How Wichita is planning to pay for a new $75 million baseball stadium
Wichita city officials have been moving forward with a baseball stadium project at lightning speed, as far as government projects are concerned.
It’s moving so fast that the facts haven’t quite had a chance to catch up.
For example, the amount of land the city plans to sell for $1 an acre has changed in the past two weeks, and so have the financing numbers for the project.
But a surprise private development agreement first reported in The Wichita Eagle on March 3 has stalled the process. Since then, the city has made efforts to be more transparent, hosting a social media town hall and postponing a vote on the development deal.
Still, the ballpark plan is full of unknowns.
From big questions: “What will the ballpark look like?” and “How exactly are we paying for it?”
To more big questions: “What land are we selling?” and “Who are we selling it to?”
To still more: “How much of this is being paid for with everyone’s property taxes?”
And: “Will the team even come?”
On Tuesday, the City Council could decide whether to approve the land sale and development deal. The council moved its meeting to 6 p.m. to allow more people to attend and seek answers.
“So hopefully everyone comes with their questions on Tuesday, and even if we are here until midnight, at least the public will have a good understanding as to how we’re going forward,” Vice Mayor Jeff Blubaugh said.
“We don’t want the perception to be, ‘Oh, this is something that they just rushed through, and all the facts weren’t together, and the public didn’t understand what was going on.’ So that’s why we’re trying to make the best of it,” he said.
Here’s what’s at stake:
The city has agreed to complete an $83 million project on the west bank of the Arkansas River to attract a Triple-A Minor League Baseball team to Wichita. That includes a $75 million stadium, a pedestrian foot-bridge and riverbank improvements.
The team won’t come if the city doesn’t sell land around the stadium to Wichita Riverfront LP for $1 an acre, Wichita Mayor Jeff Longwell has said. Exactly what land will be sold hasn’t been determined, the development agreement says.
Other than Lou Schwechheimer, the principal owner for the Baby Cakes, ownership of Wichita Riverfront LP has not been disclosed. Longwell said Thursday the agreement won’t be executed until a list of investors is provided, but he didn’t give a timeline for that to happen.
Wichita officials have said the land to be sold for development near the stadium is as much as 4.5 acres. But on Saturday, Longwell said the amount is likely to be less than that.
In its presentation on March 5, the city said the team owners wanted 7 to 9 acres to develop, and that’s why it was offering an option to buy an additional 2.63 acre parking lot at First and Waco. That presentation sketched out four potential areas for sale, one north of the stadium, two on the riverfront and one near Maple and McLean.
“The team agrees that the riverfront should be protected and should be part of gathering space for the public,” Longwell said Saturday.
Meanwhile, construction at the ballpark is in full swing — without a stadium design or a signed contract with the team. Lawrence-Dumont Stadium was demolished months ago and work started last month on site grading, utilities, infield walls, dugouts and access tunnels for the new stadium. The council is expected to vote on the $26.8 million second phase of the construction contract on Tuesday, too.
Paying for the project
The stadium project is funded entirely by taxpayers.
The question is, which taxpayers? Those who use the area or everyone in the city?
In a recent radio interview, Longwell said, “If you don’t go there, you’re not paying anything for this.”
That’s not true. According to numbers the city provided to The Eagle on Thursday, $16 million of the stadium will be funded by general obligation bonds.
Those are paid back by citywide taxes.
Longwell later clarified his statement, saying the stadium wouldn’t add to Wichitans’ “general tax burden.”
A plan to pay for the stadium hasn’t been completed. The boundaries of a community improvement district that’s supposed to generate $13 million in sales taxes haven’t been established.
Citywide taxes are wrapped up in more than half of the financing for the project. But how much it costs the city depends largely on the success of the development around the stadium.
The projection of $16 million in general obligation bonds came in the last two weeks. It had been $21.5 million at the last City Council meeting.
The financing numbers provided to the public at the last City Council meeting were incorrect, said city spokeswoman Elyse Mohler.
“There was an error creating the chart and the wrong numbers were used,” Mohler said.
Numbers for other types of financing also have changed. Here’s how the ballpark project is being financed, as of Thursday.
▪ STAR bond district: $40 million
STAR bonds are issued by the state to finance major commercial, entertainment and tourism areas. State and local sales tax in a set district are used to pay off the debt over 20 years.
Boundaries: West of McLean between Second and Kellogg, east of Osage between Second and Douglas and east of Sycamore between Douglas and Kellogg, excluding WaterWalk Hotel Apartments.
▪ General obligation bonds: $16 million
General obligation bonds are backed by citywide taxes, including property tax from the city’s debt service mill levy, and usually fund long-term infrastructure projects like roads, parks, bridges, transit and public facilities.
▪ Tax increment financing district: $14 million
Tax increment financing allows the city to divert increased property taxes collected within a defined area to a project to pay down debt over 15 years. If property values don’t increase as projected, TIF funds are backed by general obligation bonds.
Boundaries: Same as STAR bond district but also includes the area between Pearl Street and Texas Street east of Seneca.
▪ Community improvement district: $13 million
A CID designation allows the city to add up to 2 percent sales tax in the district. If the added sales taxes don’t produce the projected $13 million over 22 years, CID funds are backed by general obligation bonds.
Of the four potential subsidies for the project, only one is guaranteed to stay the same. The Kansas Department of Commerce awarded Wichita $40 million in STAR bonds, which divert sales tax from the area to help pay for the project.
Wichita has used STAR bonds in the past, such as $14.7 million for Wichita WaterWalk, which included the Keeper of the Plains monument platform, pedestrian walkways, fountains, waterfalls and a water show.
The city projected WaterWalk would create 1,250 full time jobs and generate annual retail sales of over $78 million, according to state documents. It was projected to bring up to a million new visitors to Wichita each year.
It’s hard to say if it hit those projections.
State standards for STAR bonds require cities to make projections for things like the number of annual visitors from out of state. But there’s no legal requirement for cities to track or report that information, and Wichita has not done so.
The stadium project district, which is across the river from WaterWalk and includes the Advanced Learning Library and Wichita Ice Center, is projected to increase permanent jobs from 230 to 800 by the time the it is fully built. The district is expected to draw 888,400 people a year, with 1 out of 5 coming from a different state and roughly 1 out of 3 coming from at least 100 miles away. That’s what Wichita told the state in 2016, and the city still cites the number of expected visitors.
Outside of STAR bonds, the rest of the cost of the stadium project is backed by the city’s general tax fund, which comes from citywide sales and property taxes. If enough money isn’t spent in the district, the city will have to figure out how to cover the cost.
“The general obligation bonds are always in place as a backdrop for any of the obligations that we have, . . .” Longwell said at his weekly briefing on Thursday. “We’re not 100 percent sure if we’ll have to use any general obligation bonds yet.”
Longwell stopped short Thursday of guaranteeing not to raise property taxes or move funds from other services if the baseball development doesn’t meet projections.
According to the private development agreement, the city can buy back the land from Wichita Riverfront LP for the same price if it doesn’t build enough commercial space within a certain period. The earliest the city could buy it back would be nearly three years after the stadium opens.
Blubaugh said he thinks the stadium will be great for the city.
If everything goes according to plan, the stadium project will be a catalyst for downtown development, attracting new businesses along the river and downtown, Blubaugh said.
Sales in the district would grow from $6.7 million in 2016 to $50 million in 2030, according to Wichita’s projections from the STAR bond feasibility study.
But if things go wrong, Wichita taxpayers could be on the hook for tens of millions of dollars in debt and a brand new, empty stadium.
Blubaugh said he doesn’t think that will happen.
“The city has been very, very, very conservative in their projections to make sure (the numbers are right),” he said. “Because we wouldn’t want to go back to the taxpayers ever and say, ‘Hey we’ve got to raise your taxes to pay for this baseball stadium.’ So we’ve been very, very conservative.
“I think we’re going to exceed all of our expectations and our estimates,” he said.
Shawn Henning, director of finance for the city, agrees that the city’s estimates have been conservative and carefully calculated to minimize impact on general taxpayers, even if there’s a shortfall.
“It’s our expectation that we have minimized any potential risk,” Henning said. “If there should be a shortfall, we do have some other potential revenue to the naming rights, which will be held as a reserve to help cover any shortfall.”
But, like several other key parts of the stadium plan, naming rights still haven’t been secured.
The city expects to receive $250,000 a year for 20 years from a revenue-sharing agreement on naming rights with the Baby Cakes. The city points to that money as $5 million of the $38 million it expects to get from the ball club by 2042 that could help pay off the stadium.
None of the $250,000 a year is guaranteed.
The baseball team’s owners would have first dibs on any money collected for naming the stadium. Under an agreement the city approved in October, that money would first go toward “soft and hard costs as determined by the team,” which could include but not be limited to “signage, print and radio sponsorship, suite, tickets to Ballpark events, concessions, merchandise, promotions, parking, etc.”
The next $250,000 a year, if available, would go to the city. Any amount above that would go into the team’s coffers.
Of the $38 million the city estimates will come from its dealings with the ball club’s owners, only $7 million is guaranteed, according to the city’s agreement with the team.
That comes from a $350,000-a-year stadium management agreement over 20 years. The city has already committed the first six years, or $2.2 million, of that to pay a settlement it reached with the Wingnuts, the independent baseball team displaced by the Baby Cakes.
Longwell said the benefits of the project outweigh the risks.
“Everything we do does not come with 100 percent risk guarantee,” Longwell said. “But if we’re going to continue to move this city, I think, in the right direction, there’s times when we need to take calculated risks.”
Blubaugh said he thinks the problem with the deal so far is the way information has come out about it.
“We should have had a much better communication plan,” he said of providing details to the public ahead of a decision.
“This came out reactive, and I think it’s really a good plan, but it’s all in the messaging and how we’re delivering it. And that’s why we’re having to kind of go on the fly here, changing the council meeting,” he said.
Asked if he thought the private development agreement would pass on Tuesday, Blubaugh wouldn’t say.
“I don’t ever want to say never, you know,” he said. “No one wants to say for sure anything until we understand all the facts and any issues that are brought up by the public.”
If the facts of the deal still aren’t clear, Blubaugh left open the possibility the vote could be delayed again.
“It could pass. If there was some issue that we still didn’t have good information on, we could put the vote off until the first meeting in April. . . . But we’ve got to make sure the public’s on board with this, because this is a big investment for Wichita.”
If you go
What: City Council meeting that will include consideration of a deal to sell land near the stadium for $1 an acre to baseball team investors to develop
When: 6 p.m., Tuesday, March 19
Where: City Council chambers, 1st Floor, City Hall, 455 N. Main
The meeting is open to the public, and you don’t have to sign up in advance to speak about the ballpark deal. Speakers are generally limited to 5 minutes.
Contributing: Carrie Rengers of The Eagle