Politics & Government

How Wichita ballpark got $40 million in state incentives

How Wichita is planning to pay for a new $75 million baseball stadium

Here's a breakdown of how the new baseball stadium in Wichita will be financed, based on numbers provided by the city on March 14.
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Here's a breakdown of how the new baseball stadium in Wichita will be financed, based on numbers provided by the city on March 14.

Wichita doubled what it would pay to build a new baseball stadium — to $75 million — during private negotiations with a Triple-A baseball team.

It also doubled what it sought in state incentives to help pay for the stadium and nearby amenities — to $40 million — without conducting a feasibility study on the more expensive stadium.

City and state officials approved the new price tag quickly.

They and others who back the stadium say it is worth the increased taxpayer investment because it will be a catalyst for economic development, drawing retailers and restaurateurs and providing a quality-of-life amenity to help recruit and retain a talented workforce.

“Truly, this project is going to make us that great next American river city,” Jeff Fluhr, president of the Greater Wichita Partnership, said at the stadium’s groundbreaking ceremony.

Wichita’s ballpark is one of a growing number of projects funded with sales tax revenue bonds, or STAR bonds, which are meant to be used for tourist attractions that draw new money into the state.

“We view that as a positive that the project got bigger,” said Robert North, chief counsel for the Kansas Department of Commerce who approved STAR bonds for the stadium in November as interim secretary of the department.

“Our purpose in investing in these projects is to get more people to the state,” North said. “And it’s going to get the people that are coming to, in this case, Wichita to get them to stay even longer, stay overnight, go out and eat, bring new sales tax into our community and the region and the state.”

But Kansas lawmakers say Wichita’s stadium project exposes a problem with the state’s economic incentives programs, which they call overused and under-examined.

In the past 20 years, Kansas has awarded more than half a billion dollars in STAR bonds. That money would have normally been collected by the state and used on programs and services, like schools, health care, prisons and higher education. Instead, it has funded projects such as Derby’s dinosaur park, Hutchinson’s salt museum, Manhattan’s Flint Hills Discovery Center and the Kansas Speedway.

Kansas doesn’t track if those projects deliver on their promises of more tourism dollars.

BEHIND OUR REPORTING

Why did we report this story?

Wichita’s stadium project is completely taxpayer funded, through a combination of financing tools. We wanted to find out the city’s and state’s expectations for the project — and the potential taxpayer risks associated with it.

Who did we talk to for this story?

Besides the sources quoted in this story, we consulted local economic experts, city officials in charge of economic development, community members and outside experts to better report this story.

Where did we find this information?

Information about the stadium’s price change was obtained through an analysis of past city council meetings, statements by public officials, public records and interviews. We obtained (and read) thousands of pages of documents related to STAR bonds through the Kansas Open Records Act from the city and the Kansas Department of Commerce. Official statements submitted by the city to the Municipal Securities Rulemaking Board tied to the sale of the bonds also provided details about the STAR bond project.

Where can I get more information?

If you have specific questions about this article, please contact Chance Swaim at cswaim@wichitaeagle.com or 316-269-6752.

Lawmakers want more scrutiny of the projects, including Wichita’s ballpark, to make sure the incentives aren’t being wasted on “pet projects that line the pockets of select developers,” said Kansas Rep. Kristey Williams, an Augusta Republican.

“More often than not, the promises are much greater than the returns,” she said. “And we can be optimistic, and we can support efforts like this, but it has to be really transparent in order to maintain the public faith.”

Consultant not consulted

The Kansas Department of Commerce, not the Legislature, approves STAR bond projects. The state is essentially passing up 20 years of new sales tax in each STAR bond district.

Communities must submit a feasibility study projecting tourist numbers and whether a project can generate enough new sales tax to justify the taxpayer investment.

Wichita submitted two studies to the state for its STAR bond project.

One used 10-year-old projections from the east bank STAR bond district, which included the city’s projected visitors for the WaterWalk. Those projections were not updated with the actual number of visitors, which has never been counted or reported to the state.

The second plan included a study by Development Strategies, a real estate and economic development consulting firm hired by the city, that found it was feasible to build a $37.5 million stadium supported by $20.5 million in STAR bonds.

The city later adjusted that study’s numbers and reused other parts of it without contacting the consultant.

“It is our understanding that the baseball stadium project and planned development in the district have changed over the past two years, though how these changes might impact the 2017 results has not been evaluated,” said Andy Pfister, senior associate at Development Strategies, in a written statement. “If requested by the city, we would be happy to revisit the study and evaluate the potential fiscal impacts of the current proposal.”

An independent, updated feasibility study of a $75 million stadium wasn’t done.

Even so, the state doesn’t hold cities accountable for the projections they submit to the state.

Wichita City Manager Robert Layton said the ballpark is expected to generate more development than originally considered in the Development Strategies feasibility study, which could generate more sales tax than estimated.

“So I would say the city was conservative in its projections,” Layton said.

Layton said the city adjusted the Development Strategies tax-revenue projections and did its own “stress test” on its adjusted numbers that showed the project made sense.

“We’re using STAR bonds to leverage more and to get more. So we’re leveraging more resources and we’re getting a larger project than what we had anticipated,” Layton said.

Cities making their own projections for STAR bonds projects was identified as a potential problem in a 2015 Legislative Post Audit Committee report.

“Allowing the beneficiary to contract for these reports and provide future projections creates a strong risk of bias in the finished report,” the committee found.

“Given the investment the state is asked to make in foregone tax revenue, it is likely more appropriate to require an independent assessment of such proposals,” the audit says.

When do STAR bonds work?

For STAR bonds to work as intended, a project needs to draw visitors who otherwise wouldn’t have come.

The Department of Commerce guidelines say 20% of visitors to STAR bond districts should come from a different state and 30% should come from at least 100 miles away.

Whether the Wichita baseball stadium and surrounding development will bring in that many out-of-area visitors will probably never be known. Those numbers are hard to track, and the state doesn’t require cities to do so, said Ryan Brinker, spokesman for the Kansas Department of Commerce.

The Development Strategies study projected 463,400 visitors a year to the stadium and 888,400 a year to the west bank STAR bonds district. Of those visitors, 21% would come from out of state, the study said.

Development Strategies projected average attendance of 4,000 people a game, based on comparable cities with Double-A teams. Most Triple-A ball clubs have higher attendance numbers than that, but not the team Wichita is getting. The Baby Cakes’ average attendance in a larger New Orleans market last year was 3,827.

The stadium project has drawn comparisons to the WaterWalk district across the river, which also used STAR bonds but is seen by many as a failure.

It was envisioned by the city as a “24/7 urban village,” according to plans submitted to the state in 2007, with destination retail and restaurants, offices and housing.

That project got $13 million in STAR bonds. A city feasibility study said it would draw 3 million visitors a year and spur $87 million in private investment.

“It will preserve and augment the magic of the Arkansas Rivers to a whole new generation and generations to follow,” the project plan said.

STAR bonds did pay for elevation of the Keeper of the Plains statue and footbridges to the area surrounding it.

But destination restaurants never came. Its major attraction, a Gander Mountain outdoor store, closed in 2017. That building has been leased out as office space for King of Freight, a freight brokerage.

The state has not tracked either visitors or private investment.

It remains to be seen whether the stadium district will have a different outcome.

Wichita Mayor Jeff Longwell said recently that he’s not willing to accept the WaterWalk STAR bond district as a failure. He said the ballpark could spur new development there.

“I don’t think that it does this community any good to continually cite the failings of WaterWalk. No one wants to associate with a failure . . . If we’re going to come together and promote Wichita, we need to quit this notion that we have a failure, and it’s going to remain a failure, and it will be a failure for 32 more decades,” Longwell said.

“That needs to stop,” he said.

WaterWalk was a success in at least one way. Its STAR bonds were paid off early, thanks in large part to retail sales at Gander Mountain.

Wichita’s stadium district has two planned commercial development areas: a mixed-use area at the Metropolitan Baptist Church site north of the stadium and riverfront development that could include restaurants and retail. New sales taxes captured at those businesses would help pay off the STAR bonds.

Williams said she thinks STAR bonds can be a good tool, but they should benefit state taxpayers and not just developers and sports teams. She wants to make more information about the projects available, including the return on investment for taxpayers and the names of private parties who stand to benefit from the projects.

“It seems like there are a growing number of cases where the risk is taken out of the equation but the reward is still provided by the taxpayers,” Williams said.

“In some communities, large arenas and stadiums have made huge promises to those communities, but instead of driving back more money for local businesses, it’s actually hindered local businesses,” she said.

“In Wichita, I think we’ll just have to wait and see.”

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Chance Swaim won the Betty Gage Holland Award in 2018 for distinguished service to honor and protect the integrity of public dialogue on America’s college campuses. He has been a news reporter for The Wichita Eagle since 2018. You can contact him at 316-269-6752 and cswaim@wichitaeagle.com.
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