Both sides lose and both sides gain in the pending $8 million public bailout of the Kansas City T-Bones that comes up for a public hearing Thursday.
By MIKE HENDRICKS
The Kansas City Star
Team ownership takes a big hit. Ehlert Development Corp. would lose at least $4 million in the sale of CommunityAmerica Ballpark to the Unified Government of Wyandotte County and Kansas City, Kan.
Thats not just a paper loss. Ehlert would be on the hook for that amount on the loan taken out to build a stadium the company no longer would own.
The negatives for the Unified Government, the Piper School District and other local taxing districts? Because of the financing method being used to buy the stadium, they would have to wait a few more months than expected to get a sales-tax revenue windfall from the Village West shopping and entertainment area.
Secondly, local governments would see $178,000 less revenue each and every year when the stadium becomes public property and comes off the tax rolls.
While that is no budget-buster, any lost dollar is detrimental, said Piper superintendent Tim Conrad.
But as far as the T-Bones and the Unified Government are concerned, the stadium sale is a good deal for both the team and the community even if some members of the Unified Board of Commissioners are still angry about the secret negotiations that led to the deal.
The teams owners get some relief from the crushing debt they took on to build the stadium a decade ago, and the Unified Government avoids the possible loss of a key attraction that directly and indirectly generates $5.5 million annually in economic activity and sales tax dollars at Village West.
The bottom line is we were fearful the team was going to leave and wed have an empty stadium, said Mike Taylor, a spokesman for the Unified Government.
Once a perennial winner, the teams on-field performance has been less than stellar the past few seasons. Manager Kenny Hooks contract wasnt renewed after the team finished with only 40 wins and 60 losses this year, its worst record since moving to KCK in 2003.
But the T-Bones remain boffo at the box office, drawing 276,359 fans to the ballpark in 2013, an average of 5,420 per game in a stadium that can hold 6,500. Only the Winnipeg Goldeyes had better attendance among the dozen teams in the decidedly minor-league American Association of Independent Professional Baseball.
Ticket and concession sales, however, were no match for the debt Ehlert Development Corp. took on to pay the $12 million it cost to build the ballpark a decade ago.
When team President Adam Ehlerts family moved their baseball club from Minnesota to Kansas City, Kan., they did something rare for professional sports. With optimistic enthusiasm, he said, they built a stadium with private dollars, mostly because there were no public financing options available at the time.
People in the industry viewed it as a gamble, given the business model of teams like the T-Bones affordable, family-friendly entertainment delivered at just under 50 dates a year.
I was surprised they were going to try it, said Miles Wolff, the commissioner of the American Association. But it was a good market, and they had some good things working for them.
The team was moving from Duluth, Minn., to a major market, and would play games in a burgeoning entertainment district at the crossroads of two interstate highways.
But those good things werent enough to pay the mortgage long term. Ehlert Development still owes $9.5 million on the ballpark loan, which Ehlert and the Unified Governments financial advisers have concluded is unsustainable.
Finances were so tight in recent years that Ehlert Development stopped paying property taxes on time in 2011 and then not at all in 2012, according to tax records.
Those tax bills and interest penalties were paid in the first half of this year, but only after the team and the Unified Govenment secretly signed an option and economic development agreement in January.
We realized they were having some issues, Taylor said of the delinquent tax bills.
Ehlert said he initiated talks with County Administrator Dennis Hays and then-Mayor Joe Reardon. We opened our books to them, Ehlert said.
Although Ehlert never threatened to move the team, that fear on the part of Unified Government officials drove the discussions.
Images of the Woodlands came up, Taylor said, referring to the horse and greyhound racetrack that struggled for years after the opening of casinos in the Kansas City market gave gamblers other options. The track closed in 2008.
Weve got a facility there up the road just sitting empty and deteriorating, and we cant have that happening with CommunityAmerica Ballpark, Taylor said
To buy time during the negotiations, Hays made two payments of $87,000 in Wyandotte County tax dollars to Ehlert Development and authorized a partial property tax rebate in exchange for four things: an option to purchase the stadium; the teams agreement to play the 2013 season; a promise to bring tax payments up to date; and an assurance from Ehlerts lender, BMO Harris Bank, that it would take no adverse actions during negotiations.
The deal was announced last month after nearly a year of negotiations, talks that, until this summer, were unknown even to the newly elected mayor, Mark Holland, and the Unified Board of Commissioners.
Taylor said the option agreement was kept quiet so as not to hurt ticket sales, but some commissioners were upset that they werent consulted about the payments Hays made to Ehlert with Reardons approval.
Im having a hard time getting past the fact that the mayor and administrator spent this money without the commissions approval, Commissioner Ann Murguia told The Star.
Reardon did not respond to repeated requests for comment. The Unified Governments chief legal counsel, Jody Boeding, said the county charter and state law gave Hays the legal authority to shift funds around.
As long as theres money in the budget available, he can do that, Boeding said.
However, a proposed policy change would, if approved by the commission, put dollar limits on discretionary spending. Hays, who is retiring soon, and future county administrators could spend no more than $50,000 without commission approval, except in an emergency.
Of the $8 million budgeted for the stadium deal, $2.5 million would be set aside for future repairs and upgrades. The remaining $5.5 million is the price that the Unified Government would pay Ehlert Development for the ballpark.
Ehlert said he had hoped to strike a bargain that would have erased nearly all stadium debt from his companys books. It would have almost made us whole, he said of the initial proposal.
But on the advice of its financial consultants, the Unified Government opposed giving Ehlert all he wanted. The U.G. has been fiercely protective of taxpayer interests, Ehlert said.
Although he would have liked a higher price, Ehlert said the deal would put the T-Bones on firmer footing.
No matter how successful a team is, theyre not going to be able to support a stand-alone facility, he said.
With the exception of the New York Yankees, the Chicago Cubs and a few others, hardly any professional sports teams in the United States own the venues they play in, Wolff said. Those that do have trouble paying the bills.
One example is the St. Louis Cardinals top farm club in Tennessee. Despite success on and off the field Forbes magazine ranks the Memphis Redbirds as the eighth-most-valuable minor-league baseball franchise the nonprofit foundation that owns the team and its 13-year-old stadium defaulted on bond payments a few years ago.
Memphis now is considering a deal to buy the stadium, while the Cardinals would buy the team and sign a 17-year-lease.
Negotiations between the T-Bones and the Unified Government are ongoing. Ehlert has said he is willing to sign a lease that would have the T-Bones playing at the ballpark for the next 20 years. Specifics, such as rental payments, havent been hammered out.
Thursdays hearing, scheduled for 7 p.m. in City Hall, 701 N. Seventh St., will address the proposed financing of the stadium purchase.
The purchase would be financed with the same Sales Tax Revenue Bonds, or STAR bonds, that have paid for most of the public improvements at Village West. The bonds also were a significant part of the financing package that paid for the construction of Sporting Park, the privately owned pro soccer stadium at Village West.
The use of STAR Bonds for stadium construction was not legal when CommunityAmerica Ballpark was built.
Buying the ballpark would add about four months to the projected payoff in 2017 for all the bonds used in the Village West area, Taylor said.
Even so, the bonds would be paid off four years ahead of the due date, thanks to the millions of sales tax dollars generated by Village West merchants.