer with the school system, “for more than they need and asking the public to pay for it. This has to stop.”
Councilman Lee Barnes Jr. , 5th district at-large, said incentives were appropriate because the city could otherwise risk losing an employer that’s been here for over 50 years.
“And, if we look at companies that are looking to move because they’ve outgrown their current facilities or what have you, they always have the opportunity, particularly if they’re building a new building, they could build it anywhere else,” he said.
Asked after the meeting whether Fidelity Security Life Insurance had threatened to leave Kansas City, Barnes said no.
“But you know it’s always in the back of our minds,” he said, citing the 2017 relocation of Dairy Farmers of America from Kansas City to Wyandotte County.
Fidelity Security has pledged to retain 300 jobs in Kansas City with an average salary of $82,500. The company made more than $30 million in profits last year, according to an income statement posted on its website.
The amount of parking included in the building has been a major point of contention.
The financial analysis completed by S.B. Friedman says the $16.7 million parking costs account for 20% of the total cost of the project. And parking was identified as one of the primary reasons why the project needs incentives.
Kansas City has adopted a transit-oriented development policy aimed at promoting dense, compact developments that have a mix of uses and feature pedestrian access.
The city also created a special plan for the Main Street corridor. It calls for specific “transit nodes,” centered around rapid transit stops. Those areas, including the 2700 Grand site, are supposed to feature compact development that will increase ridership and support existing transportation investments like the streetcar.
Neighbors and school leaders have pushed for some sort of a shared parking arrangement to take advantage of thousands of parking spots already built at nearby Crown Center.
Barnes found that request unpersuasive. He said the building will still need parking, whether it’s on the streetcar line or not.
“When you have people coming in from Overland Park, Independence, Lee’s Summit, they won’t be on public transportation,” he said. “So you have to provide the employees somewhere to park.”
The Council’s Neighborhood Planning and Development committee approved the request Wednesday. It’s expected to be heard by the full Council next week.
Fidelity Security is seeking incentive approval before moving ahead with design specifics. Usually, projects will present design plans and incentive requests in tandem, Barnes said.
That allows the city influence over how a project ultimately looks. Neighbors worry that once the company receives its tax breaks, it will be even less responsive to their concerns. So far, the company has only displayed conceptual designs of the office project.
“This incentive should not be approved until we have a development plan that’s further along,” said resident Tom Marincel. “This to me seems like we’re putting the cart before the horse by giving out these incentives without knowing more details on what the project is going to be.”
The debate echoes many of the concerns raised during the planning stages for a new tower for Overland Park financial services firm Waddell & Reed. Developers received millions in incentives to help build the $140 million tower at 14th Street and Baltimore Avenue.
But the under-construction tower has no tenant now that Waddell & Reed was acquired by an Australian firm, which announced it would not move workers downtown.
Neighbors objected to many of the design elements for the Waddell & Reed project. They said it was far too car-centric with 1,000 parking spots and had no integration with the neighborhood because of a lack of ground-level retail.
Even city staffers raised concerns about the design, but the developer insisted it couldn’t make significant design changes because of Waddell & Reed’s specific needs for the building. And by that time, the Council had already approved a major incentive package for the project.
Development attorney Dave Frantze, who is representing the insurance company, noted that the company had agreed to hold off on receiving any of the incentives until it had received final design approval from the city.
Frantze argued the new offices will provide a wider benefit to the city by increasing commercial rents.
“This will build a market beyond what currently exists in the city,” he said.
Frantze made the same argument when pushing for incentives for Waddell & Reed’s new tower.
Frantze told the council that the the Midtown project would fetch rents of $45 per square foot, higher than any other building in the city.
But most of the new building won’t be rented. Fidelity Security Life Insurance is funding the construction of its building and will own it. The company plans to occupy 100,000 square feet of the building, leasing the remaining 53,810 square feet.
Frantze said the insurance firm would not move forward with the project unless it receives the requested incentives.
“The challenge here,” he said, “is unless we have incentives we don’t have a financially viable project.”