Patrick Tuohey

Kansas City leaders want to point to downtown as a great monument to government planning. Look at the revitalization, they say. But given the high cost of the investment and the low return in jobs and businesses, taxpayers should be wary of this so-called success.

We've written recently on the premise underlying the investment of downtown and found it lacking. The very notion that those sought-after millennials are moving to urban areas is contested. That they are doing so in Kansas City in any fashion worthy of public cost is demonstrably false. That the city is seeing any financial benefit to the development is likewise risible.

Even the Kansas City Star, which has championed the profligate spending downtown, had to report on the failure:
Nick Benjamin of Cordish, executive director of the Power & Light District, thinks the debt shouldn’t overshadow all the positives, and in other ways the city’s investment has more than paid for itself.

“The point of Power & Light and the city’s investment wasn’t solely for Power & Light,” he said. “It was to revitalize downtown. It’s hard to argue that’s not happening.”

It's happening? Certainly, the city has paid for very expensive buildings that weren't there before, but what about this "revitalization"? We wondered if there was any way to justify the expenditures for the Power & Light District based on the number of entertainment venues or jobs or the tax revenue they generated. Given that the city is on the hook for $15 million each year to cover business losses, any increase would have to be substantial. Unfortunately, there appears to be no growth in any of our measures.

According to the city's Comprehensive Annual Financial Report (CAFR), tax revenue from hotels and restaurants grew 16.56 percent, from 2006 to 2014. According to the inflation calculator at the Federal Reserve Bank of Minneapolis, inflation for that same period was 17 percent—meaning revenue growth from Kansas City hotel and restaurant tax was exactly flat.

In response to a Sunshine Request to the Regulated Industries Division in Kansas City, we learned that from 2007 to 2014 the number of businesses possessing licenses to sell liquor dropped over 13 percent from 870 to 769. Likewise, the number of employee liquor permits, such as those required of bartenders, dropped 7.5 percent from 11,767 to 10,937. In both cases these declines were slow and steady over time.

Kansas City did not get a hockey team or a basketball team out of the downtown development. It did not get a concert venue that it didn't already have in Kemper. It did not see a net gain in jobs or businesses. It did not see an increase in tax revenue. However, it did get more debt to be paid out of city coffers—meaning less money for roads, parks, and public safety. And the city will be paying that debt for a long time. According to the same Star piece:
Even with a double-digit bump in sales, it’s not nearly what was anticipated in 2004, when consultants projected that new city and state tax revenues paid by the district’s residents and businesses would be able to cover the debt.

“I don’t think there will be a point at any time in the foreseeable future, probably the next 20 years, where it actually pays for itself,” acknowledged City Manager Troy Schulte.

Back in April 2006, the Kansas City Star quoted then-Mayor Kay Barnes:
"We're going to look like geniuses" in five or 10 years, Barnes said. The city is paying low interest rates for projects that are capable of paying off the debt, she added.

Whoops! If this is genius and the downtown development is a success, it is the sort of genius and success that Kansas City cannot afford.

About the Author

Patrick Tuohey
Patrick Tuohey
Director of Municipal Policy

Patrick Tuohey is the Director of Municipal Policy at the Show-Me Institute.