Upward of $1.7 billion taxpayer dollars are on the line this April.
After years of planning and negotiations, the Kansas City Royals want to demolish six blocks of the Crossroads district to make way for a shiny new baseball stadium.
But first, they will need voters to agree to tax themselves for four decades to subsidize the Royals and the Kansas City Chiefs.
Jackson County voters will see a lengthy item on the April 2 ballot asking to repeal and replace a sales tax that would otherwise evaporate in 2031. Essentially, passage would use the 3/8-cents sales tax revenue for a new Royals stadium and improvements for Arrowhead Stadium.
To answer your most pressing questions, The Beacon spoke with Jackson County Legislators Sean Smith and Manny Abarca, who have been involved in some of these negotiations.
The exact ballot language is below:
"Shall the County of Jackson repeal its countywide capital improvements sales tax of three-eighths of one percent (3/8%) authorized by Section 67.700 of the Revised Statutes of Missouri and impose as a parks sales tax of three eighths of one percent (3/8%) authorized by Section 644.032 of the Revised Statutes of Missouri for a period of 40 years, to provide funding for park improvements, consisting of (1) site preparation and clearance, developing, constructing, furnishing, improving, equipping, repairing, maintaining, and operating both Arrowhead Stadium and its surrounds, and a new baseball stadium and its surrounds, to retain the Kansas City Chiefs in Jackson County, Missouri and the Kansas City Royals in Kansas City, Jackson County, Missouri pursuant to long term leases; and (2) refinancing debt obligations previously incurred to finance or refinance improvements to the Harry S Truman Sports Complex?"
What does the ballot measure actually do?
A 3/8-cent sales tax in Jackson County already funds maintenance and repairs for Arrowhead and Kauffman stadiums. Because the sales tax is earmarked for the Truman Sports Complex, the Royals cannot use these funds for the team’s downtown stadium plans.
A “yes” vote would repeal the existing sales tax, set to expire in 2031, and replace it with a new sales tax that is not restricted to the Truman Sports Complex. The money would be used to repair Arrowhead Stadium and to construct and maintain the new downtown stadium. It also extends the tax until 2064.
A “no” vote will continue funding Truman Sports Complex — which includes Arrowhead Stadium and Kauffman Stadium — using the existing 3/8-cent sales tax until 2031.
The Jackson County Legislature will need to take action after the April election to actually authorize the tax, and its decision may be informed by the lease agreements and community benefits agreement. Even if voters approve, the Legislature could still vote not to authorize the sales tax.
The sales tax is expected to generate $54 million per year, which would be split between the Chiefs and the Royals.
To cover upfront expenses for the construction of the new stadium, Jackson County could take out a loan that would be paid off using the sales tax revenue.
Who decides how to spend it?
This money is controlled by the Jackson County Sports Complex Authority, or JCSCA, which would disburse it to the teams.
Before the Chiefs or the Royals can use it, the money must first pay off debt obligations. That could include stadium construction if the county finances it through a loan.
After that, the Chiefs and Royals would submit expenses to the JCSCA for reimbursement.
“The Sports Complex Authority is kind of like your staff accountant, making sure you submit your receipts for your expense report,” said Smith, the county legislator.
Sports Radio 810 WHB reported that between 2007 and 2012, only 9% of the Royals’ sales tax revenue was actually spent on maintenance and repairs. The rest had been spent on things like salaries, cable, utilities and payroll taxes, approved by the JCSCA.
What strings are attached to the sales tax money?
The ballot language itself is broad.
The $54 million a year generated by this sales tax can be used for demolition in the Crossroads, construction and furnishing, maintenance, repairs and operations at Arrowhead Stadium and the new baseball stadium and the hotels, offices and other Royals-controlled development around the new ballpark.
“The ballot language is so nebulous that it can be spent on whatever is deemed appropriate by lease,” Abarca said. “It could include components of the community benefits agreement, beautification around the stadium, infrastructure, that kind of thing.”
Who else is going to help pay for the downtown stadium?
Out of the $1 billion that this sales tax will direct toward stadium costs over 40 years, about $300 million will actually be able to be used for construction.
The rest will need to pay for interest on the loan for the new stadium, as well as $200 million in debt for Truman Sports Complex.
That leaves a $700 million funding gap. The Royals plan to ask Missouri and Kansas City taxpayers to fill the rest of that gap. Those numbers likely will not be made public until after the April 2 vote.
Have the Royals proved that they need this money?
In short, no.
For development projects like apartments receiving a tax break, Kansas City agencies are required to complete a third-party “but-for” analysis.
For that kind of study, an independent financial expert looks at a project’s cost to calculate how much of a tax incentive is needed for a project to be financially practical. In other words, “but for” the incentive, the project would not be possible.
That kind of analysis has not been conducted for the Royals stadium. The new stadium may or may not be possible without the sales tax revenue — we simply don’t know, because the Royals have not made the financial details of the project public.
Decades of economic research suggest that government subsidies for stadiums are almost always poor investments because any economic benefit is usually displaced from other areas of the city and pales in comparison to the size of subsidies.
Using a method called “contingent valuation,” economists estimate that the intangible benefits of having a baseball or football team are only worth $10 million to $30 million.
Have the teams signed a lease with Jackson County?
The teams signed a lease agreement with the JCSCA on March 27, but the documents leave out key funding details, like how much money the Royals would contribute to the stadium and whether the team will seek money from other government sources.
However, County Executive Frank White Jr. said in a statement that the leases will not be legally binding until they are approved by the Jackson County Legislature.
Have the teams signed a community benefits agreement?
The Chiefs and Royals finalized a community benefits agreement with Jackson County, which has yet to be approved by the Jackson County Legislature.
Legislators involved in negotiations called it “historic,” but economists criticized the deal, saying it is “what a fake CBA looks like” and that it’s “entirely PR.”
Several community groups involved in the negotiations, including the Missouri Workers Center, the Heartland Center for Jobs and Freedom and the Metro Organization for Racial and Economic Equity, withdrewwhen they found the teams unwilling to meet basic demands.
How much would this tax cost me per year?
The sales tax is expected to generate $54 million per year. That’s more than Kansas City spends on bus service every year; a similar 3/8-cent sales tax that voters renewed last year generates around $40 million per year for the transit agency.
The transit sales tax generates less revenue because it only applies to Kansas City purchases, whereas the stadium tax would apply countywide.
This works out to about $115 per Jackson County adult every year, according to an analysis of Federal Reserve Bank data conducted by the Show-Me Institute, a libertarian think tank.
Sales taxes disproportionately hit lower-income households.
Have the Chiefs and Royals made a binding commitment to stay in Kansas City if the ballot measure passes?
They have made a commitment, but it is not legally binding.
The Chiefs and Royals signed a letter of intent that contains a commitment to stay in Jackson County if the ballot measure passes. It is referred to as a “nonbinding understanding.”
The Chiefs committed to stay at least 25 years at Arrowhead Stadium, and the Royals committed to stay for 40 years at the proposed downtown ballpark.
What happens if the Royals stop making money and go under?
In that case, Jackson County would likely be left with debt obligations on the stadium and would need to continue to make payments using the sales tax revenue.
“If baseball just goes bankrupt, then we could be left holding the bag,” Smith said.
The other possibility is that the teams could voluntarily leave Kansas City, although that is less likely given their written commitment. In that case, the county Legislature could vote to repeal the 3/8-cent sales tax, so long as the debt is paid off.
How does this compare to how the existing sports complex was funded?
When construction began on the Truman Sports Complex in the late 1960s, taxpayers contributed $102 million. Adjusted for inflation, this is about $950 million — for both stadiums.
In 2006, voters approved a sales tax that paid for renovations to the Truman Sports Complex for 25 years. By the time the current sales tax expires in 2031, Jackson County taxpayers will have contributed another $850 million.
What would happen if voters reject this ballot measure? Could it go to a vote a second time?
Abarca said he’s been told by the Royals that they would put negotiations on pause for the rest of the year if this measure fails.
The Chiefs and Royals have seven years left on their leases — and a new stadium takes around five years to build.
The Royals would have to start thinking about a contingency plan — which could mean they stay at Kauffman Stadium. Or they could leave Kansas City.
Is there a scenario where this money goes toward a stadium not in the Crossroads?
Probably not.
The ballot measure is not legally bound to the Crossroads location, but if it passes, the Royals will likely take it as voter approval of the Crossroads plan.
If this measure fails, the Royals may try again at the Crossroads location, or they may decide to change locations.
Who would own the land?
The Royals would purchase the land for the stadium in the Crossroads, then sell it to the county for a nominal price.
Jackson County would then lease the land to the Royals for 40 years.
The six city blocks for the stadium are worth $9.3 million in taxable value. If a stadium is constructed, these properties would become tax-exempt under county ownership.
Over the 40-year Royals lease, the property tax exemption will be worth nearly $1.4 billion when accounting for how the stadium district would increase the property value. That would affect taxing jurisdictions including the school district, libraries and the Jackson County Community Mental Health Fund.
The Royals have not followed typical procedure for tax abatements in Kansas City, which requires developers to meet with all affected taxing jurisdictions. Because the stadium deal is with Jackson County, not Kansas City, the Royals are not required to follow that process.
The libraries are in contact with the Royals to be compensated for some of the loss of revenue, but the mental health fund had not heard from the team as of March 29.
Have any political groups made endorsements?
The Royals and the Chiefs have donated a combined $3 million to the campaign pushing a “yes” vote.
Several groups have endorsed a “yes” vote, including the Fraternal Order of Police, Freedom Inc., Greater Kansas City AFL-CIO, the Hispanic Chamber of Commerce of Greater Kansas City and the Heartland Black Chamber of Commerce.
KC Tenants, the citywide tenants union, has endorsed a “no” vote, as have the Show-Me Institute, a libertarian think tank, and the Sunrise Movement Kansas City.
Southland Progress, which received a $40,000 contribution from the Royals on March 11, has endorsed a “yes” vote for Question 1.
La Raza, Forward Jackson County and Democratic Coalition Kansas City all received $25,000 each from the Royals. Freedom Inc. received $125,000 from the Royals on March 25.
This story was originally published by the Kansas City Beacon, a fellow member of the KC Media Collective.
