Karbank Blog

What is the worst economic development policy ever?  Perhaps it is the one that incentivizes tax-paying businesses to move off the tax rolls, permanently.  Regrettably, that is the current policy of the City of Kansas City, MO (“KCMO”).  

This Karbank letter to Kansas City's Mayor James explains the corrosive impact of the City’s “tax-abatement-forever” policy.  In summary, the policy drives down private property values, decreases the tax base, deprives resources from the school districts, libraries and essential civic services, and drives away tax-paying development.  

This is not rocket science, it is Economics 101.

When bureaucrats don’t understand how the private sector economy works, bad policy is made.  By the time the policy is overturned, and inevitably it will be if rationality is indeed a hallmark of the human species, the question is how bad the damage will be to the City’s economy and image.

An article from yesterday's Kansas City Star doesn’t adequately explain the consequences of the policy.  However, the last sentence of that article is enormously telling about how KCMO City Council’s hyper-sensitivity to development in rival Johnson County, Kansas has led to KCMO’s monumentally misguided “tax-abatement-forever” policy.  The City Councilman is quoted as saying: “…I don’t mind competing unfairly with Johnson County [Kansas]”.  Astonishingly, he doesn’t seem to realize that the City is also competing unfairly with the dutiful taxpayers of KCMO…using the taxpayer’s money to do so.

The reality is that KCMO suffers all the collateral damage from the tax-abatement-forever policy; it accelerates development in Johnson County, as it is no longer desirable to develop in KCMO.  Investors and developers will work where their efforts and capital are, to put it broadly, respected.  Right now in KCMO, they are not.  

This is not rocket science, it is Psychology 101.

Kansas City’s leaders need to go back to school to take Economics 101 and Psychology 101.

Steven Karbank

A client of our company was looking for a piece of land on which to build a building.  After a windshield tour of various sites, the client decided to walk one of the sites a few days later.  While doing so he was terrified when he came across some bones that appeared to be human.  Deeply concerned, he photographed the bones and emailed copies of the photos to the police.  The police investigated and determined that the bones were---[insert scary organ chords from a Vincent Price horror movie]---probably from a small deer or a coyote.  Nevertheless, in any real estate deal, it’s better to do more due diligence than less.