KC council set to vote on city giving Royals owner $600m plus a crapton of tax breaks, getting almost nothing in return

A Kansas City council committee is set to vote today on approving city money toward a new Royals stadium, so naturally the actual legislation didn’t get released until yesterday, providing everyone involved approximately no time to read and understand it. While everyone scrambles to play catchup, here’s an attempt to at least figure out the main gist of the city’s proposal, after looking at the most important bits and emailing with a bunch of economists who did the same (particularly University of Colorado Denver’s Geoffrey Propheter, who should be a finalist for the Nobel Prize for Speed Reading).

At stake is one bill, plus three accompanying agreements:

• The bill, ordinance 260704, would allocate $20 million from food and beverage taxes to be placed in a Special Obligation Downtown Stadium Bond Fund, which would be used to pay for [scene missing].
• An accompanying funding agreement, the Baseball Stadium Funding Agreement, would devote $600 million in city money toward a $1.9 billion stadium, with the state and county providing another $540 million. This would include $90 million for “infrastructure” from “funding not otherwise committed to the Project,” plus $510 million in “legally available sources,” which are both fancy ways of saying ¯\_(ツ)_/¯.
• The Baseball Stadium Lease Agreement spells out how much rent the team would pay ($1 a year, plus 5% of net non-baseball profits, which as Propheter notes will likely be 0% if the team as operator is smart enough to ensure that non-baseball events run at a loss) and who would get all other revenues, including naming rights and advertising (Royals owner John Sherman, without exception).
• A Baseball Stadium Development Agreement that probably lays out a bunch of other stuff, I haven’t finished reading it all yet.

The ordinance is super-short, but it contains one slightly worrisome clause: It would authorize “the City Manager to execute a lease, non-relocation agreement, development agreement, community impact partnership agreement, and funding agreement with the Kansas City Royals or an affiliated entity for design, construction, and operations of a new stadium, team offices, and supporting infrastructure.” Previous legislation authorized the city manager to negotiate terms with Sherman; it’s unclear how much additional leeway he would have in “executing” an agreement, though the lease does at least say it’s contingent on a council vote to approve it being held no later than the end of September.

The associated agreements, meanwhile, are very long, and include enough worrisome clauses to keep a council hearing very busy indeed, if anyone chooses to ask about them. In addition to the items laid out above:

• Sherman would pay no property taxes on the stadium, since it would be city-owned, and would also receive a full sales tax exemption from all spending on construction, as well as on future maintenance and upgrade costs. Total cost: undetermined as of yet, but on a $1.9 billion stadium, likely to be half a billion dollars or more.
• The city can’t levy any ticket or parking taxes to recoup its $600 million share, which would instead be paid off by an assortment of “economic activity taxes” (not strictly defined, though expected to include a STIF district to kick back city sales taxes) both within the stadium district and outside it.
• All funds from actual stadium revenue, meanwhile, with the exception of that 5% cut of non-baseball profits if any exist, would go toward paying off Sherman’s costs: $760 million toward construction, plus $55 million in “community benefits” (paid out over 30 years, so actually significantly less than $55 million in present value).
• Any future state or county taxes that impact the team are required to be siphoned off to fund the Royals’ stadium maintenance, notwithstanding that the state and county aren’t even parties to this lease.
• The Royals can stop spending anything more than $1 million a year on stadium repair in the final five years of its lease, which would almost certainly be used by whoever owns the Royals in 2051 to extract a new or renovated stadium.

This is a world-historically terrible agreement for taxpayers, with a near-record $1.9 billion stadium being covered 60% by the public while they receive virtually 0% of the proceeds — and, in fact, would lose far more money from all those tax breaks than any meager non-baseball revenue the city might receive. The total public cost would almost certainly be in excess of $1.5 billion, and could reach $2 billion, either of which would be a new record for the largest MLB stadium subsidy ever.

A vote of the city Finance, Governance and Public Safety Committee is expected today, with a full council vote by the end of the week. If that seems like a crazy rush when the full deal has only been available to read for less than 24 hours, the goal is to pass legislation by the end of the month in order to avoid any possibility of holding a public vote in November, as a local labor group is trying force the city to do with a petition campaign. So the council is willing to cut some corners on democracy in order to … well, cut more corners on democracy, it’s just cutting democracy all the way down, really. Tune in today at 9:30 am Central (Zoom link here) to see if any democracy sneaks in during today’s committee hearing.