Kansas awards $66M in STAR bonds to Overland Park hockey arena. What about Olathe’s?

Kansas has awarded Overland Park more than $66 million in STAR bonds to build a supersized hockey arena and sports complex, jeopardizing prospects for a nearly identical project proposed 10 miles away in Olathe.

The decision, announced Thursday, came a few days after Overland Park submitted a study to the state showing if the dueling Johnson County hockey arenas were to be built, they would “cannibalize each other.” Developers of both projects have been seeking Kansas sales tax revenue, or STAR bonds — a major incentive program crucial to the financing of the ventures.

Now with Overland Park winning first approval from the Kansas Department of Commerce, Olathe’s project faces an uncertain future.

Ryan Brinker, spokesman for the commerce department, said the decision doesn’t necessarily spell doom for Olathe. The department is awaiting another feasibility study — this one from Olathe — before making a final determination on that project.

In Overland Park, Price Brothers Management has proposed a $400 million hockey arena, multi-sports complex and retail hub at the Bluhawk site, at 159th Street and U.S. 69. Nearby in Olathe, Woodbury Corporation plans the $300 million project called Mentum, which includes a hockey arena and other sports, entertainment and retail amenities. It’s proposed for the site of the former Great Mall of the Great Plains site at Interstate 35 and 151st Street.

The two projects are similar in size and target similar markets.

And the state’s decision on whether to award incentives to one or both projects comes at a time of heightened scrutiny for the commerce department and the STAR bond program.

The incentive was created to encourage construction of unique tourism destinations attracting visitors to Kansas. But the program has been used to subsidize what critics believe are local quality of life projects. The Star in July revealed the state does not track whether developments meet basic state requirements.

Study shows rival arenas could fail

The study commissioned by Overland Park found that development of both hockey arenas would likely cause one or both venues to ultimately fail.

The 106-page study, from Hunden Strategic Partners, shows both of the proposed arenas want to recruit an amateur hockey team and offer youth hockey programs. Likewise, the Olathe and Overland Park arenas would rely on similarly sized concerts, conventions and family shows to round out their annual event calendars.

“It has become abundantly clear that the Bluhawk and Mentum Arenas have vastly overlapping business plans, as well as markets,” the study concluded.

Study authors interviewed several local event promoters who estimated a new Johnson County arena could recruit between 10 and 35 annual events. But the metro area is already home to plenty of venues, including downtown’s Sprint Center, Silverstein Eye Centers Arena in Independence and a variety of smaller theaters, clubs and stages.

With “no significant gaps” in supply, any Johnson County arena would have to lure away existing business or grow the market to land events.

“The market is already crowded, and the two venues will cannibalize each other for concerts and other entertainment acts,” the study found.

Proponents of the Olathe project have said their proposal has a competitive edge because of its ties to Lamar Hunt Jr., owner of the Kansas City Mavericks, a professional minor league hockey team that plays at Silverstein.

His company, Loretto Sports Ventures, is set to run the 4,000-seat multipurpose arena, which would serve as the home base of the Kansas City Youth Hockey Association. It also plans to bring an affiliate of the North American Hockey League to Olathe.

But the feasibility study says that team will be in “direct competition” with the United States Hockey League team, which is planned as Bluhawk’s primary tenant. Teams from those leagues, both sanctioned by USA Hockey, are similar in the level of competition and ages of players. A contract with the United States Hockey League has not yet been negotiated.

The study concludes that Overland Park’s proposal is best suited for success.

It’s larger by 484,000 square feet and includes more activities with courts, turf, curling, training areas and retail and restaurants. The wider Bluhawk development has retail space that’s already generating sales taxes that can pay off the STAR bonds. And developers have guaranteed the arena will stay in operation for at least a decade.

Olathe officials have touted the Mentum project as a way of revitalizing the former Great Mall site. And the developer has argued the proposal will better fit the needs of the region’s youth hockey teams.

But Mentum has lagged behind the Overland Park venture, which can now move forward with state incentives. The developer hopes to break ground next year.

“We don’t believe two hockey arenas would be successful,” said Tim Danneberg, spokesman for the city of Olathe. “Ultimately, it’s going to be up to the market to decide. And if both projects go through, there will have to be bonds sold, and I believe the market will only support one.”

Under the STAR bond process, cities sell bonds to provide upfront capital for project costs. The bonds are paid back over 20 years with the sales tax generated by the development.

Brinker said the commerce department is “still going to look at the Olathe project based on its own merits.”

“This does not spell a choice between the two,” he said.

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Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas
Sarah Ritter covers Johnson County for The Kansas City Star. Formerly a reporter for the Quad-City Times, Sarah is a graduate of Augustana College.