A proposal to revamp the Country Club Plaza is one step closer to reality after the Port Authority of Kansas City took the first of three votes for an estimated $149 million property tax incentive over the next 30 years.

Gillon Property Group, a Dallas-based developer, is overseeing the renovation of the struggling shopping center long considered a “crown jewel” of Kansas City.

That redevelopment will include 1.7 million square feet of commercial space, 824 residential units and 150 hotel rooms.

But in order to afford the project, Gillon argues, the company needs a discount on their property taxes.

The Port KC Board of Commissioners voted to support bonds to finance that deal, giving Gillon a property tax break worth roughly $149 million over the next two decades.

It’s not a done deal yet. Bond inducement is the first of three steps that the board has to take before the tax incentive is finalized. 

The next two votes will be a “bond authorization,” followed by a “bond issuance.” The City Council will not get a vote on the tax incentive.

Smaller proposed tax break

When the Port KC deal first went public in December, it caused an uproar from taxing jurisdictions like Kansas City Public Schools and the Jackson County Community Mental Health Fund.

That’s because Gillon’s initial request was more than twice as big.

Under the first proposal, Gillon would have gotten a break on $309 million in property taxes with what would have effectively been a reduced property tax bill until 2054.

“This proposal represents a betrayal of our community’s commitment to our schools,” KCPS Superintendent Jennifer Collier told the Port KC board on Dec. 22. “The proposal is a loss for our teachers, our students and our residential taxpayers.”

That would have redirected $188 million that would otherwise have gone to the school district over those 30 years.

Even some members of the Port KC board, including City Councilmember Wes Rogers, started to back off of the deal. Rogers has since stepped down from the Port KC board.

“We have to do something to make sure the Plaza’s future is as bright as its past,” Rogers said. “We cannot do that in such a way that it hurts KCPS. And in fact, we can’t do that in a way that even keeps KCPS where it is now. This deal needs to be something that both improves the Plaza and puts money into the kids who go to public schools.”

So Gillon and Port KC went back to the drawing board.

They negotiated for months, and Monday’s vote is the outcome of those negotiations.

This is not a $1.5 billion giveaway

Monday’s vote also includes a big number: $1.49 billion.

That’s the total amount of money in conduit bonds that Port KC is voting to issue.

Conduit bonds are slightly different from government-backed bonds because a private organization like a developer or a nonprofit is responsible for the debt, even if it’s using the bonding authority of an agency like Port KC.

But Port KC CEO Jon Stephens took a few minutes during the meeting to emphasize that taxpayers are not going to be on the hook to guarantee repayment of that money. Repayment of that $1.49 billion debt belongs to Gillon, not taxpayers.

That’s a key distinction between the Plaza deal and the Royals stadium deal that the Kansas City Council approved last week. For the Crown Center ballpark, the city is guaranteeing repayment of $600 million of debt. The city is responsible for any shortfall in revenue, making it effectively a $600 million subsidy.

But in this case, Gillon is on the hook for any shortfall in its $1.49 billion in debt. 

“The $1.49 billion number mentioned,” Stephens said, “is the capacity and the general expectation of how much private investment the Gillon Group will be making in the Plaza in the coming years.”

Dustin Bullard, vice president of partnerships and place with Gillon Property Group, told the Port KC board during the meeting that he was eager to get started on the project.

“Everybody didn’t get what they wanted, including us, and that’s OK,” Bullard said. “We think we’ve landed here on a great deal. We are beyond excited to continue to reimagine Country Club Plaza.”

Collier of the school district issued a statement ahead of the vote that while the new proposal is not what she wanted it to be, she appreciates the engagement.

But she also warned the public that Kansas City leaders continue to “mortgage” children’s futures with less and less public oversight.

“In Kansas City, we are increasingly giving out bigger tax breaks that impact school budgets for longer, and are approving them with less transparency and oversight,” Collier said in her statement. “We appreciate being brought to the table, but we should not have had to fight so hard for a seat or work so tirelessly once we got one.”