Kansas City schools superintendent warns against KCATA giving development incentives

Outgoing Kansas City Public Schools Superintendent Mark Bedell issued a stark warning about the future of local development in a Wednesday letter to civic leaders and elected officials.

Specifically, Bedell raised concerns about the Kansas City Area Transportation Authority’s foray into economic development projects. That agency, which does not fall under control of city leadership, allows developers to shop around for tax incentives and is not subject to recent incentive reform measures, Bedell said.

“Let me be clear: Adding another agency, especially one that operates as covertly as the RideKC Development Corporation has, will halt any progress the City and the School District have made and will likely squash any hope our region has for more equitable development practices,” the superintendent wrote. “Financial decisions are moral decisions.”

Bedell’s letter was sent to elected and appointed city leaders, transit agency leaders and board members and U.S. Rep. Emanuel Cleaver. Officials with KCATA could not immediately be reached for comment.

Last year, the transit agency announced plans to leverage its unique bi-state position to influence economic development across the Kansas City region. Now, it offers tax abatements directly to developers playing a similar role as the agencies under the umbrella of the Economic Development Corporation of Kansas City.

But Bedell noted that the KCATA, along with the Port Authority of Kansas City, does not rely on third-party financial analyses of proposed incentive projects like other city agencies require. And like the Port Authority, KCATA has recently limited opportunities for public comment at board meetings.

Kansas City Public Schools, along with other taxing jurisdictions like the Kansas City Public Library, frequently weighs in on development projects. That’s because incentive agencies offer tax breaks that can reduce future potential property tax revenues for schools, libraries and other services.

The transit agency says its START incentive program can help develop or redevelop areas near existing and proposed transportation corridors.

But Bedell cited “red flags” about the new program, including a lack of communication and openness from the KCATA about projects that will affect school funding. And he noted that its development deals have so far benefited projects in wealthier parts of the metro like downtown and the River Market.

“This Agency has become the way to circumvent appropriate process and they appear poised to ignore incentive reform recommendations, including caps on longer-deeper incentives,” Bedell wrote.

“So much has been done in darkness when it comes to the creation of the START program that the list of questions is long. Most importantly, though, why add another development agency to the landscape other than to cash in on the practice of ‘incentive shopping’?”

KCATA and development

The seven-county KCATA was created in the 1960s as a result of a bi-state “compact” approved by state legislatures in Kansas and Missouri and ratified by Congress. While its position is unique, president and CEO Robbie Makinen has said the KCATA has never fully utilized its potential.

“The KCATA had over the years become a very good bus company,” he said last June. “What it needs to be is a transit authority.”

Makinen has long planned for the transit agency to do more than run buses.

Several years ago, KCATA launched Ride KC Development Corporation, a separate nonprofit overseen by the KCATA squarely focused on economic development.

Last year, lawyers told transit leaders that they were empowered to issue bond financing, which allows KCATA to take title of land from developers, award property and sales tax abatements and enter into lease-back agreements with developers. That’s similar to how agencies like the Port Authority offer incentives to developers.

In recent years, Kansas City has sought to tighten incentives for development projects. The City Council in 2019 capped the amount of property tax abatements for most developments. And last year, the city implemented new rules that require developers to include a certain amount of affordable housing in new housing projects that receive tax subsidies.

But those rules don’t necessarily apply to agencies like the KCATA or the Port Authority.

Still, City Hall has influence over the Port Authority as the mayor appoints all board members.

The KCATA is another story: It has ten board members – five from Kansas and five from Missouri. Of the Missouri members, Kansas City’s mayor appoints three.

As the agency is working with developers, it has come under scrutiny for not fulfilling its core mission.

Bus route cuts made early on in the pandemic have still not been fully restored, leaving many passengers to battle long waits and infrequent service.

Kansas City Mayor Quinton Lucas has publicly criticized the bus service.

“KCATA is not delivering services at the level we would expect right now,” he told The Star last month. “...Kansas City has put in too much money year after year to have substandard services.”

The transit agency’s budget of about $105 million is funded by local, state and federal dollars.

KCPS pushes back

After six years at the helm, Bedell last month announced he would resign to take the top leadership post at a Maryland school system.

The superintendent notably condemned a 2020 proposal to shower tax breaks on BlueScope Construction, after the firm flirted with leaving its West Bottoms headquarters for a site in Kansas. The company had already benefited from a 20-year, 100-percent property tax break, but sought 13 more years of tax breaks.

“I am exhausted with the development community pitting the City against the public entities that are doing the work of trying to give our students and their families access to the world they deserve,” Bedell wrote in a scathing letter to the City Council. “This is systemic racism.”

He accused the city of frequently offering incentives that harm Kansas City Public Schools while sparing districts in the Northland where white students are the majority.

The day after Bedell’s letter was publicized, the City Council voted down an incentive request for the company.

Economic development incentives cost students of Kansas City Public Schools three times as much as students in other local school systems, according to a 2020 city analysis.

Between May 2018 and April 2019, property tax abatements cost school systems in Kansas City a total of $46.7 million, according to a city analysis of disclosure documents.

Of that total, Kansas City Public Schools lost out on $28.8 million in potential revenue — more than $2,000 per student. That was well above the $650 average for all school districts within Kansas City limits. Over the same time period, tax abatements in Hickman Mills deprived each student of $651 in revenue. In North Kansas City, that figure was $379.

Bedell underscored that disparity in his letter on Wednesday.

“Economic development is an equity issue that we cannot hide from as a City, not when suburban communities around us aren’t diverting money from their schools at the same amount per pupil,” the superintendent wrote.

“We cannot continue to pay for development in this way and at this rate — with a significant amount of money that could otherwise go to the education of Kansas City’s Black and Latino students.”