Last month, we asked our readers what issues they wanted to hear the candidates running for local office address ahead of the August primary. Based on the (ample) input we received, we developed a five-item questionnaire for candidates running for city council in Shawnee.
Today, we begin publishing the candidates’ responses. The first question was as follows:
In recent years, developers have become increasingly likely to seek public finance incentives like tax increment financing and community improvement district sales taxes to pay for parts of their private projects. What’s your stance on the use of such incentives? When, if ever, is it appropriate to commit public finances to private real estate projects?
City Council Ward 3 (four year term)
Bringing new businesses to Western Shawnee is a top priority for me, and I am willing to entertain reasonable incentives in order to make it happen. We should not give away the farm at tax-payers’ expense, but reasonable incentives are necessary to bring developers to the table. This would be appropriate if the size and scope of the commitment on behalf of the developer would significantly improve our Shawnee community. Specifically, we need to bring corporations to Western Shawnee; we need to build out the available retail plots around Walmart and we need to revive the area around the old Price Chopper West of K-7.
There is a long list of incentives that our city can utilize to encourage new businesses to be part of the Shawnee community. Many incentives are for blighted areas or areas that would not thrive without any incentives. “But For” is a phrase used to test whether the area would develop at the same rate without the incentive. The process for selecting business incentives should be clear and objective. The project should be mutually beneficial and have historical data to prove that it will deliver jobs and growth to our community. The development should to be held accountable and clearly demonstrate how many jobs are added or revenue is brought into the city. Also, the project should to be completed on time and on budget within a small variance or receive penalties. Finally, we should continue to be transparent on showing who has received any incentives and if the development has delivered as originally promised.
First off, I think that taking anything off the table entirely is foolish. Traditionally TIF has been used to get a project started when it would not have otherwise been feasible or undesirable. The problem comes when an area would have already been developed and the TIF does not benefit the city but is just a break for the developer. So we need to be careful with providing these incentives to make sure they are actually needed in the situation and then also build in certain provisions to make sure that the city’s interests are protected.
Additionally, when it comes to incentivizing development, we need to look at what other factors entice a company to want to move to Shawnee. Quality of life, availability to housing for employees, access to restaurants, and other things like this are also major factors in attracting businesses. I think we need to make sure we are providing as much as we can in this area as well as just offering up money.
City Council Ward 3 (two year term)
Developers now understand that cities will provide incentives for them to move their company, jobs, and real estate developments into the city’s boundaries. This is now becoming standard negotiating tools of developers. Shawnee needs to understand that it must be competitive in what it will offer to incite developers and companies to move to Shawnee. The Shawnee government’s first objective should always do what is best for the city of Shawnee. Any initial incentives that Shawnee is willing to provide to developers or companies must ultimately be a benefit to the city of Shawnee in the long run.
Lisa Larson-Bunnell (incumbent)
In some circumstances, tax incentives are appropriate to attract and maintain businesses. However, they carry the potential for abuse. Each type of tax incentive carries its own risks and benefits. There are several factors that should be considered before approving any tax incentive. First, the nature of the project and whether it will provide jobs, goods or services that are unmet needs in the area. Second, the city must determine whether the nature of the project is such that the city will derive enough benefit to offset the cost of city services (e.g., public safety, waste water, etc.) being provided to the business(es). The benefits could be through additional taxes received, or things like infrastructure improvements. Third, as much as possible, the city and city council should use data from other markets to predict what the development will look like at the end of the incentive period. We are fortunate that we have similar markets in the KC metro area that have taught us which types of incentivized projects are the most likely to thrive after 15 or 20 years, and which are most likely to require additional incentives to keep the development going.
I would be more judicious than cities in Johnson County have been in recent years. Incentives have a place, but they need to be targeted and used in appropriate situations, such as developing on difficult terrain or in an area that is truly blighted and/or where there is a legitimate government interest in providing the incentive. They should not be used for every project or development that comes asking. If a typical project is not sustainable without an incentive, or the project doesn’t have the full backing of the people surrounding it, we need to really be careful about propping it up via a governmental mechanism that ends up picking winners and losers and/or raising taxes on our citizens.
City Council Ward 4
When a proposed development provides a benefit to our community, then incentives warrant consideration. That does not mean that every new development should ultimately receive public funding, but if the proposal will fill a need that is currently unmet in Shawnee, will bring in good-paying jobs, or the particular land being developed presents unique challenges, then we should take steps to attract those businesses. It’s important to understand that the city is not losing money by offering incentives, but rather sharing the increased revenue that wouldn’t exist without the development. If Shawnee is reluctant to growth, we will struggle to attract good, reputable developers, and residents will spend money in neighboring cities, in many instances where those incentives were offered. Expanding our commercial tax base will preserve our financial well-being, help keep residential property taxes low, and offer more diverse options and amenities for residents.
These economic incentives, amongst others, are tools that can enable specific growth and improvements. They are designed to be available when an opportunity is mutually beneficial to our city and the developer.
Unfortunately, they are often misused. They should not be used to simply attract any developer who wants to build, expand, or renovate in our city. They should be reserved for unique criteria wherein the city and citizens have more to gain from the incentive relationship than they have to lose. The right kind of developers/developments that we should reserve economic incentives for could offer:
- A significant number of skilled, full-time employment opportunities that could not otherwise come to Shawnee.
- Improvements to a blighted (but not necessarily undeveloped) area; these improvements should have measurable qualities that would decrease crime and improve aesthetic appeal.
- Penalties or Recourse (claw back provisions) if the developer or tenant cannot sustain the commitments made to obtain the incentive.
Undisciplined use of these incentives would introduce a government position of picking winners and losers in the local market. These behaviors suppress organic growth and introduce the risk of lost tax revenues for the city and/or added tax burdens on the citizens.
One of my main goals as council member is to help create a vision for where Shawnee wants to go over the next 5, 10, 15 years, and then work hard to attract commercial growth which aligns with that vision. I do view options such as tax increment financing (TIF) and community improvement district sale taxes (CID) as tools in part of a broader toolkit to attract business and would be open to using them in certain situations.
It’s important to understand that these tools are not public financing. This is because they are based off of collecting revenue that will never exist without the project. Consider the case of an undeveloped piece of land generating $10,000/year in property tax. If there was a development project proposed which aligned with the city’s vision and would increase the value of the land to be worth $1,000,000/year in property tax, then it would be worth considering leveraging a TIF or CID structure if it helps this desirable project occur. The city is not giving up any revenue or money, it is saying the developer can keep a % of new tax revenue generated if they build the project, where currently nothing exists. The city at no point can lose money, as it will still collect its $10,000 a year, plus increased sales taxes and other revenue that is added to the local economy with more jobs and spending. Additionally the rebate to the developer would of course be capped at a certain number of years and dollar amount, so that over time the benefit to the city from the project will only increase.
However, I would be very diligent about the use of these programs. They may not be appropriate for projects which will also put a much higher demand on city services, as in this case the city would have to increase spending on services without the accompanying revenue to match in the short term. Additionally, projects which are not aligned with our vision for the future I would consider out of scope. As I said to start, these options are tools in a city’s toolkit, and the city needs to use the right tool for the right job.