On July 12, 2007, Kansas City officials issued some pretty precise documents promising that the Power & Light District would pay for itself.
Summed up, it would cost $489,632,115 in debt over the next 25 years or so to acquire downtown property, install new water and sewer lines, build parking garages, and subsidize construction of restaurants and retail stores for the Cordish Co.
But consultants who had looked at the deal also said the entertainment district would create $506,437,961 in new revenues such as sales, earnings and property taxes.
So how did those rosy predictions work out?
Not well. In fact, they weren’t even remotely close. Yet many people still don’t realize how costly this project will be for Kansas City taxpayers for years to come.
In round figures, recent debt payments have been close to $19 million a year. However, the district’s total tax revenues are averaging only $5.5 million annually.
There’s a larger point to be made here about how risky it is to promote city-backed projects that put the full faith and credit of local taxpayers on the line. Fortunately, City Hall has backed away from doing large deals like this one for the last few years. Still, at least six projects are draining the general fund of money each year because they haven’t been as successful as once hoped.
The largest by far is the Power & Light District, and it deserves more attention given that fact. First, some math.
• Bonds issued for the project won’t be paid off until 2032 — 19 years from now.
• The taxpayer subsidy to make debt payments this year is projected to be its highest so far: $14.3 million.
• Multiply 19 years times $14.3 million and that’s — whoa — $272 million that could be transferred from the general fund to pay for the Power & Light bonds. That’s $272 million unavailable for roads, parks, police, fire and other essential services.
Supporters of the Power & Light District make a few key points.
The first is dead-on. Building the entertainment area in conjunction with the new Sprint Center — which is fully financed with hotel and car rental fees, not taxpayer dollars — has been the key to reviving downtown. That’s a huge plus in its favor.
The second contention is not fully accurate.
Cordish Co. and city officials point out that the bonds issued for the Power & Light District also built public infrastructure such as the garages and the modern water/sewer lines. That’s true.
But then comes the argument that, if you take that money for public stuff out of the equation, the Power & Light District retail complex comes close to covering its costs. That’s not true.
At least half the bond revenues support the subsidy given to Cordish for constructing the retail stores and restaurants, acquisition costs for the property they are built upon, the Midland theater makeover and the condos Cordish has pledged to build. Plus, the “public” garages are greatly used by Power & Light customers. Add that cost to the mix, and about two-thirds of the bonds go toward the entertainment district.
Notice: $5.5 million of available revenues a year created by the district is nowhere close to covering two-thirds or even half of the bond payments, which are almost $20 million annually.
Finally, city officials and Power & Light executives often have talked about the better days ahead, when the district eventually would ramp up revenues to better cover debt expenses.
That hasn’t worked out yet as hoped, either. The city budget shows the annual total of revenues from the district the last four years has been $5.6 million, $4.5 million, $5.5 million (estimated) and $5.4 million (projected this budget year).
The one overriding lesson from the entire Power & Light District project is this: The city in the future must do a better job estimating the true costs of projects to taxpayers, never again exposing them to this kind of financial miscalculation.