City Beat: Council ponders tax abatement for BKD project

Council considered a set of industrial development bonds for the project that would have Kansas City developer Opus Northwest build a 100,000-square-foot, four-story office building in the parking lot of University Plaza, where BKD would be the main tenant.

The $21.5 million in bonds would be issued under Chapter 100 of the Missouri Revised Statutes. While the city would own the property, Opus would buy the bonds and the city would have no actual liability, according to Mary Lilly Smith, the city’s economic development director.

“The city would take control of the property and the development and lease the property back to Opus, and … the property will be exempt from property taxes,” Smith told council. “Opus will be responsible for paying the principal and interest on those bonds.”

If approved, Opus would receive 100 percent property tax abatement on the land improvements for the first 10 years and 50 percent abatement for the next 15 years; the 50 percent would increase to 75 percent if the project achieves Leadership in Energy and Environmental Design Silver certification.

Even with the abatements, Smith said the property would generate $2.2 million in payments in lieu of taxes over 25 years with LEED Silver certification and $4.4 million without the certification. If the property were not developed, it would generate only $37,000 in property taxes during the same period.

Springfield citizen Fred Ellison objected to the tax exemption, noting that millions more in property taxes could benefit city schools and parks.

“Businesses should carry their own weight, not be supported by the taxpayers,” he said.

Several council members, however, disagreed. Councilman Doug Burlison said comparing the potential lost tax money to what could be collected if the project went forward without abatements was not realistic.

“Without those abatements, there is no building,” he said. “We’d be collecting property taxes on a parking lot at that point.”

Council is expected to vote on the proposal at its July 28 meeting.

Prime donation

Council also approved a $30,000 donation from trucking firm Prime Inc. to accelerate a street-widening project on Mayfair Avenue, the street that’s home to the company’s headquarters.

The project, which should be completed before fall, would widen the street to 26 feet from 20 feet, making it safer for Prime’s trucking traffic. A company representative said the street is especially treacherous in inclement weather.

Prime’s donation would cover about one-third of the $90,000 cost of the project; the remaining funds would come from Public Works’ road improvement budget.

While at least one citizen suggested donations such as Prime’s could lead to preferential treatment, Public Works Director Marc Thornsberry said the situation would be the same for anyone.

“Anybody, whether it would be Prime or any property owner that is willing to come to the city and say, ‘We think you have a problem with this roadway, but we’re willing to help you out to improve safety,’ we’re always going to look pretty hard at that,” Thornsberry said.

Canopy removal

Council accepted the bid of Billings-based Rensch Construction Inc. to remove the last canopy on Park Central Square.

Rensch’s bid came in at $45,000, less than half the next-lowest bid for the project. Canopy removal on the northeast corner of the square should begin around the end of July and finish by mid-September.

The decision to remove the canopy is part of what was originally Phase II of the square redesign, which includes streetscape and sidewalk improvements. The original Phase I, which included renovations of the central part of the square, was put on hold when it was determined that the square’s Lawrence Halprin design could qualify for historic designation.

The state Office of Historic Preservation has told the city that removing the canopy – also part of the Halprin plan – would not have an adverse effect on the square’s potential historic status.

What is Chapter 100?

Section 100 of the Missouri Revised Statutes allows cities to build certain types of projects with bond proceeds and sell the projects to private companies. Because the city, and not the company, owns the property, it is exempt from property taxes. In most cases, the company makes payment in lieu of taxes for a portion of the lost tax revenue.

Springfield has participated in projects previously using the state’s Chapter 353 urban redevelopment corporation program, but the BKD/Opus project would be the first time the city uses Chapter 100 bonds to offer tax abatement to a private developer.

The most common type of bonds issued through Chapter 100 are industrial revenue bonds, which do not require a public vote because they don’t have the general credit of the city as a guarantee.

Other municipalities to use the Chapter 100 program include Kansas City, Farmington and O’Fallon.

Source: Missouri Department of Economic Development