ORDINANCE NO. 180982
Authorizing the City Manager to execute a development agreement with Power Tower Block 124, LP, and the Port Authority of Kansas City, Missouri, in relation to the construction of a Class A office tower and parking garage in the Power & Light District; estimating and appropriating the sum of $27,000,000.00 and declaring the City’s intent to reimburse itself for certain expenditures; authorizing the City Manager to take certain actions for purposes of implementing the objectives of this ordinance; consenting to the assignment of development rights; and recognizing this ordinance as having an accelerated effective date.
WHEREAS, there is increasing demand for new Class A office space in the Downtown Loop, to meet the needs of employers, particularly with respect to those wanting to be located in an urban environment with amenities that attract and retain a highly skilled and diverse workforce; and
WHEREAS, the attraction of new and expanding businesses to the Downtown Loop serves multiple public purposes in that it, among other things, allows the City to retain and/or attract high quality jobs, generate additional new tax revenues, and support its existing financial investments and commitments in the Power & Light District; and
WHEREAS, there has not been a substantial multi-tenant office building developed in the Downtown Loop in decades, and office vacancy rates are steadily decreasing as a result of the conversion of older office buildings in the Downtown Loop; and
WHEREAS, the City Council, in recognition of the ever-decreasing supply of available office space, has, since at least 2004, anticipated and committed to support the development of a new office tower in the Downtown Loop; and
WHEREAS, the City Council passed Ordinance No. 010154 on March 3, 2004, which accepted the recommendations of the Tax Increment Financing Commission of Kansas City, Missouri (the “TIF Commission”), as to the 1200 Main/South Loop Tax Increment Financing Plan (the “1200 Main/South Loop TIF Plan”), approved the 1200 Main/South Loop TIF Plan, designated a Redevelopment Area, and contemplated the completion of multiple Redevelopment Projects for the purposes of remediating blight, including a new office tower; and
WHEREAS, on October 11, 2004, (a) the City and HRB Tax Group, Inc., formerly known as H&R Block Services, Inc. (“HRB”), executed that certain Development Agreement dated October 11, 2004, as subsequently amended by that certain First Amendment to Development Agreement dated October 2, 2017 (collectively, the “HRB Development Agreement”) and (b) the City, as successor in interest to the TIF Commission, and HRB executed that certain Lease with Option, whereby HRB was granted an option to purchase Block 124, Unit 3 (the “Option”), which Developer has since timely exercised; and
WHEREAS, the HRB Development Agreement obligates the City to finance the construction of up to 1,333 parking spaces to service the Block 124 Office Tower and the 1200 Main/South Loop TIF Plan Redevelopment Projects, and acquire additional real estate on which to locate such parking spaces, at an estimated cost of $69,000,000.00; and
WHEREAS, Redevelopment Project 7 of the 1200 Main/South Loop TIF Plan calls for, in part, the new construction of approximately 250,000 to 350,000 square feet of office space (the “Block 124 Office Tower”) in the elevated condominium unit over the current retail space located generally on the southwest corner of 13th and Main (“Block 124, Unit 3”); and
WHEREAS, the City Council adopted Second Committee Substitute for Ordinance No. 040161, on February 20, 2014, and activated Redevelopment Project 7 of the 1200 Main/South Loop TIF Plan, so that the developer of Block 124, Unit 3 would be eligible to immediately receive the benefits of tax increment financing to implement Redevelopment Project 7; and
WHEREAS, since executing the HRB Development Agreement, the activation of Redevelopment Project 7, and in anticipation of the Block 124 Office Tower, the City and HRB have made significant financial investments in the Block 124 substructure, to provide structural support to the Block 124 Office Tower and a portion of the required parking garage; and
WHEREAS, HRB has expressed its intent to assign its development rights for the Block 124 Office Tower to Power Tower Block 124, LP or its affiliates (the “Developer”) in which HRB is a partner and the City is consenting to the assignment even though its consent may not be required; and
WHEREAS, the Developer’s proposal for the Block 124 Office Tower is to construct 250,000 square feet of office space; and
WHEREAS, the Developer’s proposal, if implemented, will reduce the City’s parking ratio obligation from 1,333 to 750 parking spaces, all of which parking will fit entirely within Block 124, Unit 3, and further reduce the City’s cost commitment for parking from $69,000,000.00 to approximately $36,000,000.00; and
WHEREAS, for the purposes of assisting the City in fulfilling its parking commitment to HRB, the City has requested that the Port Authority of Kansas City, Missouri (“PortKC”) establish an AIM Zone over Block 124, Unit 3, issue bonds pursuant to Chapter 68 of the Revised Missouri Statutes (“PortKC Bonds”) to finance the cost to construct the 750 space parking garage, and own the garage following the completion thereof, whereby fostering implementation of the 1200 Main/South Loop TIF Plan and the continued development in the Downtown Loop; and
WHEREAS, PortKC has communicated its interest in entering into the development agreement contemplated herein in order to generate and thereafter invest any and all revenue and proceeds PortKC is entitled to derive from the project into its large multimodal port facility which has been identified as a priority and catalytic project for the industrial redevelopment of 415 acres located along the Missouri River east of I-435 in Jackson and Clay Counties; and
WHEREAS, the State withholding taxes generated by the net new jobs to be located at the Block 124 Office Tower, when coupled with the net revenues anticipated to generate from the parking garage, are expected to satisfy 100% of the debt service requirements of the PortKC Bonds; and
WHEREAS, the Developer’s agreement to reduce the square footage of the Block 124 Office Tower and PortKC’s possible establishment of an AIM Zone thereon are expected to save the City from incurring new financial obligations for parking in the Downtown Loop, reduce additional City debt by $6,000,000.00, and position the City to benefit from new repayment sources for the garage that will greatly reduce the City’s long-term financial liabilities; and
WHEREAS, to encourage Port KC’s participation in and implementation of the foregoing, the City desires to guarantee the payment of all debt service payments which may be due and owing on the Port KC Bonds following the issuance thereof, along with all ancillary and administrative costs associated therewith, and those which result from creating and implementing the AIM Zone; and
WHEREAS, in furtherance of the substantial benefits to be realized by the City, the City estimates and desires to appropriate $27,000,000.00 and apply such funds (the “City Payment”) toward the cost of constructing the Block 124 Office Tower which is currently estimated to cost $94,000,000.00, provided that the development agreement authorized herein includes public participation provisions allocating an approximately twenty-eight percent (28%) share (based on the City paying $27,000,000.00 of the $94,000,000.00) or an adjusted pro rata share based on the percentage of the City payment to the total investment dollars, continuing up to and through any sale of the Block 124 Office Tower, so the City would potentially be entitled to recoup all of the City payment with interest; and
WHEREAS, the Real Property Tax Increment Allocation Redevelopment Act, Sections 99.800 to 99.865 of the Revised Statutes of Missouri, as amended, allows a developer to receive not more than twenty-three years of tax increment financing benefits for a project area; and
WHEREAS, due to the activation of Redevelopment Project 7 in 2014, time is of the essence for Developer to proceed to implement the Block 124 Office Tower project on Block 124, Unit 3, in order for the Developer to realize the limited, remaining benefits of the 1200 Main/South Loop TIF Plan; and
WHEREAS, without the City’s Payment and its execution of the development agreement contemplated herein, the Block 124 Office Tower will not be realized, to the detriment of the public interest, the 1200 Main/South Loop TIF Plan, and the long-term stability of the Downtown Loop; NOW, THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF KANSAS CITY:
Section 1. That the City Manager is hereby authorized to execute a development agreement with the Developer and PortKC for the purposes contemplated herein. Such agreement is approved in such form as is determined to be acceptable by the City Manager.
Section 2. That the City Manager is hereby authorized to execute one or more financing agreements with PortKC and such other parties as he determines to be appropriate, for the purposes of guaranteeing, in full, the repayment of the PortKC Bonds and payment of related PortKC costs, as contemplated herein. Such agreement is approved in such form as is determined to be acceptable by the City Manager.
Section 3. That the City Manager is authorized to execute, without further City Council approval, any additional agreements with the Developer and PortKC, and any and all amendments thereto, or amendments to existing agreements, as may be required in conjunction with the financing and construction of the Block 124 Office Tower and related parking garage, provided such agreements or amendments are not inconsistent with the purposes contemplated herein.
Section 4. That the revenue in the following account of Fund No. ____, the Series ______ Bond Fund, is hereby estimated in the following amount:
xx-xxxx-xxxxxx-xxxxxx Bond Proceeds $27,000,000.00
Section 5. That the sum of $27,000,000.00 is hereby appropriated from the Unappropriated Fund Balance of the Fund No. ____, the Series ______ Bond Fund to the following accounts:
xx-xxxx-xxxxxx-xxxxxx Block 124 Office Tower $27,000,000.00
Section 6. That the Director of City Planning and Development is designated as requisitioning authority for Account No. xx-xxxx-xxxxxx-xxxxxx.
Section 7. That the Director of Finance is hereby authorized to close project accounts upon project completion and return the unspent portion of the appropriation to the Fund Balance from which it came.
Section 8. That the City hereby declares its official intent to reimburse itself for certain expenditures made within sixty (60) days prior to or on and after the date of this ordinance with respect to the Block 124 Office Tower and related parking with the proceeds of bonds expected to be issued by the City. The maximum principal amount of bond proceeds expected to be issued for the Block 124 Office Tower and related parking is $30,500,000.00. This constitutes a declaration of official intent under Treasury Regulation Section 1.150-2.
Section 9. That the City hereby consents to any assignment of HRB’s development rights for the Block 124 Office Tower to the Developer, in which HRB is a partner, pursuant to Section 25 of the HRB Development Agreement.
Section 10. That this ordinance is recognized as an ordinance with an accelerated effective date as provided by Section 503(a)(3)© of the City Charter in that it appropriates money, and shall take effect in accordance with that section.
I hereby certify that there is a balance, otherwise unencumbered, to the credit of the appropriation to which the foregoing expenditure is to be charged, and a cash balance, otherwise unencumbered, in the treasury, to the credit of the fund from which payment is to be made, each sufficient to meet the obligation hereby incurred.
Randall J. Landes
Director of Finance
Approved as to form and legality:
Brian T. Rabineau
Assistant City Attorney