Posted on April 28, 2021 at 9:00 a.m.
Above picture credits: photo illustration. (Courtesy of | The Beacon)
Of the 226 school districts in Missouri, Kansas City students suffered the highest loss of income from city-approved developer tax breaks, a new study shows.
In fiscal 2019, Kansas City Public Schools lost $ 21 million in potential funding from development projects, according to Good Jobs First, a national political group focused on accountability in economic development.
The most recent data collected by KCPS shows that the district lost even more revenue in fiscal 2020: $ 38 million.
“It affects the district as a whole,” said KCPS Superintendent Mark Bedell. “As a 100% free or discounted school district for lunch, every penny matters to us.”
Here’s how it happens: In Kansas City, development projects – from a new office building to a new apartment complex like One Light Apartments downtown – can get tax breaks from the local government.
Tax breaks, also known as discounts, can take the form of the city, which waives property taxes for years. And a construction project that can be worth hundreds of thousands or even millions of dollars will incur property taxes over time.
For example, in 2018, the Downtown Three Light Apartments were approved for a 100% property tax reduction for 25 years – meaning the Kansas City Public Schools and other municipal services that rely on those property taxes for 25 years of that Would miss out on revenue. According to an article by Kansas City Star, the developer would have paid $ 12.5 million without these tax breaks.
For cities like Kansas City, offering tax incentives is one way of attracting developers. The idea is that the money not raised through taxes will instead be generated through the income and jobs that accompany the project.
The problem is, property taxes for local school districts are the largest source of income for public education, according to Good Jobs First.
In Missouri, local property taxes make up 37% of public school revenues, the study found. For the Kansas City Public Schools, local property taxes account for approximately 68% of the district’s total revenue, according to the 2020 fiscal year financial report.
And the impact is being painfully felt: Less funding for schools in Kansas City is impacting school renovations, teacher salaries, and services for over 15,000 children.
For Bedell, this also means a continuation of the historic divestment into the poorest neighborhoods of Kansas City – a form of systemic damage.
“Kansas City can only be great when the least-served and the least-represented sit at the table and participate in the decisions that affect the city as a whole,” he said.
Tax breaks are particularly damaging to Missouri
Good Jobs First collected data from about a fifth of the public school districts in the United States, which resulted in reportable tax breaks. The researchers found that gross sales for fiscal 2019 were $ 2.88 billion. The total corresponds to an increase of 13% compared to the information from 2017.
The millions given tax incentives to developers is a national problem – but it’s one that is a particular problem in Missouri.
Missouri developers can apply for and receive incentives through a number of programs, including Chapter 99, Chapter 100 Industrial Development Bonds, Chapter 353, Extended Corporate Zones, and the Tax Increment Financing Commission (TIF).
Good Jobs First found that tax breaks approved under these programs resulted in net revenue of $ 130 million in Missouri in fiscal year 2019. This made Missouri the seventh-largest loss state in the study’s results. That’s a loss of $ 148 per student.
According to a KCPS analysis, revenue from the district and public charter schools increased 60% from 2017 to 2020.
It’s not that KCPS is an anti-economic development, Bedell said. The main problem with using tax incentives in Kansas City, according to Bedell, is that the development projects that receive cuts are focused on already affluent parts of the city, such as the Plaza, Midtown, and downtown Kansas City.
But the city has not shown a similar reinvestment in communities east of Troost Avenue that have historically suffered from city redlining and divestment, Bedell said.
“These are usually the poorest zip codes we have in this city. They usually don’t benefit from a tool that should really benefit these communities more, if you look at it from an equity perspective,” he said.
In a statement to The Beacon, T’risa McCord, interim president and CEO of the Kansas City Economic Development Corporation, said the organization recognizes the impact of tax incentives on businesses such as the Kansas City school districts.
“We work regularly to foster collaboration between tax jurisdictions and the development community,” said McCord. “And try to create only the incentives necessary to move development forward and ensure we protect the revenue of the jurisdictions involved.”
Tax breaks are “systemic racism” for KCPS
In a letter that Bedell wrote to the city council last summer before voting on a $ 14 million incentive project, Bedell described tax breaks and the use of incentives as a form of systemic racism.
As the Good Jobs First study shows, it is the school districts with higher poverty rates and more black and color students who suffer the highest losses.
Kansas City Public Schools – where 57% of students are black, 28% Spanish, and all students qualify for a free or discounted lunch – lost $ 1,925 per student in fiscal 2019 due to tax breaks.
“These are poor color students who are being deprived of resources,” said Linwood Tauheed, professor of economics at the University of Missouri-Kansas City.
According to Bedell, Kansas City’s use of tax breaks adds to this cycle of systemic racism, in which prosperous areas become wealthier and neighborhoods closed due to historically racist practices remain closed.
It creates conditions that do not allow people in these parts of the city to build generational wealth or escape the cycle of poverty, Bedell said.
A persistent lack of investment in neighborhoods east of Troost also continues the mobility problems that KCPS sees in the families it serves.
“As a district you never have stability,” he said. “You can never get out of this hole because children are only recycled in relation to where they live, from house to house to house.”
Tauheed reiterated that education is essential to a neighborhood’s development. In other words, a strong public school district is the key, and even the foundation, to fuel economic development, especially in economically disadvantaged communities.
“Investing in education is investing in economic development,” said Tauheed. “If you don’t invest in education, you are not investing in economic development, which affects communities in need. There is no development east of Troost. “
Kansas City is slowly working on reform
The city council discussed the reform of the incentives last year and recently passed an ordinance reducing the percentage and duration of cuts offered.
That was a start, said Bedell. But it didn’t contain everything the district wanted, and progress is still slow.
“We’re a bit closer to where we want to be, even though we feel like we’re still far from where we need to be.”
The city is currently reviewing its AdvanceKC scorecard, a metric to determine if a development project meets a list of criteria before receiving incentives. A KCPS employee is on the steering committee to review this scorecard.
Overall, KCPS wants a seat at the table to have a say on incentives and development projects before they’re approved, and the ability to enable or disable incentive deals.
As a 100% free or discounted school district for lunch, every penny matters to us.
MARK BEDELL, SUPERINTENDENT FOR PUBLIC SCHOOLS IN KANSAS CITY
Other states have mechanisms that give school districts a say in the use of incentives. Across the border in Kansas, school districts must sign development plans with tax increase funding.
In Ohio, TIF projects that receive 75% of the cuts over a 10 year period require school district approval. School districts in Utah can decide how long and how much to participate in a TIF project. In Minnesota, two out of three tax jurisdictions, including school districts, are required to approve incentive plans that last longer than 15 years.
In August 2019, KCPS sent a letter to the city council with recommendations for reforming tax incentives. Reforms include improving public transparency about the use of incentives, and developing standards of performance and accountability.
Good Jobs First also recommends protecting local school district taxes from some or all of the tax breaks.
For Bedell, the bigger goal is to give the green light to more projects in the neighborhoods where KCPS students live.
“I don’t think our school district would have significant problems approving projects and reducing projects if we knew there was going to be a return within the community.”
Celisa Calacal is a contributor to business and civic engagement for The Beacon, an online news agency based in Kansas City that focuses on local, in-depth journalism for the public good.
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