Divided Overland Park council votes to grant exception to city policy, give 100 percent of TIF proceeds to Metcalf 108 developer

Jay Senter - December 5, 2017 11:05 am
Plans call for the developer to sell a portion of the property for the construction of a new 123-room hotel.
Plans call for the developer to sell a portion of the property for the construction of a new 123-room hotel.

By Roxie Hammill

A policy limiting the amount of money developers can collect from tax incentives was put aside Monday night by a divided Overland Park City Council to allow the Metcalf 108 office and hotel project to move forward.

After an hour and a half of discussion that was testy at times, the council voted 7-5 in favor of an exception to a policy limiting the developers to 90 percent of the expected increase in property or sales tax revenue due to the project. “Yes” voters said they did not want to lose a highly visible project bringing office space to the city’s gateway. The “no” voters were concerned about the message the vote will send to other developers.

“You’re on very thin ice here,” said council member Terry Goodman. “And if you approve this there will be absolutely no reason why someone else won’t come in and ask for 100 percent.”

Council members Dan Stock and Curt Skoog, who voted for the redevelopment plan, said the project is too much needed to walk away from.

“We’re losing touch with what we’re really trying to do as a city, and that’s to build a Class-A office building in an important corridor,” he said.

Metcalf 108 is a redevelopment of the northeast corner of Interstate 435 and Metcalf Avenue that has been in the works for more than a year. The 435 Overland Park Place Hotel, which has already been bulldozed, would be replaced with a six-story office building containing a first-floor restaurant, and a four-and-a-half story parking structure. The developer, Metcalf 108 Redevelopment Investors LLC, also intends to sell part of the property for a new 123-room hotel.

The vote was the first major test of a tax increment financing policy written about two years ago. The financing method has become increasingly popular among cities to encourage development, but some residents have questioned whether cities are giving up too much potential revenue.

Developers did not start out asking for 100 percent of the TIF. The original plan was to conform to the city’s 90 percent limit. That would have given the developer $16.3 million to work with.

But this summer the Kansas Legislature passed a law that exempts tax money for schools’ capital expenses. That law reduced the revenue available to developers to $14.8 million, said Curt Petersen, lawyer representing the developers. Raising the percentage to 100 percent brings the amount back up to the original, he said.

At the same time, the costs of construction have been going up. Petersen said an increase in the cost of building the parking garage has also made the budget tighter.

Goodman and Petersen got into a testy exchange over the parking garage, with Goodman saying increased percentage seemed opportunistic. He questioned whether the city should be asked to pay for increased costs of the parking garage when developers should have made a better contingency plan. “When does it stop?” he asked.

Petersen said the amount being paid for the garage from tax incentives has not changed. “I feel like in your voice you’re suggesting we’ve changed our position. We have not changed our position.” Although the percentage has gone up, the amount asked has not changed from the original, he said.

Council members Dave White and Faris Farassati also agreed that the developers should have planned for unexpected increases in the cost, instead of coming back to the city.

“I don’t think our function is to be a shock absorber for every single thing that happens to your plan,” said Farassati.

But others said the city shouldn’t forget the bigger picture of a gateway development that includes much-sought-after Class A office space. Skoog said the project is a good match for Vision Metcalf, a planning guide that favors density and walkability over single-story buildings and sprawl. If this project is replaced with a less-dense one, it could affect development in the corridor for years to come, he said.

In the end, council members Jim Kite, Farassati, Dave White, Goodman and Terry Happer Scheier voted against the agreement.

The project isn’t a completely done deal yet, however. The council still has to consider a project plan, which will need nine votes to pass.

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