Category: Kansas City Chiefs

The Kansas state house voted 79-41 last night to pass a bill creating a sports authority to build and operate a Kansas City Chiefs stadium, and lo and behold, it now includes language subjecting the authority to public transparency laws, while also allowing the city and county where the stadium would be built to have votes on the 11-member authority board:

The board would have 11 voting members, including legislative appointees, the state commerce secretary and a representative of the team. If the stadium is built in KCK, both the Olathe and KCK mayors would receive a direct vote on the board.

The authority’s governing board includes appointed members from the governor, House speaker, House majority and minority leaders, Senate president, Senate majority and minority leaders, and the team. The secretary of commerce serves by virtue of holding office. The two mayors of the host cities serve as ex officio members if they elect to participate.

Assuming the state senate follows suit, this should put an end to the standoff where the state was threatening to disenfranchise Kansas City, Kansas and Wyandotte County unless they kicked in more local sales tax money.  Though if you read the above closely, you may have noticed that the final bill retains another provision that had raised eyebrows:

“The Hunt family would have a longer and more aggressive voice at the table,” Democrat State House Rep. Alexis Simmons said. “They would be the only owner in the NFL to have a voting voice at the table in the financing discussion.”

Setting aside the question of how long a voice should be, Chiefs owner Clark Hunt getting a vote on the public board that he’ll be negotiating his lease with later this year is indeed a conflict of interest. Bill sponsor Rep. Sean Tarwater put it differently, telling his fellow legislators that none of them should vote against the sports authority bill just because the stadium would involve billions of dollars of tax subsidies because “That deal is done. This is just our opportunity to put guardrails on it and have oversight of the project.” Sure, “guardrails,” let’s go with that.

The Chiefs have until this fall to lay out the terms of a lease, which would include who would get stadium revenues and how ongoing stadium expenses would be dealt with — good thing we have those transparency provisions, because this is going to be fascinating to watch.

Sure, the state of Kansas already passed a bill to provide Kansas City Chiefs owner with $2.775 billion in state-backed STAR bonds and another $1.3 billion and change in additional tax money, and the city of Olathe and Wyandotte County voted to chip in their own tax revenues toward paying off that debt. But the state hasn’t actually created a sports authority yet to own the stadium so that the Chiefs can get out of paying property tax! (Yes, the linked Beacon News article says “income tax.” Why does it say that? Do I look like the king of the Beacon News here? Go do your own research!)

Where was I? Oh, right, new bill to create a sports authority. That’s straightforward enough, shouldn’t be any new wrinkles that—

The proposal appoints nine voting members, plus the mayors of Olathe and Kansas City, Kansas, in a non-voting capacity.

Non-voting capacity? That’s not great. Maybe the sponsor of the bill could be talked into—

State Rep. Sean Tarwater, R-Stilwell, is sponsoring the bill. He seemed open to giving KCK voting authority — on a condition.

He would like KCK to change a law it passed last month so that Kansas can collect increased sales tax dollars from more of Wyandotte County to pay off the stadium, instead of from a district around the stadium.

“The resolution in Kansas City probably needs to change because when they passed it, they limited [the state’s] district to the little teeny area that they drew for themselves,” Tarwater said.

Huh? No, that’s not what happened. Kansas City, Kansas, and Wyandotte County of which it is a part, only voted to limit its local sales tax district to the area just around the stadium. Kansas can still siphon off state sales taxes from 293 square miles of land, including all of Wyandotte, as originally planned. If Tarwater wants to hold KCK’s seat on the sports authority hostage in order to get more local tax money kicked into the stadium pot, that’s his right as an exortionist office holder, but at least try to get the details right, this isn’t the Beacon News here.

And anyway, how important is a sports authority seat, really? Even if KCK doesn’t get a spot at the table, the other members will surely have state residents’ best interests at—

The authority board includes “a representative of the professional sports team” using the facility as a voting member. This means the Chiefs would have a vote on such things as negotiating its lease, financing, and operations. Having the team oversee itself is a crazy conflict of interest and uncommon in other similar authorities if not absolutely unique, for obvious reasons.

The bill, according to the analysis by the Show Me Institute — which is based across the border in Missouri, so feel free to blame sour grapes if you like — also exempts the stadium project from oversight and competitive bidding rules, amid other sweetheart provisions. Kansas state senator Mike Thompson warns that this will set up “an unaccountable ‘Shadow Government,'” but you know, don’t knock it until you’ve tried it. What other alternative is there, getting enough votes together to defeat the bill? HAHAHAHAHAHA BWA HA HA HA. HA. Ha.

We finally have a number for how much tax money Wyandotte County could hand over to Kansas City Chiefs owner Clark Hunt following last Thursday’s vote to funnel virtually all sales and hotel taxes from a 200-acre stadium district in Kansas City, Kansas to help pay off $2.775 billion in state STAR bonds for stadium and related construction. Or rather, a couple of numbers:

The local tax breaks could total $350 million to $450 million. The Unified Government expects the project to generate $488 million in revenue, netting the county at least $38 million over 30 years.

I have questions! So many questions:

• How did the county estimate $350-450 million in tax expenditure (over 30 years, it sounds like, which would be more like $190-230 million or so in present value) when it’s unknown exactly what the Chiefs plan to build on the 200 acres?
• How did the county come up with that $488 million estimate for new tax revenue, and did it account for money cannibalized from other spending that would have taken place in the county even without a stadium?
• Since the state is planning on going ahead with the stadium regardless of whether Wyandotte County chips in, wouldn’t it get any new tax revenue either way, making the tax breaks a net loss?

Todd LaSala, a private attorney who serves as an economic development consultant for the Unified Government, attempted to answer the last question, at least, speculating that Hunt could build his stadium in a different part of the state if the county didn’t agree to the funding: “If you voted no, it sends an interesting, if not a dismissive message to the Kansas City Chiefs, who want to choose Wyandotte County as their home.” LaSala didn’t indicate why the Chiefs owner would balk at a Wyandotte stadium site when he’d be getting the same amount of STAR bonds for it regardless, but it is important to remember that if you want to remain attractive to the local billionaire, you must never speak your mind and learn how to light his cigar right.

As for the other questions, I’ve gone through all the documents presented for last week’s county commission vote, and I can’t find anything giving details about how those tax break and tax revenue projections were calculated. Given that when the state of Kansas tried a similar exercise with its own $3 billion-plus in Chiefs tax breaks, economists deemed the resulting figures to be “incredibly optimistic,” “insane,” and “just not credible,” it’s probably a good idea to take these latest numbers with a grain of salt — even before considering that these tax subsidies look to be money that Wyandotte County is voluntarily giving up to land a stadium it would get regardless. I’ve reached out to both the county and LaSala with the above questions, and will post an update here if I hear back from them.

Both Wyandotte County, where a new Kansas City Chiefs stadium would be built under a proposal by the state of Kansas, and the city of Olathe, where a Chiefs training facility would go, held hearings yesterday to hear from residents on whether they should kick in local tax money to help the state pay off what could total $4 billion in subsidies for the combined project. Despite only having since Friday to look over the plans, residents turned out in force to speak their minds:

• In Olathe, the hearing was “standing room only” as “many spoke against the ordinance, while a few spoke in support of the proposal,” according to KSHB, with many wondering if the city will be able to make up for the lost tax revenues and complaining about the rushed timetable for the proposal to give the Chiefs virtually all city taxes from a 165-acre sports district: “I feel this is not a public hearing, this is a presentation of what has already been decided,” said one resident, Pete Marsh. This proved to be foreshadowing, as the city council listened for two hours, then promptly approved the tax district in a unanimous vote.
• In Wyandotte County, which under its proposal would kick in all of its future sales and hotel taxes from a 200-acre district around a new stadium in Kansas City, Kansas, more than 50 residents testified, many likewise expressing concerns about the cost in lost taxes and the lack of information on the hastily arranged deal: “I think the people need more information,” one speaker said. while another pleaded, “Please, be transparent.” Unlike in Olathe, Wyandotte commissioners said they would put off a vote — for two whole days, with a final decision on the tax district to be made in another hearing tomorrow at 5:30 pm.

To be clear, neither of the new local tax districts would increase the total amount of money going to Chiefs ownership. Rather, city and county tax money would defray some of the state’s costs of paying off $2.775 billion in bonds for the stadium and surrounding development, which otherwise will come from state taxes collected across a mammoth 293-square-mile swath of Wyandotte and Johnson Counties. (This is a different tax district from the Olathe and Wyandotte County tax districts, something one article in particular seems very confused about.) And while some may insist that redirecting all the tax money collected by the county and city in and around the stadium and practice facility for the next 30 years is bonkers, local officials insist that the lunch will be entirely free:

“As I see it, we’re not currently generating any sales tax on this otherwise empty spot of land, there’s really nothing to lose here,” Olathe Councilman Matthew Schoonover said.

Yes, it’s the Casino Night Fallacy again, where any money that is so much as touched by a team is considered to belong to the team, even if it’s tax money that any normal business would pass along to pay for government services. To follow Schoonover’s argument to its logical extreme, no one should ever pay any taxes, because if you didn’t exist, the government wouldn’t collect anything — try telling the IRS that “I should owe no income taxes this year, because if I had quit my job I wouldn’t have earned any income” and see how far that gets you, but when you’re a sports billionaire, suddenly this is standard business practice.

Instead of Schoonover’s “What if nothing were built?” thought experiment, let’s consider this in terms of two other hypotheticals:

• What if the city and county held on to the land and it were used for something else? Once the Chiefs tax districts are carved out of local budgets, that land and any money it could generate is gone forever. Losing the opportunity to make future tax revenues off a parcel of land may be a bit more abstract than losing tax dollars that are currently being collected, but it’s just as much of a cost to local taxpayers.
• What if spending in the Chiefs tax districts gets cannibalized from elsewhere in the local area? If somebody builds a restaurant across from a Chiefs stadium and the only people who eat there are fans who otherwise would have spent their money across the border in Missouri, that’s indeed a net positive; if anybody eats there who would otherwise be eating somewhere else in the county, though, that’s money coming directly out of local government’s existing budget, no future hypotheticals needed.

Or looked at yet another way: Chiefs owner Clark Hunt wants to get the benefit of intercepting all the taxes paid in and around his team facilities and spending it on himself, while all costs associated with any new development — roads, police and fire protection, any schools needed to educate the kids of new residents in a mixed-use district — will fall entirely on city and county taxpayers.

Exactly how much city and county tax money is at stake here? We don’t know, as neither Olathe nor Wyandotte County appears to have tried to calculate the total tax expenditure during the four whole days legislators had to think about it. Wyandotte commissioners promised more information at tomorrow’s meeting; hopefully residents will have time to read it before the commission votes to rubber-stamp the deal.

Two local Kansas governments will be holding public hearings tomorrow on possible subsidies for a new Kansas City Chiefs stadium to defray the state’s possibly insurmountable costs. Wyandotte County holds its first public hearing at 5:30 pm, and the city of Olathe in neighboring Johnson County, where a Chiefs practice field would be built, will follow at 6 pm. Olathe apparently plans to vote on stadium funding at its meeting, and accordingly has published its plan, which is a doozy:

• The legislation would create a 165-acre tax district around the new facility for diverting city taxes.
• Within that area, all city sales tax revenues, the city’s share of county sales tax revenues, and 7% of the 9% city hotel tax — except for any money already pledged to paying off other projects — would be redirected to the Chiefs to cover the team’s development costs.

Economist J.C. Bradbury weighed in over the weekend to call this “bonkers,” and it indeed would break new ground in siphoning off tax money for a stadium: Olathe wouldn’t be just giving up increased tax revenues like in a TIF, but all sales and hotel tax revenues within the tax district, for the next 30 years. (At least the tax district is smaller than the state’s incredible 293 square miles, but that’s a low bar for comparison.) The likely practice field site is currently undeveloped, at least, so Olathe wouldn’t be losing much in existing taxes; unless, of course, a Chiefs development lures away businesses that would otherwise locate elsewhere in Olathe and moves them to the tax-subsidy district, which is pretty likely.

Meanwhile, economist Geoffrey Propheter chimes in to note that rezoning the practice field site as exempt from property taxes would cost the city about $37 million in present value of lost future tax revenue. No one has yet attempted to calculate how much Olathe would give up in future sales and hotel tax money.

At this point, the best-case scenario for Olathe might be that it turns out no one wants to open a ton of hotels and restaurants and other businesses around a practice field that’s only open to the public a handful of days a year, and there’s not so much local tax revenue to lose. Or the city council could just say, “We get all the hassle of hosting a Chiefs practice field but the Chiefs keep all the tax money? No thanks.” We’ll find out tomorrow night.