New figures from the KDHE show that cleanup of the former Sunflower Army Ammunition Plant could cost between $91 and $130 million, instead of the $40 million suggested by Oz officials.
Officials with Oz Entertainment Co. assured state finance officials Friday that their plans for a theme park and resort in Johnson County are still viable, despite new estimates that indicate environmental cleanup of the proposed site could cost two or three times more than the company had assumed.
But members of the Kansas Development Finance Authority remained skeptical Friday, indicating their own consultants would closely scrutinize the Oz studies and reports touting the proposed $771 million development's viability.
Those comments came in response to a Kansas Department of Health and Environment report that estimates costs of remediation at $91 million to $130 million, rather than the $40 million that Oz officials have stated.
"When I sign the consent order promising to perform the cleanup of Sunflower, pursuant to the standards of KDHE, I lose the protection of the corporate shell," said Robert Kory, chair and CEO of Oz Entertainment. "I have to be 110 percent sure of our ability to perform."
Last month, Oz Entertainment released a feasibility study, financial plan and proposed redevelopment agreement outlining how it intends to develop the theme park and resort on the 9,065 acres of the former Sunflower Army Ammunition Plant near DeSoto.
That plan called for paying about $16.7 million toward cleaning up environmental contamination. Included in that figure, Oz officials said, was about $9.3 million for premiums on insurance policies guaranteeing cleanup will be completed.
Based on the amount of debt that would be issued for the project and the revenue Oz would need to cover it, Oz officials estimate they will need to attract 2.2 million visitors per year to break even. They believe they can attract between 3.2 million and 3.8 million visitors a year.
"We still feel very comfortable with that," said Ken Becker, an investment banker with Salomon Smith Barney, which plans to underwrite the bonds that would be issued to finance the project.
But Tom Page, chair of the KDFA board, said the revised figures cast doubt on the project's feasibility.
Of the 9,065 acres at the site, Page noted, only about 55 acres would be dedicated to the theme park, and that is in an area that supposedly does not need environmental cleanup.
Some land will be reserved for green space, Page said, while other land is committed to be set aside for parks, schools and other public projects, leaving only about 5,200 acres available for other commercial and residential development.
If KDHE's higher estimates are correct, he said, the cleanup costs alone would run between $17,500 and $25,000 per acre.
But Becker said the cleanup costs would not necessarily have to come from the sale or rent of that property. He said the current plans call for developing the theme park and associated retail developments first, then using income from those developments to fund cleanup of the remaining land.
Oz Entertainment is asking KDFA to issue $246.7 million in bonds backed by sales and property taxes to help finance the project.
The KDFA board could consider that request at its October meeting if Oz can provide financial assurances regarding the environmental cleanup by that time.
-- Peter Hancock's phone message number is 832-7144. His e-mail address is phancock@ljworld.com.
No comments
Commenting is turned off for this story.