Olathe city officials expect to consider next month the nature of the city’s financial support for the new Kansas City Chiefs headquarters.
Exactly what form that support will take is not yet clear, but the assumption is that the Chiefs will ask for the city to provide incentives that would direct new tax collections from the area of the headquarters building to help pay for it.
That’s in line with the approach taken by the state government, which is pledging the growth in state sales tax revenue collections. The state’s package is referred to as a “STAR bond” deal, an acronym for “sales tax and revenue.” The state’s deal, announced earlier this month, involves building a new stadium near the Legends in Wyandotte County and a practice facility/headquarters building near College and Ridgeview in Olathe.
According to the state’s deal, the city council would need to opt in to “pledge all local incremental general sales tax within the STAR bond project area to the project” for it to move forward. That deal also included a 60-day deadline for local governments like Olathe to act. Authorities expect the issue to reach the City Council agenda Feb. 3 or Feb. 17.
A map of preliminary STAR Bond districts attached to the Kansas City Chiefs Kansas deal.
Courtesy of Kansas legislature
This pledge would be confined to a district, although the size of the district hasn’t been confirmed — typically, STAR bonds would apply to new businesses, although a preliminary map shows a massive zone spanning much of Olathe and Wyandotte County. And the reference to “incremental” in the language of the deal, means that only the growth in sales tax collections would be subject to the agreement. Existing sales tax collections would not be affected.
The current sales tax rates in Olathe include 6.5 percent for the state, 1.5 percent for the city and 1.475 for the county. So, for every $10 spent in the STAR bond area, 80 cents could go to the Chiefs HQ with city and state approval.
Outside of the STAR bond incentives, the Chiefs or other new businesses may ask for more incentives to help fund other uses on-site. Sources close to the deal say the Chiefs HQ, practice facility and a variety of mixed-uses will go on a piece of ground at Ridgeview Road and College Boulevard in northwest Olathe. That is south of the Garmin Olathe Soccer Complex.
The STAR bond deal indicates entertainment venues, retail, restaurants, hotels, apartments, parks and medical facilities are all on the table to be built alongside the Chiefs’ development. These uses can apply for a variety of incentives, all of which play into the state’s theme of not charging citizens extra taxes to aid development. But it is not yet clear which of these tools the project will be asking for.
Tax increment financing “allows a developer to be reimbursed for a portion of their redevelopment costs out of the incremental increase in certain property and sales taxes generated by a redevelopment project,” according to the city.
TIFs are common in Olathe for large commercial uses — some existing TIF zones are at Olathe Gateway, including Bass Pro, Heritage Crossing at the Olathe DMV and the Hilton Garden Inn hotel on Strang Line. The upcoming amusement park/hockey rink by Bass Pro will have a TIF zone.
To qualify for a TIF, a site must be blighted or designated a conservation area, which can mean agricultural land. The possible site of the Chiefs’ HQ is currently agricultural.
Kansas TIF money can only go toward demolition of structures, road and utility construction or land acquisition — it can’t go toward private building construction.
COMMUNITY IMPROVEMENT DISTRICTS
Often rolled up with TIF zones are community improvement districts (CIDs).
CIDs allow developers to add a special two percent sales tax at businesses within a zone to cover construction or land acquisition. The tax lasts for about 20 years to help reimburse developers for those costs.
Existing CIDs are at several new Downtown Olathe restaurants and at the upcoming amusement park/hockey rink by Bass Pro.
Industrial revenue bonds are a commonly requested incentive in Olathe. They allow the city to exempt businesses from sales taxes on construction materials, or exempt businesses from property taxes for a period of time, usually 10 years.
Certain businesses can get up to 100 percent property tax abatements, but based on the office-space and HQ nature of the Chiefs’ development, city code indicates the team could get 50 percent.
They would also receive special consideration by the city council, since the project is a business headquarters and will spur ancillary development.
Certain businesses that may go in the full mixed-use development, like apartments or hotels, would be excluded from IRBs.