KC, OKC got Topgolf for nothing but Wichita offered millions; project study had flaws
The city of Wichita is moving forward with a $10.2 million subsidy for a Topgolf sports attraction and neighboring development — but other cities in the region didn’t pay anything to land the golf-themed business and there’s a glaring error in the economic study that justified the project.
Oklahoma City and Overland Park officials told The Eagle they didn’t spend any public money to get Topgolf, a popular sports entertainment company owned by publicly traded golfing behemoth Callaway Golf Co., a company currently valued at $5.9 billion.
“We gave them no incentives, no reimbursement,” said Sean Reilly, a spokesman for Overland Park city government.
“Topgolf did not receive any incentives from the city,” said Joanna McSpadden, Oklahoma City’s economic development program manager. “That’s the idea, right? We don’t have to incentivize everything, we can have some growth on the private dime, too.”
Topgolf is a popular golf-themed business that combines a restaurant and bar with a high-tech driving range. Hitting bays are climate controlled for comfort and the balls are equipped with chips that allow golfers to see a variety of data on a teeside shot monitor and compete with their friends.
The Eagle has learned that the feasibility study on Wichita’s project, planned for the northeast corner of Wichita, is five years old, was predicated on a different and larger project proposed by a Topgolf competitor, and was paid for by the same developers who selected the consultant that prepared it.
The city did not commission its own additional, independent study for the 2021 project.
Wichita City Council member Jared Cerullo said when he learned of the plan a week before the council voted on it, “I started questioning why the city would allow a very successful multi-billion corporation to receive this $10 million break on its sales taxes.”
He said he’d have rather seen those incentives go to fighting blight in poorer parts of the city than to an upscale recreational facility in a wealthy area.
He also said he felt misled by Topgolf’s vice president of real estate development, Todd Waldo, who came to Wichita to advocate for the deal and met with him and other council members before the public meeting where the deal was approved on June 1.
“I personally don’t believe Mr. Waldo was truthful with me when he told me that subsidies such as Wichita’s were, quote, very common,” Cerullo said.
Waldo declined to comment on Cerullo’s account of the interaction.
The study used this year to explore the feasibility of a Wichita Topgolf addressed the possibility of competition for visitors from the Overland Park Topgolf, but ignores a similar facility in Oklahoma City, an oversight that could affect the tourism draw at the smaller Wichita attraction.
Also, it was written in 2016 and never updated before being used for Wichita’s 2021 proposal.
Wichita’s current $10.2 million subsidy is earmarked for the second phase of a larger project that has already helped pay for the development of the Wichita Sports Forum, a privately owned venue for basketball and volleyball leagues and tournaments; and the renovation of the Stryker Complex, a city-owned soccer stadium and 11-field sports venue privately managed by the Sports Forum.
Wichita’s Topgolf subsidy was approved by the City Council on a 4-3 vote, as the sixth amendment to the development agreement for the project near K-96 and Greenwich.
City Manager Robert Layton said not all of that $10.2 million is going to Topgolf itself, which legally can only be directly reimbursed for development costs up to $3 million from the STAR bond proceeds.
But Topgolf will also benefit at least indirectly from a concurrent plan for neighboring development, currently slated to include a hotel and possibly apartments.
And $4.2 million of the $10.2 million subsidy was already spent to acquire 22 acres of land — at $190,000 an acre — that Topgolf will share with surrounding development.
Council member Jeff Blubaugh called it a “$10 million giveaway.” He said he might have voted for a stand-alone attraction, but the expansive nature of the project beyond Topgolf forced him to vote no.
“It’s not an incentive used for an entertainment venue/restaurant,” he said. “They tied in additional retail space, they’ve tied in apartments.”
The subsidy gives businesses in the STAR bond district a competitive advantage over other restaurants, hotels and apartment complexes in the area, he said.
“I think it does more harm to businesses in northeast Wichita than what it does good,” Blubaugh said.
What are STAR bonds, what do they do
The money to bring Topgolf comes from STAR bonds, a state-authorized program that allows local governments to borrow money to subsidize developers’ projects, and then pay it back by diverting sales tax income that would otherwise go to state and local government coffers.
The STAR bond program was created by the Legislature and first used in 1999 to fund the Kansas Speedway NASCAR track.
It was designed primarily to spur tourism — dollars that are especially valuable in Kansas because they represent outside money introduced into the state’s economy instead of dollars that are already here simply changing hands.
“That’s definitely one of the primary drivers for STAR bonds,” said Bob North, chief counsel for the state Department of Commerce. “There’s also a quality of life component (but) the visitation is important.”
The program has grown into its own industry.
Since 1999, the state has issued a total of nearly $745 million in STAR bonds, subsidizing everything from a soccer stadium for Sporting KC ($150 million) to a hospital and outdoor activity center with animatronic dinosaurs in Derby ($34.8 million).
Other Wichita-area projects include:
- Wichita’s River District, anchored by Riverfront Stadium, the Keeper of the Plains statue and the River Vista Apartments, which received $47 million in STAR bonds.
- Goddard’s Olympic Park, a multi-sport athletic complex with stadium swimming facilities and accompanying hotel and retail spaces, which received $25.8 million in STAR bonds.
While some projects have thrived, others have struggled.
One of the biggest failures was Kansas City’s Schlitterbahn Water Park, built in 2013 with $85 million in STAR bond support and permanently closed in 2019 after the 10-year-old son of Kansas Secretary of State Scott Schwab was killed on the “Verruckt,” then the world’s tallest and fastest water slide.
The Kansas City/Wyandotte County government approved a plan in November to raze the park and replace it with a development centered around youth sports, to be subsidized by $130 million in STAR bonds.
Faulty analysis of feasibility study
When Wichita Destination Developers — the group developing the K96-Greenwich district — wanted to amend the STAR bond plan to include incentive money for a golf entertainment amenity, they commissioned New York consulting firm Canyon Research Southwest Inc. to conduct the required feasibility study.
But Canyon’s study actually evaluated a proposal by DRIV Golf Lounge+Brewhouse, a Topgolf competitor.
When the study was done in 2016, DRIV was proposing a $32 million Wichita facility with 64 hitting bays on three levels.
The Topgolf project approved June 1 is a $26 million project with 52 bays on two levels — about half the size of the 102-bay Oklahoma City Topgolf that opened in 2015.
The Canyon study used tourism estimates for the entire STAR bond district to determine that DRIV would attract a quarter of its visitors from out of state and a third of visitors from more than 100 miles away.
But the study failed to factor in a possible loss of tourism due to the presence of an Oklahoma City Topgolf, which is roughly 160 miles south of Wichita and the closest facility of its kind.
“The closest TopGolf locations to the Wichita MSA are in Overland Park, Kansas; Centennial, Colorado; and Allen and Dallas, Texas,” the study states.
Eric S. Lander, the Canyon executive who authored the study, said he probably omitted the Oklahoma City facility by mistake.
“I guess at the time, I probably wasn’t aware that that one opened, maybe,” Lander said. “I don’t know. It’s been five years.”
The only time Lander mentions Oklahoma City in his feasibility study is as a potential market from which to draw tourists.
“Given the size of the primary trade area population and proximity to such potential markets as Kansas City, Oklahoma City and Dallas-Ft. Worth, out-of-state visitors from outside of a 100-mile radius are estimated to account for 60 percent of the District’s total annual visitation or 295,000 visitors,” the study states.
Kansas City is 10 miles from Overland Park, which, like Oklahoma City, has its own 102-bay Topgolf. The Dallas-Fort Worth area boasts four Topgolf locations.
Asked if factoring in another Topgolf attraction close to Wichita would change the tourism numbers, Lander said, “My feeling is that it wouldn’t have moved the needle much.”
Wichita Destination Developers said visitation information for the Oklahoma City facility was not available when the study was completed, but they could not explain why its existence went unmentioned.
“The two facilities will operate distinctive market areas with little or no cannibalization on customer counts. Therefore, Oklahoma City Top Golf location will not have a material adverse effect on the visitation estimates contained in the Study related to the Wichita location,” the developers’ email statement said.
Lander said that since the STAR bond district already has several regional attractions, Topgolf won’t have to rely on luring tourists of its own, even though that’s supposed to be a prerequisite of STAR bond funding.
“People, visitors aren’t necessarily going to come just for that one attraction,” Lander said. “It’s sort of a critical mass. The more attractions you bring in, the bigger the draw.”
The Commerce Department was acting on the information available in 2017 when it approved the concept of a subsidy for Wichita’s golf entertainment center, officials said.
“We have requested additional information and will review it when it’s received,” North said in an e-mail.
City Manager Layton said he plans to follow up with Canyon and determine whether the report needs to be adjusted before this month’s plan amendment goes to the state for final approval.
He said the K-96 & Greenwich STAR Bond District overall is a shining example of how STAR bonds can be used to create flourishing districts.
But even as officials cite the district as a STAR bond success story, they maintain that Topgolf never could have built a regional attraction without state incentives.
“The kind of regional draw that we wanted would not have been built without the assistance,” Layton said.
Topgolf spokeswoman Kara Berry also said the state incentives were necessary for the multi-billion-dollar company to build a Wichita facility.
“The economic incentive associated with the STAR bond was critical to the economic viability of bringing Topgolf to Wichita,” Berry said.
She declined to speak to whether economic incentives were offered for Topgolf to build the prospective facility they ultimately abandoned in George Laham’s development next to the STAR bond district.
Twists and turns of a golf attraction
The concept of a golf attraction has taken several turns along the way.
The original DRIV plan was abandoned some time after the project plan was filed, but was picked up by another golf company, BigShots.
For a while, BigShots and Topgolf moved forward on parallel tracks, with BigShots in the STAR bond district, and Topgolf planning a facility on Laham’s private land just outside it at 13th and Greenwich.
“I think everybody that was involved with both projects was concerned about the ability of the market to support two, but that really didn’t impact anything as far as our work with BigShots,” Layton said.
Ultimately the companies merged their projects into the current plan, in which BigShots will own the facility in the STAR bond district and Topgolf will lease it and run it for their profit.
Layton said the city had no role in that.
“I received a call out of the blue indicating that Topgolf was not going to 13th and Greenwich and instead had partnered with BigShots,” Layton said. “We were shocked, frankly, when they told us that they had a tentative deal.”
Cerullo said it’s obvious why the plans changed.
“As soon as Topgolf found out they could get a $10 million handout if they simply built 2 miles north, they pulled out of their plan at 13th and Greenwich,” he said. “I don’t blame them for doing that. If I were the head of Topgolf and found out I could save $10 million on my taxes with such a move, I would have changed course too.”
Assistant City Manager Scot Rigby, who oversees economic development, said he found it hard to believe that neither Overland Park nor Oklahoma City used incentives to lure Topgolf.
“I would be surprised if there wasn’t some direct benefit that subsidies provided to them,” he said.
“They may not directly say, ‘Hey, this is for Topgolf,’ but they may have improved water lines, sewer lines, streets, those type of things to make it eligible for development.”
In Oklahoma City, McSpadden said Topgolf is in a special assessment district, which allowed the city to build streets and other infrastructure for the developers, for which they’re now paying via an extra levy on their property tax bill.
Specials are a familiar thing to Wichita homeowners, since that’s the mechanism the city uses to get neighborhoods to pay for their own street and road repairs.
“That’s not a true incentive because it gets paid back” by the property owners, McSpadden said.
In other Midwest cities with Topgolf
Around the central Plains, Topgolf incentives are all over the map.
Michael O. Geisel, city manager of the St. Louis suburb of Chesterfield, Mo., said the city didn’t give Topgolf anything.
He said Topgolf chose Chesterfield because it was a good place for their business with the right combination of good demographics and adequate land for the facility.
“We love them, they’ve been a great addition,” he said, adding, “We didn’t give them one penny, one incentive, nothing . . . That’s just not our way.”
Omaha attracted Top Golf with what Nebraska calls an Enhanced Employment Area Occupation Tax, said Kevin Anderson, who heads the city’s economic development department.
It allows the development to benefit, in this case, from an additional sales tax on food and drink sold within the project area after the improvements are up and running.
“Those occupation taxes amounted to a projected just over $5 million,” Anderson said.
It is similar to what Kansas calls a Community Improvement District Tax, although the Kansas version charges additional tax on all purchases in the area, not just food and beverages.
In addition to STAR bonds, Wichita has two CIDs around K-96 and Greenwich to benefit developers and boost investment.
One CID charges a 1.2% extra sales tax, with 1.0% for incentives promised to the Cabela’s outdoor products store and 0.2% for improvements to the nearby freeway interchange.
The other CID charges a 1% additional sales tax, all of which goes to interchange improvements that its outline says will “support the development of the K-96 STAR Bond District.”
A key difference between Wichita’s and Omaha’s Topgolf projects: Wichita is subsidizing development on open land in an upscale part of town, while Omaha’s lured Topgolf to an aging shopping center.
Anderson described Omaha’s Topgolf site as “an area in need of some redevelopment work.”
“They had some challenge in that (property) acquisition, as well as demolition and site preparation for a complete redevelopment,” he said.
Centennial, Colorado, a Denver suburb, gave Topgolf about $1.5 million in incentives, said Neil Marciniak, the city’s economic development director. “They were building along a storm water flood-plain area so there were significant improvements alongside that to channelize that flood-plain.”
The incentive included no up-front money and was given as rebates based on the sales tax actually generated by Topgolf after it was up and running. The company later reported that it got 75% back the first year, 66% the second year and 50% in years three through five.
Changes coming with STAR bonds in Kansas
Kansas acted this year to tighten up its STAR bond rules.
A 2015 audit recommended taking economic impact studies out of the hands of “local government or its private partners,” but it wasn’t until this year that the state moved to put the secretary of Commerce in charge of “the scope, conduct and methodology of the study.”
Under a new law taking effect July 1, the economic analysis used to justify Wichita’s Topgolf wouldn’t be sufficient because of the inherent conflict of interest in allowing proponents of STAR bond projects to hire their own consultants to analyze whether a plan is worthy of government support.
Going forward, the Commerce Department will pick the consultants who prepare feasibility reports, although the developer or local government will still have to pay for the analysis.
The new law will also ban public officials from working for STAR bond developers and require attractions to track visitors to prove whether the projects are meeting their tourism goals.
North said the Commerce Department is working with several vendors to figure out how to do that.
“If you’re running a museum and you require everybody who walks in the door to sign a guest book with their address and so on, then that’s kind of the easier end of things,” he said. “If you’ve got the Sports Forum and you’ve got a van full of 10-year-old players and maybe one or two adults and you’ve got thousands of folks in and out through the day, it’s a little more difficult thing to track.”
To justify a state subsidy, proposed STAR bond amenities are required to bring in at least 20% of visitors from out of state and at least 30% of visitors from outside a 100-mile radius.
“You’ve got to have enough spending in the district to help pay for some of the infrastructure and improvements that go into making the attraction . . . that’s a benefit because that’s how you pay for all the cool stuff,” North said. “And then you’ve got that slightly more indirect benefit that visitors are going to spend dollars across the community, across the region.”
In a city like Wichita, visitors will probably end up being counted more than once as they go to various attractions in the STAR bond area, but that’s OK, North said.
“There are going to be visitors that come exclusively, I think, because they want to participate in the golf attraction,” he said. “There’s also going to be visitors that come to Stryker, and maybe their tournament’s over and they stay another day because there is a Topgolf, and they want to do some of the other activities that are available there.”
The hope is that some of visitors to the STAR bond project will spill over into the surrounding community.
“People are going to go across the street from the district and they’re going to eat, they’re going to spend the night, maybe they’re going to go to the Exploration (Place) museum downtown,” North said. “That is just added economic impact for the community.”
This story was originally published June 20, 2021 at 4:09 AM with the headline "KC, OKC got Topgolf for nothing but Wichita offered millions; project study had flaws."
