The Kansas City, Missouri city council will take up a familiar issue in the coming weeks: How much revenue should be devoted to economic development endeavors? KCMO Mayor Sly James has proposed a limit on the amount of property tax available to subsidize development in the city. His proposal, under consideration but not yet approved by the council, would cap the amount of property tax available for use as a subsidy at 50 percent of the total property value for any given project.
Property tax abatements and tax increment financing are commonly employed subsidies in the Kansas City area. The Tax Increment Financing Commission and the Planned Industrial Expansion Authority both retain the power to approve subsidies that capture up to 100 percent of the total property tax value of a project. Other taxing jurisdictions that rely on property taxes to fund public services – school districts, counties, and fire districts are shorted revenue by these diversions.
If approved, Mayor James’ proposal would cap these subsidies by prohibiting the KCMO city council from approving any deals made by the economic development entities in which more than 50 percent of the property tax is diverted from public coffers. The Mayor’s reform proposal comes just a year after the City Council approved one of the largest tax increment financing deals in history for Cerner Corp., which stands to receive a $1.6 billion subsidy for the expansion of its corporate campus in South Kansas City.
Wasteful, inequitable subsidy awards are a predictable result when tax revenues are spent by special economic development authorities before even making it to state and local general funds. Mayor James’ proposed cap is a good first step to ensure that at least some of the public’s money is reserved for public purposes.