There will be lots of analysis on the impact of the Royal project on Kansas from folks who follow their issues more closely. I'll punt those analyses to them, except to say that we continue to oppose the development culture, no matter the state, that treats taxpayers as cows to be milked for every big government idea that comes down the pike. Indeed, Kansas City's border war has cost both sides hundreds of millions of dollars over the past few years—money that won't be going to necessary public services in the region.

Meanwhile in Missouri, the rush appears to be on to dream up new ways to compensate for the Royal's departure from the West Bottoms, no doubt to be driven by more government largesse. Kemper Arena seems set to receive massive tax subsidies as it's turned into a youth recreation complex. What, if anything else, gets built around that remains anyone's guess, though chances are good that those projects will be subsidized by taxpayers, too. We continue to oppose such a development plan. Of the things the City could and should do in the West Bottoms, not letting the City's own sewage treatment plant continue to stink up the area and its surrounding neighborhoods would be a good start. We'll see what actually happens.

To many of us, the Royal represented one of the signature cultural events that made Kansas City unique. In a time where municipal me-tooism is all the rage, the Royal stood out as a sign that Kansas City, though changing, is still connected to her past. Its departure is a loss for Kansas City, Mo., and serves as a sad commentary on a tax-incentivized development culture run amuck in this region. 

The post Regarding the American Royal’s Move to Kansas appeared first on Show-Me Institute.

Overall, Kansas City redirects $100 to $110 million each year to developers for the various TIF projects in town. That doesn’t include some of the recent ones like Burns & McDonnell, the Kansas City Star, and Cerner. In fact, according to the Washington Post, Cerner is the biggest recipient of taxpayer subsidies in the state of Missouri. Their last subsidy from Kansas City may be the biggest in the city’s history.

When will city leaders decide that we’ve subsidized enough and start trying to reap the rewards of all the previous spending? Given recent news regarding Two Light and the Star, the answer appears to be no time soon.

The post Kansas City’s Debt appeared first on Show-Me Institute.

The pair also expressed concern that the revenue generated from the catering rights arrangement wouldn’t meet the city’s projection of $30 million a year. Even if lack of competition increases prices, Shalit said, the two areas may generate only $17 million in revenue. The Business Journal reported that if gross revenue generated from the catering rights agreement is insufficient to make the scheduled fee payment, the city will have to pay the shortfall from “any legally available” city funds.

This matches other reporting which claims that Kansas City would have to almost double their convention business in order to make the proposed convention hotel work financially.

Right now, caterers pay a fee of 18 percent of their revenue to Bartle Hall for the right to be able to work at the convention center. That amounts to $2.2 million a year and is used to pay off Bartle Hall’s bonds, plus maintenance, operations, and the like.

In the proposed deal being considered by city leaders, Kansas City has guaranteed payments to Hyatt of just over $62 million for 15 years, or about $4.1 million a year. Here’s how that would work: The Hyatt will still pay a catering fee of about 18 percent to Bartle Hall. Bartle Hall will keep 4 percent to service their bonds and provide maintenance, etc., and return 14 percent to the Hyatt to cover the city’s 15-year, $62 million catering commitment.

In order for the project to generate the $4.1 million, Hyatt would have to conduct $30 million in catering each year. (Fourteen percent of $30 million is $4.1 million.) In any year that Hyatt does not reach $30 million in catering, the city would have to make up the difference. Currently, the catering business for Bartle Hall is about $12-15 million each year. If it were to remain at that level, under the new agreement the city would be paying Hyatt $2 million a year to make up the difference, as 14 percent of $15 million is $2.1 million—$2 million under the $4.1 million commitment.

The city’s argument that a convention hotel and catering agreement won’t drain the general fund assumes that catering business will double. If it doesn’t double, the general fund will have to support not only the catering agreement with Hyatt, but probably Bartle Hall, as it’s unlikely that their portion of the catering fee is sufficient to service bonds and maintain the property. (The agreement with Hyatt also states, “City will maintain the existing Convention Center to its current standards.”)

No one is promising that building a new 800-room hotel will double business, either in room nights or catering. They would be laughed out of the room if they did. (The deal might actually cost Kansas City business.) But all the financing models make the assumption that business will double. Taxpayers and city leaders have to decide if that is a reasonable gamble.

The post How the Convention Hotel Could Drain the General Fund appeared first on Show-Me Institute.

It appears that, unlike most TIF projects, the developers want 100 percent of incremental economic activity taxes, including sales taxes and the earnings tax. Page 11 of the MOU states,

The City will . . . redirect through its annual budget the City’s portion of the Project TIF for a period of 23 years and Super TIF for a period of 30 years generated from the Project’s tax revenue sources . . .

In  other words, they want the half that they get from the TIFs directly, and then they want the city to give them the rest through the appropriations process. Here is the tax revenue the developers want to keep:

• Tax Increment Financing (TIF): as mentioned above, all economic activity taxes collected by and for the county, school district, library district, and the zoo will be redirected back to the project for 23 years.
• A Super TIF that collects for 30 years the tax not captured in the TIF above, including the convention and visitors tax, and redirects it to the developers.
• A 100 percent exemption on sales taxes on construction materials and real/personal property taxes.
• The creation of a 1 percent Community Improvement District (CID) tax that will then be redirected back to the developers.

Here are some extra freebies the developers want:

• A cash contribution of $35 million.
• The city’s portion of the land, valued at $13 million.
• Fees generated by zoning, permits, inspections, etc., capped at $800,000.
• A management fee to the hotel for catering amounting to $62,363,816 over 15 years. Should the event fees be insufficient to cover this, the city will pay, “from any legally available city funds,” just like we do with the Power & Light District.

Here are some possible problems for the city, based on past issues:

• The “City will maintain the existing Convention Center to its current standards. . . .” Isn’t this exactly what the city failed to do with Kemper Arena?
• The MOU says that the city won’t be responsible for cost overruns, “except to the extent intentionally caused by the City without Good cause.” I’m guessing there will be an attorney whose full-time job it is to find ways to sue the city over this, just like Cordish sued Jackson County over its assessment.

Not mentioned in the MOU is any exemption from the streetcar Transportation Development District (TDD). Apparently, funding the downtown streetcar is more important than funding the city, county, schools, libraries, and zoo. What does that say about the City Council’s view of the rest of Kansas City?

The post The Convention Hotel’s Tax Breaks and Gimmes appeared first on Show-Me Institute.

• Strongly agree — 26 percent
• Agree — 9 percent
• Disagree — 14 percent
• Absolutely not — 51 percent

That’s a pretty strong vote of 65 percent opposition to the idea. Readers offered several dozen comments.

We at Show-Me had some immediate comments too. The least of which not being that you’d certainly have to work at the Star to be surprised by this result. Kansas City has had ruinous results in building big projects like this. For example:

• The Power & Light District remains a drain on city resources, having never lived up to the promises made by boosters.
• The Citadel Plaza project was never even built, yet it cost the city millions.
• The city got itself into a horrible bind by taking on huge responsibilities with Kemper Arena and then not meeting them.
• The city spent money studying a proposed streetcar expansion before voters had a chance to voice their views. They rejected it.
• The city spent hundreds of thousands pitching itself for the Republican Convention even though the economic impacts claimed by supporters were specious.
• The city proposed a $1.2 billion new airport terminal based on at least one false premise.

Furthermore, just as mega-events such as Republican Conventions and Super Bowls fail to generate economic benefits, stadiums and arenas fail as well. (Read here for studies by The Brookings Institution and The Atlantic.) Kansas City voters are wary of such promises, and they are either defeating such efforts as translational medicine taxes and streetcars or are demanding sign-off on efforts to build new airport terminals. Why this well-founded skepticism is surprising to anyone is itself a surprise. The city should focus on delivering basic and necessary services and leave the economic speculation to others.

The post Star Survey Results Actually No Surprise at All appeared first on Show-Me Institute.

For those unfamiliar with the Kemper situation, the shortest of the short stories is one of a contract dispute. The American Royal—a century-old nonprofit and scholarship-granting organization focused on agriculture—has a lease with Kansas City to use Kemper but doesn’t think the city has maintained the facility at the level the city promised.

Why the city would neglect Kemper is straightforward enough; the arena has operated in the red for years now, and with the Sprint Center now online downtown, the public face of the city for many concerts and sporting events is no longer in the Bottoms, but on the Bluff. Rather than continue to operate in what it says is a poorly maintained facility, the Royal wants the arena bulldozed and replaced with a new facility that more closely accommodates the Royal’s mission and substantively fulfills the requirements of their lease, which extends amazingly until 2045.

In light of the maintenance requirements and duration of the lease, how much does the Royal say the city is liable for?

Based on the numbers that the American Royal received and validated with the city, [American Royal attorney Chase] Simmons said, the city has $150 million worth of obligations to the organization, on top of the $2.5 million it’s losing on average each year.

In other words, this was a dumb lease by the city for an older facility, whose subsidies we have criticized before. Our longstanding objections to city-ownership of sports stadiums still stands, but it’s accentuated here by what has happened in Kansas City with Kemper Arena. The city has a money pit on its hands and, on top of that, appears to have done a poor job of honoring its remaining lease obligations.

But that doesn’t make the American Royal a victim or a hero in all of this. (Disclosure: I am a Governor with the American Royal.) When the city balked at the Royal’s plan to bulldoze the arena, another group proposed turning Kemper into a multipurpose community sports facility, leveraging . . . historic preservation tax credits. Just two years ago I criticized not only Missouri’s practice of throwing historic preservation incentives around, but I was specifically critical of throwing them at Kemper Arena. The “Foutch Plan” (as it was called) was an alternative, and as a matter of policy it wasn’t “better,” but it did have the positive effect of forcing the Royal to try to make its proposal more attractive.

When it appeared the city may accept the Foutch Plan over the Royal’s, the Royal did something really, really sad—it floated the possibility that it would move out of Kansas City entirely, a nuclear option presumably intended to shock the city back to the Royal’s side. In my view, an American Royal outside the West Bottoms is not the American Royal, and I think most civic leaders would agree with that view. In any case, such a move by the Royal would almost certainly rely on subsidies provided by someone else in the region, probably in Kansas, which would  run afoul of Show-Me’s longstanding opposition to border war incentives.

Ultimately the idea of moving didn’t tip the scale to the Royal, but litigation threatened by the organization against Foutch did, and Foutch dropped its proposal. That threat, while effective in pushing out the competing plan, exacerbated the PR nightmare that got rolling after the Royal’s leadership threatened it could move. But that’s where things stand today: The Royal’s plan appears on track to prevail, and Kemper appears on track to be bulldozed.

The most basic reaction we would offer here is that Kansas City shouldn’t have been in the arena business anyway. Moreover, the overly generous terms of the lease goes to show that trusting government to act as a fiduciary for taxpayers in financial matters is hardly ever prudent. We rejected historic preservation tax credits to save Kemper and also reject border war incentives that would subsidize the Royal so that it could possibly move out of Kansas City.

However, we support contract rights, and to the extent that an agreement was made between the Royal and the city, the terms of that agreement have to be substantively performed. Taxpayers deserved a better deal than the one the city made, but they got a lot of bull instead. And like the city’s predicament with the money-hemorrhaging Power & Light District, what taxpayers deserve does not change what taxpayers are on the hook for. Yes, the Royal may eventually “win” the question of what happens to the Kemper Arena property, but that win will have come at a price—for the organization, and for the city.

There has to be a fundamental shift in the political and policy culture of Kansas City if we are to avoid debacles like this in the future, and that means fighting bad ideas before they are implemented and educating taxpayers about better development strategies that will make them, their families, and their communities better off by empowering them, not the government.

The post The Beef With Kemper Arena appeared first on Show-Me Institute.

Now in its twelfth year, the program has sought to bring statewide attention to endangered places through a media campaign and offers support services to the properties on the list.

The list is a good one overall, calling attention to some notable structures that with some love and money — emphasis on money — could be saved.

But there seems to me to be one significant outlier in the mix: Kemper Arena, Kansas City’s 1970s-era predecessor to the new Sprint Center downtown. The cavernous space hosts few events these days since Sprint opened, and even the family of the arena’s namesake is calling for the place to be torn down. (It is worth noting that our Chairman of the Board (who also is a Show-Me co-founder) is a Kemper, although I have not discussed this issue with him.)

Is Kemper Arena historic? Sure. It housed the 1976 Republican National Convention, countless sporting events, and served as the backdrop of some of the greatest rodeos and barbecues in the country. But does that, therefore, mean it is off limits for demolition, if it comes to that? No.

State-underwritten historic preservation efforts, particularly in and around Saint Louis, have been operating with an open throttle for more than a decade now, with the state issuing more than $1 billion in tax credits for preservation since 1999. As obvious preservation projects have dwindled, the preservation net has widened in some cases to simply keep the subsidies pumping. But are we saving historic buildings, or just saving — and oftentimes subsidizing — aging properties under the pretext of historic preservation? Shouldn’t that blurring distinction bother preservationists?

As a born-and-bred Kansas Citian, a movement to save Kemper absent a plan the private market would embrace would be mystifying to me. There is a difference between advocating for ingenious uses of old properties and trying to force old and obsolete properties on the community for all time. I support the former. I am not keen on the latter. Indispensable history is all around us, but not every building is indispensable.

Kemper Arena has certainly had some fine days, and to the extent Missouri Preservation is highlighting that history, the organization should be applauded. But while Kemper has had historic days, much like so many buildings of its kind, that does not mean it should stand until the end of days.

Preservation has a place. It’s just not every place.

The post Missouri’s Buildings Immemorial, And The Right Place For Preservation appeared first on Show-Me Institute.

In the interest of focusing on the key points, I am only going to discuss the consultants’ seven recommendations that were highlighted in the Star. If you are in such a hurry that you can only read one more sentence, then I will tell you this: Four of the recommendations are very good, one is worth consideration, one might be a good idea, and one is absolutely horrible. But on to the details, with each suggestion followed by my comments. The report suggests that Kansas City should:

• Consider a new trash fee, consistent with what is charged in many cities in the region and nation. Kansas City residents often resist this idea, saying the earnings tax, in place since the 1960s, is supposed to cover those costs.

Definitely worth considering. Moving toward direct fees for direct services is a move in the right direction. However, this should not be done as just an excuse to create a new fee. Rather, it should be at least partly offset by spending cuts elsewhere, as the revenue moves toward the new trash fee.

• Consider seeking state legislation for mandatory suburban withholding of that earnings tax to make sure people working or living in Kansas City pay the taxes they owe.

This is an absolutely terrible suggestion. Businesses that operate outside of Kansas City should not be forced to collect taxes for the city. If anything, this could serve as an incentive (albeit a minor one) for companies outside of Kansas City to hire fewer KC residents. Just a stupid idea.

• Consolidate the Police Department with the rest of city government.

Both Kansas City and St. Louis would like to gain control of their police departments from the state. I am friends with some St. Louis city cops, and I have never talked to one who liked this possibility. Control by the state board means that the police department answers to one board and the governor, not to 28 aldermen and 11 citywide elected officials. However, in Kansas City, with its city manager form of government, local control might work better.

• Hold the line on city hiring, limit wage increases, and contain health-care costs to a greater degree than the city has done in the past.

Now we are on to the good ideas, so I don’t have much to add. Obviously, this suggestion is imperative for any city.

• Pursue regional funding for civic and cultural assets, as is done in such cities as Denver, St. Louis and Minneapolis-St. Paul.

Now, here is an idea that might raise taxes for some people but which I still support. The zoo-museum district in St. Louis has been an excellent system for some time, and should be expanded for other counties like St. Charles. I think it should definitely be implemented in Kansas City.

• Prioritize basic, quality-of-life services over “nice-to-have” amenities.

This is a pretty standard, yet important and worthwhile, recommendation.

And, finally, the best part of the whole report:

• Hold the line on new taxpayer incentives for development and tax abatement to limit negative effects on city revenues. Also, re-evaluate the number of sports and entertainment arenas such as Kemper Arena that are subsidized by the city, “particularly given ongoing maintenance needs.”

We could not have said it better ourselves.

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