Important details of the new terminal remain unknown. We don’t know the final costs. We don’t know the financing details, or how building contracts will be awarded. All those things are being reevaluated now. Voters should vote no on Question 1 until they know exactly what is being asked of them. This is too important to get wrong.

Voters approved the measure by a wide margin, with three-fourths voting yes. It was a clear mandate to move forward. But the details remain murky even to insiders. Just last week, the City Council voted 9 to 4 against a memorandum of understanding (MOU) with Edgemoor Infrastructure & Real Estate. Following the vote, Mayor James described the vote as an “ambush” and excoriated his colleagues, saying “you can’t lead people you can’t trust. . . You can’t lead people who sneak.” But Councilman Quinton Lucas, who supported a yes vote on Question 1, told The Kansas City Star,

There’s a reimbursement agreement that obligates the city to potentially millions of dollars, a number of those costs incurred before the election. There was absolutely no detail on financing. I know we want flexibility, but we also want to know what we are binding the city to, potentially for years to come.

Lucas was not alone. Councilman Scott Wagner, who also supported approval of Question 1, issued a statement about his concerns on Facebook in which he detailed important matters that appear to be unresolved in the MOU. He indicated that he had been raising these concerns for quite some time. Just before the vote, Kansas City’s Black Chamber of Commerce said that the MOU before the Council lacked transparency and were “weak for minority participation.” As David Hudnall at The Pitch writes in an excellent overview of the debacle, the astonishing part is the failure of the MOU to protect the city’s interests.

These were all the same concerns I detailed before the public vote, and it is a shame that they were not addressed before the Council vote. Given all this, it’s surprising that Mayor James did not know that 9 of his colleagues were going to vote against the MOU. But in an effort “marked by distrust, misinformation, unnecessary secrecy and conflict,” maybe it should be no surprise at all.

The post The Airport and Transparency appeared first on Show-Me Institute.

First, from the Evangelical Free Church of America:

Greetings,

I have recently become aware that there are discussions about changing the Kansas City open catering policy at the convention center.  As an event planner, I want to express my concern over this potential change.

In 2014, I brought a week-long event to Kansas City for 5,500 students. This event utilized over 8,000 hotel rooms, over $740,000 in catering to the convention center and various other economic impacts. Having an option to select from a list of caterers was the tipping point for choosing KC. In fact, we had such a good experience, we have already signed to return to KC for the same event in 2018.

We would love to make KC our home for this event every 4 years. However, if the open catering policy changes, we will definitely have to revisit our plans. This is a unique feature that makes KC different in a sea of convention centers across the country.

I am asking that you please work to keep your open catering policy.

Should you have any questions or wish to speak with  me further, please contact me using the information listed below.

Blessings,

Laurie Seay

Event Director

EFCA

Second, from Educational Testing Service:

Dear Council Members,

ETS and The College Board have found Kansas City to be a wonderful location for our Advanced Placement Readings since 2008.  One of the things we like best is the open catering policy at the Convention Center.  The opportunity to competitively bid catering services has been not only financially favorable, it has allowed us to ensure that the quality of food and beverage and related services meets our standards.  In 2015, our catering spend was just short of $2.3M to a combination of three KC local caterers, so you can see that the impact of not being able to competitively bid out this work could be considerable.

ETS is very concerned about the potential for allowing the proposed new hotel to have exclusivity for catering in the Grand Ballroom and Convention Meeting Space.  We hope that you will consider the fact that such exclusivity is described in a non-binding portion of the signed Memorandum of Understanding, and we urge you to consider not moving forward with a binding agreement.

Thanks for your consideration.

Patric Close Mills

Educational Testing Service

And finally, from The Menonite Church USA:

City Council of Kansas City

I’m writing to you representing an organization that recently held it’s national convention at the Kansas City Convention Center. We had a great experience. The convention center staff (including Matt Cunningham and Walter Moore and Steve Lesher) were great to amazing with. The CVB staff (including Juanita Crowder and Esther Walker-Young and Kim Dooley) were phenomenal to work with. Our participants spoke very highly of everyone they came in contact with during our event (vendors, hotel staff, restaurant staff, security guards, etc.). All this is to say that Kansas City has a good thing going!

The main reason I am writing today is to voice concern about the potential change to the open catering policy at the convention center. As someone that has planned large conventions for over 18 years, I can tell you that very few convention centers have open catering policies. I can also tell you that having an open catering policy was one of the selling points of bringing our convention to Kansas City. Having the opportunity to look at multiple caterers and have them bid on our business helped us control our costs. We were able to provide our convention participants with good meals at decent prices. As a non-profit organization, it is hard to go into a convention center with one catering option and have any bargaining power. Your open catering policy allowed us to ensure that we got competitive pricing. I would encourage you to keep the open catering policy as is.

Please do not hesitate to contact me if you have any questions. I would be more than happy to share more of my views on this issue.

Have a great day.

Scott Hartman

Convention Planning Coordinator

Mennonite Church USA

These are legitimate concerns. Kansas City taxpayers have every reason to suspect the wisdom of the deal, and members of the City Council should proceed cautiously before investing public funds in a deal that risks so much.

The post The Convention Hotel Deal May Cost Kansas City Conventions appeared first on Show-Me Institute.

According to some, ending competition for convention catering business would increase quality:

An exclusive food provider, according to O’Neal, would help the convention center ensure quality control because “with one vendor, the building can control quality better, and that’s what people remember about a building.”

City Manager Troy Schulte agrees. Even if the city weren’t negotiating with Hyatt, Schulte said, he was thinking about moving toward a single caterer. He said the city has received some complaints about catering, which he declined to specify. Schulte said a single provider would make quality control better.

You read that right. Some Kansas City leaders apparently think that reducing choice increases quality. (By the way, Aramark has an exclusive catering agreement at Kauffman Stadium, and they haven’t been doing so well regarding quality.)

This flawed thinking isn’t limited to the catering contract, according to the Memorandum of Understanding. Neither the initial award of catering nor the award of the construction contract for the hotel are to be competitively bid. The city apparently just plans to give those contracts to Hyatt and J.E. Dunn respectively without making sure their bids are the best or the cheapest.

Is it any wonder that city finances are such a mess when even the most basic economic principles of choice and competition are disregarded?

The post Back in the USSR appeared first on Show-Me Institute.

Steve Vockrodt at The Pitch considers other costs that the city doesn’t seem to be including in their estimates:

The property upon which the hotel will be built (bound by Truman Road and 16th Street and by Baltimore and Wyandotte) is mostly city-owned, which means that it currently generates no property taxes. Troy Schulte, the city manager, has said the land is worth $13 million.

Assuming that valuation is correct, it means that the land—if the city sold it to a developer and it returned to the tax rolls—would generate $333,998 a year in property taxes. Under TIF, the development captures all that money.

Given these arrangements, then, the public subsidy for the hotel is going to be a lot more than $35 million. About half the cost of the $300 million project will wind up being paid for by public taxes.

But wait, there’s more. The Kansas City Business Journal adds:

The post Convention Hotel: Power & Light District v. 2.0? 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.

As we examine the deal, we wanted to share the Memorandum of Understanding with our readers. You can find a copy of it here.

KC Convention Hotel Memorandum of Understanding (Text)

The post Kansas City’s Convention Hotel Memorandum appeared first on Show-Me Institute.

As with many of the arguments in favor of building a new $1.2 billion terminal, it’s true . . . sort of.

In July and August of 2010, the Kansas City Aviation Department gave $10.2 million to the city of Kansas City in the form of an interdepartmental loan with an interest rate of 3 percent. The initial Memorandum of Understanding (MOU) indicated the loan was “for the use by Finance in connection with the historical liabilities associated with various TIF [Tax Increment Financing] projects” and would be paid back by July 1, 2013. Not surprisingly, the city later renegotiated and the debt won’t be fully paid until 2017, at the earliest.

The Federal Aviation Administration (FAA) says that such loans are legal as long as they are at the prevailing rate of interest (see page 7,720 of the Federal Register). The 3 percent the city is paying is within the prevailing rate of interest.

What is troubling is that the loan from the Aviation Department was going to cover TIF payments the city couldn’t otherwise afford to make. In other words, Kansas City is borrowing money from the airport, with interest, to cover losses it incurred in tax abatements to things such as the Power & Light District. (Gamblers Anonymous includes this activity as one of many signs of addiction.)

A $1.2 billion new terminal will upset an already out-of-balance apple cart. Consider the following:

• MCI is already relying on federal funds to cover losses;
• Federal programs aimed at subsidizing airports are drying up;
• The increased fees and ticket prices that are needed to fund an airport bond will make the airport less attractive to airlines and passengers; and
• If the airport cannot generate enough money to repay its bonds, the city will almost certainly dip into the general funds to cover the payments, just as it has done elsewhere, even when the city is not technically on the hook.

Not only is building a new terminal a bad idea on its merits, but it puts at risk a source of money the city is using to cover losses on all its other bad ideas. Worse yet, a new terminal may turn the Aviation Department from a source of funds for the city to another drain on resources.

The post About Those Aviation Department Funds… appeared first on Show-Me Institute.