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Archive for Thursday, September 23, 1999

OZ RESORT WOULD REQUIRE MORE VISITORS TO BREAK EVEN

September 23, 1999

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The Kansas Development Finance Authority plans to hire an outside accounting firm to review the feasibility study.

The proposed Wonderful World of Oz theme park near DeSoto would have to draw an additional 103,000 visitors a year to break even, according to a revised feasibility study, but Oz officials still insist they can meet that target.

The latest figures were submitted to the Kansas Development Finance Authority this week and show the theme park would have to attract at least 2.28 million visitors a year to meet operating expenses and debt requirements.

KDFA asked for the revised estimates earlier this month after Oz Entertainment Co. said it had made a mistake in its original projections.

The original break-even estimate was based on the idea that the theme park would be partially financed with $70.5 million in tax increment financing, or TIF bonds that would be repaid with taxes that otherwise would go to Johnson County, the city of DeSoto and the DeSoto School District.

Oz also wants the state to issue $202 million in sales tax revenue, or STAR bonds, to help finance the $763 million project.

Under state law, however, Oz is prohibited from using school district taxes to repay any TIF bonds. As a result, Oz had to adjust its financing plan by lowering the amount of TIF financing to $44.7 million and increasing the amount it would have to borrow from private lenders.

It also had to adjust for payment of about $8.2 million a year in taxes paid directly to the DeSoto School District.

Economic Research Associates, a consulting firm that performed the original feasibility study, said those changes affect the details of the project, but not its overall viability.

"In ERA's opinion, the modified assumptions have not changed materially the expectation of positive public benefits and business viability of the project," the consultants said in their report.

Although 2.28 million visitors a year represents the "break-even" number, ERA said a "conservative" estimate of actual attendance would be 2.8 million per year, and the "expected" attendance should be closer to 3.2 million per year.

Oz hopes to acquire the 9,065 acre Sunflower Army Ammunition Plant near DeSoto and develop it into a theme park and resort.

KDFA, the agency that would issue the bonds and manage the land transfer, plans to hire an outside accounting firm, Deloitte & Touche, to review the feasibility study.

But before the agency will take any steps toward issuing the bonds, KDFA attorney Rebecca Floyd said Oz officials need to provide several more pieces of information, including:

  • A more detailed explanation of the financing structure.
  • Additional information about how Oz would finance the development if Johnson County commissioners refuse to approve issuing TIF bonds.
  • Copies of the underlying studies about costs and attendance that were used as the basis of ERA's feasibility study.
  • And drafts of insurance policies and other financial guarantees that Oz would be able to clean up environmental contamination on the property.

Oz officials have estimated it would cost about $40 million to clean up that contamination, but officials at the Kansas Department of Health and Environment say the cost more likely would range between $91 and $130 million.

The U.S. Environmental Protection Agency is preparing to schedule a public hearing on a "preferred corrective measure" to clean up chemical waste at 49 solid waste management units at the site.

That plan would involve removal of about 8,000 cubic yards of soil -- or roughly 2,000 dump truck loads -- that would have to be stabilized and disposed of in a landfill.

-- Peter Hancock's phone message number is 832-7144. His e-mail address is phancock@ljworld.com.

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