When staffers with the Kansas City manager’s office explained to City Council members last week how future revenue increases in a so-called “stadium impact area” could be used to pay off the city’s share of the new Royals stadium, they included a graphic of two racks of ribs.
On the left rack, 10 ribs are supposed to represent tax money that’s currently funding city services like trash and snow removal, road resurfacing and dozens of other things.
On the right is the same 10 ribs in 2031, the year after Royals leadership hopes the downtown stadium opens, with an extra one and a half ribs added to represent new money generated within the stadium impact area.
That rib-and-a-half, the argument holds, will go toward paying down what the city owes on $615.2 million in bonds it approved Thursday to help fund the project. That leaves the rest of the ribs to fund city services, same as before.
But economic and public policy experts who spoke to KCUR are dubious of the financing plan — and the metaphor.
“You're taking ribs from other parts of the city,” said J.C. Bradbury, an economist at Kennesaw State University who studies sports economics.
That’s because the extra money spent by people visiting a new stadium comes from somewhere else, Bradbury said. It’s not new spending.
“There's no such thing as a free stadium,” he said. “It comes in an opportunity cost of people not spending that same amount of money elsewhere in the community, where it would generate taxes elsewhere to fund other things.”
“These are magic ribs,” he said. “You're not going to generate enough new revenue to pay for itself.”
Council members also learned last week that the city will ultimately be on the hook for nearly $1.4 billion over the 30-year life of the agreement to fund the stadium.
Still, Kansas City Mayor Quinton Lucas said the deal is good for taxpayers.
“I think we have probably one of the best deals in Major League Baseball for a local market,” Lucas said after Council’s Thursday approval. “What you have seen is a strong and robust public-private partnership, a whole lot of give and take.”
‘A propaganda advocacy document’
The city hired the real estate consulting company Hunden Partners to conduct an analysis on how much revenue the stadium impact area would generate.
The Chicago company projected that the impact area — which encompasses the Crossroads, Westside, Longfellow, and Union Hill neighborhoods — will generate $688 million from increases in tax revenue over a 30-year period starting in 2030, when Royals officials want the stadium to open.
According to Hunden’s calculations, that amount, plus money from a hodgepodge of other sources — revenue from a smaller TIF district at the stadium development itself, support from the state of Missouri, restaurant tax revenue, gaming revenue, and on-street parking fees — will add up to an estimated $1.4 billion, just enough to cover the city’s obligation.
Bradbury threw cold water on the numbers.
“This is a propaganda advocacy document,” Bradbury said of the Hunden report.
The consultant’s findings seemingly go against decades of economic research suggesting sports stadiums do not generate enough economic benefits to justify the public money that cities pour into them.
“50 years of research has shown that stadiums do not generate new economic wealth in communities,” Bradbury said. “It doesn't happen. It's one of the most solid empirical results in the history of economics.”
According to Kristan Wong Karinen, a research analyst at the nonpartisan organization Good Jobs First, which studies economic subsidies, growth in cities is normal, regardless of a new baseball stadium. But that means the cost of city services will also naturally increase.
“More services are going to be needed, but the city is only going to have the same amount of money to pay towards those services,” Karinen said.
To use the ribs analogy, the same number of ribs won’t be as filling in 30 years, she said. “Over time, the number of ribs that are the equivalent of city services is going to decrease.”
Karinen called the incentive deal a “mega subsidy.”
“This could end up falling on the shoulders of everyone who lives in Kansas City, not just people who are in the stadium impact area,” Karinen said.
Hunden Partners representative Mike Thiessen told city officials last Tuesday that Kansas City’s situation is unique because the stadium is moving from a suburban area to a downtown that can better support economic activity.
“Any of the money that's generated is new, incremental revenue — it's the rib and a half, it's not the 10 ribs,” he said. “You're being asked to contribute incremental growth revenue, not baseline growth revenue, and that changes the economics.”
Bradbury said the setup is akin to robbing Peter to pay Paul.
“You're actually going to start skimming off some of that extra revenue that was going to be funding other things like police and roads out of there as well,” Bradbury said.
‘Falling on the shoulders of everyone in Kansas City’
6th District Council member Johanthan Duncan, one of two who voted against the two stadium financing ordinances last week, tried to get Council to tack on amendments that would direct City Manager Mario Vasquez to find more revenue for the city to fund the stadium, and another requiring the Royals to release its stadium financials to the public.
Both failed.
“We want transparency in this deal,” Duncan said. “These are public dollars being used for a private business. I think it is a reasonable expectation that that private business then share what are the profits that they are making off the public dime.”
The development agreement City Council passed in August says the Royals have no obligation to repay the $615.2 million in city bonds. If future revenue does not match the debt obligations, the city is still on the hook to cover the shortfalls.
Kansas City already knows what happens when a development that was supposed to pay for itself falls short. The Power and Light District’s revenues have consistently fallen short of the debts it needs to pay back, forcing Kansas City to cover an average of $10.5 million each year, the Kansas City Business Journal reported.
And future money the city redirects to pay off stadium debt is revenue it’s not spending on other services, said Bradbury.
“It's kind of like when you take water out of the swimming pool,” Bradbury said. “Doesn't matter whether you take it from the deep end to the shallow end — you're still taking it out.”
“This is just not a smart decision to make from a public finance perspective,” he said.
