Tax Abatement: Too Little Too Soon?
![]() By Mark Forsythe The Kansas City Post How can you tell when your economic development policies are adequate? How much tax abatement is too much? How little is too little? Too little is easy to figure out. The development doesn't happen. The Planned Industrial Expansion Authority (PIEA) is one of those little known pseudo-governmental bodies that recommends tax abatements on a project by project basis. The maximum amount of "relief" they can recommend is 100% property tax abatement for 10 years and then 50% abatement for another 15 years. Usually this abatement is on the improved value, or increment as it is known. Consider you have a building appraised by the county at $100,000. You would continue to pay the property taxes on that $100,000 value regardless of what improvements you make. The development could end up being worth millions of dollars but the tax bill will still be assessed at the original $100,000 rate. Recently some big news was made as the PIEA actually denied a developer the standard maximum abatement. Developer Andrew Haden was given abated taxes on improvements at 2109 Broadway for 10 years. He had applied for the standard full 25 years but was denied on the basis that the Crossroads Arts District is now a desirable place to develop so it doesn't need as much incentive. Haden told the PIEA's board its decision "would put him at a disadvantage compared with other Crossroads condos that carry 25-year abatements." Really? Then why bother? Better to cut your losses now rather than pursue a poor project. So to my original question, do we know if we've given too little? I guess we haven't. "Haden will proceed with an $8.1 million conversion of the 95-year-old building he bought in 2005. Haden expects to deliver 34 units priced at $200,000 to $500,000 in early 2008." I don't know Mr. Haden, but if he's a shrewd businessman he's going to put a couple of bucks in his pocket at the end of the day. Had he really "needed" that extra 15 years at 50%, he would have had to have walked away from the deal. Nobody is going to start a project that loses money. But the development is going forward and we as a community know we saved ourselves 15 years of tax revenue. Of course this raises an even more pressing question. How many developments are out there right now receiving tax breaks they really don't need? |




























