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Lawrence and Douglas County

Lawrence and Douglas county

Town Talk: City would pay $24M in lease payments for proposed rec center, complex would include special sales tax; land transfers, including sale of Kmart Distribution Center property

June 15, 2012

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News and notes from around town:

• New details are starting to emerge on a proposal to build a regional recreation complex in northwest Lawrence, and the idea isn’t getting any cheaper. But a new memo from City Hall still suggests the community is in line to get a good deal.

Here are the key points as I understand them:

— Local builder Thomas Fritzel and his company would build a 165,000-square-foot indoor recreation center and sell it back to the city on a lease-purchase agreement. The terms of that agreement would be: the city would pay a $100,000 per month lease payment for the next 20 years. If your calculator starts to smoke at numbers of such size, that’s $1.2 million per year or $24 million for the 20-year period. At the end of the 20-year period, the city would own the facility. It will own the ground from the very beginning.

— Perhaps at this point, you are recalling that city officials once indicated the city’s share of the project would be closer to the $13 million to $16 million range. Well, that is still true, but it gets complicated. (I’ve noticed that tends to happen when you are trying to explain how $24 million and $16 million are one in the same.) Here’s the explanation: The city would pay $1.2 million per year to Fritzel. That $1.2 million is about equal to the amount of annual debt payments the city is making for several other projects that recently have been or soon will be paid off.

The key point, the city argues, is it will be using the same $1.2 million per year that it always has had its eyes on for a future recreation center. Previously, the city had assumed it would have to go out and sell bonds to finance a new recreation center. With $1.2 million per year at 20 years, that is $24 million but you won’t get a $24 million bond for that. Instead, the city is now estimating, you would get about a $16.5 million bond. The rest of the $24 million would go to pay interest on the bond.

Under the current proposal, the city wouldn’t have to issue a bond. Instead, it would make monthly payments to Fritzel.

— A special sales tax district also has come into play on this project. The city is proposing that a special 1-percent transportation development tax be charged on all purchases made at the recreation center and the approximately 100 acres of commercial property that is envisioned to surround the center. The special 1-percent tax would be used to pay for the costs of the roads to serve the recreation center and the commercial development. A cost estimate for the road infrastructure hasn’t yet been finalized. As a note, the $24 million doesn’t include any infrastructure costs, such as roads, sewers or water lines.

— More formal opposition from neighbors also has entered the equation. I don’t have all the details, but the city has acknowledged that neighbors have filed a formal petition to protest the proposed commercial zoning for the property. The protest petition means the rezoning would have to receive four votes instead of three at the City Commission in order to be approved. Based on my reading of the tea leaves, getting four votes won’t be a problem. Financial matters, not zoning matters, will be the most likely culprit to derail this deal.

— City officials want more details about what will be included in the design of this recreation center building. In general, the $24 million cost includes a 165,000-square-foot building and 800 parking spaces. It also is expected to include multiple gyms, a fitness area, a wellness center, a indoor turf field, a walking track and other features. The city is proposing to hire Lawrence-based GouldEvans architects to review the plans, modify them to meet the city’s standards, and come up with an independent estimate of how much the building will cost to construct.

That will be a key number. My understanding is, the city is being told the building will cost about $24 million to construct, which would mean that Fritzel essentially would not make any money on the construction of the building. Or another way to look at it is Fritzel would be financing the construction of this project interest-free for the city. Again, my understanding is that Fritzel has presented this as his donation to the city in this public-private partnership. It would be a significant donation, but the city wants to confirm all the numbers behind it.

— All indications are that Kansas University continues to be very interested in building a track facility and soccer field at the site. Fritzel, it appears, also would build those facilities. Whether he would finance them on such favorable terms, I do not know.

— There is one other cost that hasn’t been talked much about with this project yet. How much would it cost the city to operate this facility? At this point, the city doesn’t have an estimate. But it will be significant. I haven’t confirmed this, but a city official told me that at 165,000 square feet this new building would be larger than all the other indoor recreation spaces the city owns combined.

I think there are other questions out there with this project, too. I think there is reason to question whether the other private partners in this project — Duane and Steve Schwada, who have proposed to donate 50 acres for the facility — are on board with Fritzel's plan. I’m not sure of the potential objections, but if their objections are strong enough, the deal could collapse.

Another question is the role Bill Self’s Assists Foundation in this. At one point, the foundation seemed very interested in donating $1 million to a major recreation center, and perhaps could help raise another $1 million or $2 million in private funds. I still think the foundation is interested in doing so. But where does that money fit into the equation? Does it go to the city, the builder, or does it pay for some expenses not yet identified?

• I spent a couple of days away from the office last week boating on beautiful Melvern Lake, which caused me to neglect passing along the weekly land transfers from the Douglas County Register of Deeds. But fear not, click here to get two weeks worth of land transfers.

Worth noting is it appears prominent real estate investor and frequent GOP political commentator Lawrence Kadish apparently has bought the property that houses the Kmart Distribution Center. According to the register of deeds listing, Kadish purchased both 2400 and 2424 Kresge Road from a trust led by Micheal O’Neill and Gayle B. Wilhelm. It appears Kadish owns the real estate that houses several Kmart stores across the country as well.

On a slightly smaller scale, it also appears some industrial property near the railroad tracks in East Lawrence has changed hands. Rockchalk Real Estate LLC — which lists Lawrence resident Carol March as its resident agent — has purchased the property at 1010 E. Ninth Street. I’m not sure what is housed there, but it is near the property that Star Signs occupies at the end of Ninth Street. Rockchalk purchased the property from Tyler N. Thone.

Also perhaps worth noting, to some, is it appears Kansas Attorney General Derek Schmidt and his family have purchased a new home in Lawrence. I’m not sure if he already lived in Lawrence or is new to the community. It would be interesting sometime to see how many statewide elected officials and cabinet members who serve in Topeka choose to live in Lawrence.

Comments

patkindle 2 years, 6 months ago

spend, spend spend thats what we do in lawrence nothing is finer than spending for the greater good expecially when it is coming out of someone elses pocket hope and change spread the wealth of the other guy

ksarmychick 2 years, 6 months ago

Yup 7.5 million in interest from the taxpayers over 20 years....that's $375,000 a year paid to Fritzel.

Eride 2 years, 6 months ago

Figuring out how much the operating costs will be and the revenue structure used to help pay for them should be one of the first things done...

This project and the library seem like huge wastes of taxpayer funds at a time when more important infrastructure projects are having trouble being funded.

d_prowess 2 years, 6 months ago

I think the Library and this project can't be cast in the same light that you seem to be doing.
The Library is much more of a community benefiting project than anything else. While the Rec Center is definitely for the benefit of the community members as well, it also is being positioned to have a significant revenue producing component to it since it is being designed at a size to specifically attract athletic tournaments, and the dollars that come with them, to Lawrence.

Eride 2 years, 6 months ago

The Library serves only a small portion of the population. A portion, that if anything, will be further reduced going forward as digital books become more and more mainstream. Spending 20+ million dollars to rebuild the library is a foolish waste of money when our roads need overhauled, our fire department needs trucks that aren't 20 years old, our police need a new headquarters, our water and sewage system needs major infrastructure repair and enhancement, etc. The library rebuild doesn't even increase accessibility to the library! Which if anything would have been the point (IMO) of spending all of that money in the first place. Why not build one or two ancillary libraries in other parts of town for half the money?

I think your claim of the new recreation center drawing significant revenue from large tournaments is also overstated. Based off the current plans as-is, garnering such large tournaments are unlikely. There won't be enough field space to hold any of them! And nearby cities already have very nice facilities that DO have enough field space to hold such events. Will the center be able to hold large soccer tournaments? No. Large tennis tournaments? No. Large track tournaments (other than KU tournaments)? Maybe, depends on what KU builds there and if KU wants to share, I am going to guess "No." Basketball? No.

The majority of the operating cost of this place is also going to be on the backs of the taxpayers. Until they actually bother attempting to calculate a revenue and expense model, color me skeptical.

jafs 2 years, 6 months ago

The library expansion was voted on by voters.

Perhaps they should put this rec center proposal to a vote?

Bob_Keeshan 2 years, 6 months ago

Derek Schmidt has lived in Lawrence for years, including the time he was representing his state senate district and the last time he was on the ballot in 2008. My kids used to go to school with his kids, and that was five years ago.

I guess so long as it didn't bother his so-called constituents it was OK, right?

Flap Doodle 2 years, 6 months ago

Sounds like the game with three cups and a ball.

somedude20 2 years, 6 months ago

wait, I thought the game was two girls and a cup...is that wrong?

blindrabbit 2 years, 6 months ago

Why would any tea-party, right-wing Republican who works in Topeka want to live in liberal, open-minded, progressive Lawrence. We don't want them anyway, can you imagine Brownback, Kobach, Klein and O'Neal fitting into enemy turf and adopting the Lawrence "lifestyle". Actually, I heard the Herr Kobach was looking at some property between Lawrence and Lecompton; hope he invests in some good security.

bornherelongago 2 years, 6 months ago

Are you suggesting that liberal, open-minded, progressives are violent? That sounded an awful lot like a threat to Republicans rabbit. You might want to think about all of those words you just used to describe Lawrencians. I have lived here all of my life and am proud to be a registered Republican. And I've never once threatened a left wing liberal. How's that for open minded?

Steve Jacob 2 years, 6 months ago

I really don't mind spending the money on a rec center that will bring people to town. It might even become a convention center, and the money will flow into town. I just hope we don't "co-sign" anything, the city should not take the risk for private companies. And the 20 year lease terms stays the same regardless if the Fritzel goes under or changes hands.

And TIF is still a secret tax and a small part of the population that will never patronize a TIF area.

blindrabbit 2 years, 6 months ago

All for the Rec. Center, but you talk about The City walking through a mine-field! The more I think about this, the more potential problems come to mind, especially with the strong ego's of Fritzels and Schwada's.

blindrabbit 2 years, 6 months ago

bornhere: I am a lifelong moderate Republican, but not of the ilk of those I mentioned in my prior post. The right-wingers hijacked the GOP years ago, and I am stubborn enough to say that I still support what is left of the moderate GOP. I in no way am threatening to anybody, but if you feel that I am maybe you might speculate on why the gentleman mentioned might feel out-of-place. He is making his own bed with his repressive concepts.

sherbert 2 years, 6 months ago

Sounds like the city is using fuzzy math to me, as much as I think the rec center itself sounds great.

shanep 2 years, 6 months ago

Sounds expensive. Does our little Ville really have that kind of bread? I would like to see more information about the other $1.2 million a year debts we are about to pay off.

pizzapete 2 years, 6 months ago

Does the city go to rent-a-center when they need to purchase new office furniture, too? Why isn't the city issuing bonds to buy the land, build the structure, and own it outright in addition to keeping all of the revenue it produces? Why such a sweetheart deal for the developer?

Chad Lawhorn 2 years, 6 months ago

The city contends that with the $1.2 million a year they have to spend on they project they could only issue. $16.5 million in bonds. In other words, they could only build a $16.5 million project. The rest of $24 million ($1.2 M x 20 years) would pay interest. The city believes — and this is probably the key question out there — that the building Fritzel is proposing has a value of about $24 million. Thus, the city contends, the proposed lease-purchase arrangement with Fritzel is a way to essentially finance the building interest-free. They're characterizing that arrangement as a gift or a donation from Fritzel. I've got a call into Thomas Fritzel to get some comment from him. My understanding is the city will run the center and keep all the revenues from the center itself. Anyway, for what it is worth . . . I tried to explain all this in the article, but it is complicated, so I thought I would give it another shot.

kustomguy 2 years, 6 months ago

Any more news if they will include an ice rink in the new rec center?

Chad Lawhorn 2 years, 6 months ago

No ice rink in the current plans. Thanks, Chad

blindrabbit 2 years, 6 months ago

I attended a forum at SW Middle School about 4 years ago about future rec. needs in Lawrence, hosted by Bonny. I mentioned the need for a ice rink, and though I was not asked to leave, it was apparent my idea was not appreciated nor taken seriously. The reaction was not from Bonny a couple of high-faluters in the audience.

About 15 years ago there was a group (CrystalSports) I think, that had the idea of a privately financed ice rink; ownership (funding) was to be by selling a fixed number of shares (I think the price then was $10,000 per share). Location for the facility was to be on City owned land near what is now, the tennis center, West on Clinton Parkway. From what I remember, there were several potential share holders lined up

It was hoped that revenue would be generated from from rental fees for recreational ice skating, figure skating training, recreational and club ice hockey and perhaps from KU participation. Anyway, the proposal did not progress to the actual selling of shares; maybe the potential operating costs killed the concept. Anyway, I was ready to apply for the Zamboni job.

Carol Bowen 2 years, 6 months ago

Yes, I got a brush off when I suggested something they don't want. This rec center has exclusive energy and interest.

patkindle 2 years, 6 months ago

ok heck, it is just someone elses money build the ice rink too that would be so cool , ha ha

Patricia Davis 2 years, 6 months ago

Would some one please separate the Fritzels, LJW, Schwada, and Compton? It's like going to a tragic-comedy without a program.

countryguyks 2 years, 6 months ago

This is the biggest bunch of Bull Hockey I have ever heard !

This Rec Center will be as big of a success as the Lawrene Bus system !

Eileen Jones 2 years, 6 months ago

The bus does not even travel as far west as the proposed rec center. How will kids get there?

This is for the developers, not the people. I don't want to pay for it.

Eileen Jones 2 years, 6 months ago

One thought crowds out all others:

How much is the city commission getting in kickbacks?

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