Kansas City spent millions to subsidize Power & Light. Amid COVID, it might refinance
As Kansas City grapples with falling revenues, it will look to refinance a mountain of debt it issued to help develop the Power & Light District in downtown.
Officials say the move could save the city millions in the next couple of years to help offset deep budget cuts the city may have to make to weather the COVID-19 pandemic.
Since the COVID-19 pandemic brought life to a grinding halt a year ago, business hasn’t been the same. The city’s tax revenues have fallen off. Valuable city-owned entertainment centers sat vacant for months before some reopened at limited capacity.
Now the city will consider spreading out debt payments on the Power & Light District In recent years, the city has had to draw as much as $15 million in a fiscal year from the general fund to help pay off that debt because the district hasn’t generated enough revenue to pay off the cost of creating it.
Kansas City Mayor Quinton Lucas and manager Brian Platt are expected to present an annual budget proposal to the City Council on Thursday. Where last year’s $1.7 billion budget, introduced weeks before COVID-19 upended the city, added police officers and firefighters and eliminated fares on buses, this budget will likely be about cutting costs.
To help shore up the budget, the City Council will consider a plan to refinance bonds the city issued to build huge swaths of the Power & Light District, said Tammy Queen, the city’s finance director. Councilwoman Katheryn Shields, the council’s finance chair, said she talked to city staff about the proposal in recent weeks.
Included in the refinancing is KC Live!, an outdoor entertainment area surrounded by bars forming a square block of downtown. In the past, thousands have packed the district for Royals playoff games, World Cup soccer and, most recently, last year’s Chiefs Super Bowl run.
But even before the COVID-19 pandemic, the area didn’t make enough money to pay off the bonds the city issued to build it. Without refinancing, the city would have to use about $13 million in general fund proceeds to help make debt payments in the fiscal year starting May 1, Queen said. That would grow to $19 million in the fiscal year starting May 1, 2022.
Queen said the annual payments would have continued to climb anyway.
“The pandemic makes that worse,” she said.
The plan is to take advantage of lower interest rates and spread out debt payments to reduce the coming year’s payments to about $5 million, saving the city about $8 million between April 1 and March 31, 2022. The city is currently expected to finish paying off the bonds in 2033. Under the proposal, the payments wouldn’t stop until 2040.
The bonds to be refinanced helped construct the KC Live! block, One Light and Two Light luxury apartments and restaurants and stores along Main and 14th streets downtown.
In 2014, the city refinanced another set of bonds for the district when it faced rising pension costs.
Queen said the city also routinely considers refinancing debt when it can take advantage of lower interest rates and save money.
Over the life of the refinancing, she said, the city would save about 2% of the cost of the current payments.
Queen said Lucas and Platt’s budget proposal would include the plan. But council will have to separately approve an ordinance authorizing the new bonds sometime this spring.
This story was originally published February 10, 2021 at 12:40 PM.
