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City starts process to approve tax abatement, sales tax exemption for Rock Chalk Park project

January 22, 2013

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Lawrence city commissioners unanimously agreed to start the process of issuing $40 million worth of industrial revenue bonds that will provide property and sales tax breaks for the proposed Rock Chalk Park.

Commissioners at their Tuesday evening meeting approved a “resolution of intent” to issue industrial revenue bonds for the Kansas University portions of the proposed sports complex planned for the area just north of the northeast intersection of Sixth Street and the South Lawrence Trafficway.

The industrial revenue bonds will qualify the project for a sales tax exemption on all construction materials purchased for the project. City officials on Tuesday estimated the exemption will relieve the project of about $885,000 in sales tax payments.

The bonds also qualify the project for a property tax abatement for all the structures at the facility, which is proposed to have a track and field stadium, soccer field, softball stadium and other amenities.

Tuesday’s action, though, did not grant the property tax abatement, but rather starts the process. That process will include a cost benefit analysis by the city, a review by the city’s Public Incentives Review Committee and another separate vote by the City Commission.

The city doesn’t yet have an estimate on the potential value of the property tax abatement. The project would have automatically been exempt from property taxes if Kansas University was proposed to own the facilities.

But instead, a private for-profit entity, Bliss Sports, led by Lawrence businessman Thomas Fritzel is scheduled to own the facilities for 50 years as part of a financing arrangement with the Kansas University Endowment Association and KU Athletics.

The private ownership makes the project ineligible for the automatic property tax exemption given to state-owned property. The $40 million in bonds will be issued by the city, but the legal obligation to repay them will rest with Bliss Sports, the city's bond counsel told commissioners.

None of Tuesday’s action involved a proposal for the city to build a $25 million regional recreation center adjacent to the KU facilities. Commissioners are still scheduled to discuss potential agreements for that project at its Feb. 19 meeting.

At least one commissioner, Mike Amyx, has expressed concern with the recreation center portion of the project. But he voted for Tuesday’s items, saying he was not opposed to the KU portion of the Rock Chalk Park proposal.

Comments

Richard Heckler 1 year, 7 months ago

"he industrial revenue bonds will qualify the project for a sales tax exemption on all construction materials purchased for the project. City officials on Tuesday estimated the exemption will relieve the project of about $885,000 in sales tax payments.

The bonds also qualify the project for a property tax abatement for all the structures at the facility, which is proposed to have a track and field stadium, soccer field, softball stadium and other amenities."

What type of fuzzy math provides our city government with the thinking that Lawrence,Kansas taxpayers don't need the help that $885,000 in sales tax would bring?

That all property taxes that could be generated from this venture is NOT revenue that WE taxpayers would like to see in the cooke jar?

What's up with this reckless economics?

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jhawkinsf 1 year, 7 months ago

So instead of paying $885,000 in sales taxes, they're going to pay zero. Of course, if this project doesn't go forward at all, as many advocate, the city would receive zero in sales taxes anyway. Meanwhile, all those businesses that sold the building materials to the developer will have had many millions of dollars spent in their stores, presumably generating significant profits and creating jobs for employees of those stores. Now, if we had any way of knowing if that money was spent locally, we'd know that there has been a significant boom to the local economy.

Your problem, Merrill, is that you want to oppose this project, but then spend the money it would generate, even if it's not built. Now that's fuzzy math.

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just_another_bozo_on_this_bus 1 year, 7 months ago

"the city would receive zero in sales taxes anyway."

The city also wouldn't have the rather sizable expenses for infrastructure and services that such a facility would require. There are reasons why taxes need to be collected.

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jhawkinsf 1 year, 7 months ago

You're correct about infrastructure. But all this activity will provide new jobs. Those people will in turn spend their wages, creating even more business activity. All that activity will produce new tax revenue for the city, state and feds. Those who sell the building materials will garner new profits, which in turn will be taxed.

I've long called for independent bean counters to weigh the benefits vs. the costs and provide that to the city. If it makes sense for the city, then do it. If not, then don't. But definitely look at both sides of the equation. Not just one, not just the other.

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Richard Heckler 1 year, 7 months ago

"The project would have automatically been exempt from property taxes if Kansas University was proposed to own the facilities.

But instead, a private for-profit entity, Bliss Sports, led by Lawrence businessman Thomas Fritzel is scheduled to own the facilities for 50 years as part of a financing arrangement with the Kansas University Endowment Association and KU Athletics.

The private ownership makes the project ineligible for the automatic property tax exemption given to state-owned property."

How does the above justify a free ride on taxes? That needs a ton of in depth explanation. How will taxpayers get their tax dollars back?

This is pure and unadulterated fraud supported by city government. . Taxpayers are the victims of the fraudulent behavior.

This is exactly why taxpayers should have the mandate to approve projects such as this.

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flyin_squirrel 1 year, 7 months ago

Why do you care about KU and Fritzel's arrangement? It is the Rec Center arrangement that involves the city, and this has nothing to do with that.

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jafs 1 year, 7 months ago

Since we seem to be offering a property and sales tax abatement on the project, it certainly does involve the city.

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flyin_squirrel 1 year, 7 months ago

That land isn't owned by the city, it is owned by Fritzel and now the KU Endowment.

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jafs 1 year, 7 months ago

So what?

Since it's owned by for profit entities, it doesn't qualify for automatic property and sales tax exemptions, which is why the city is going to grant them.

Did you read the article?

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Richard Heckler 1 year, 7 months ago

BY what authority/tax code is this decision possible?

Because we can is not good enough.

How many years of curbside recycling could taxpayers enjoy with this lost tax dollar revenue?

How is it that taxpayers do not need this money?

Again this is exactly why taxpayers should have the mandate to approve projects such as this.

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flyin_squirrel 1 year, 7 months ago

OH, now the money should be used for curbside recycling? I believe the $800k would allow you to have free curb side recycling for less than a year. I think I will take some first class venues for KU sports, as well as the chance to remove the track from Memorial Stadium over a year of free curb side recycling.

Merrill, do you cut grass or smoke it?

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Keith 1 year, 7 months ago

"Tuesday’s action, though, did not grant the property tax abatement, but rather starts the process."

You hear the term slippery slope all the time in regards to government actions, but seldom see such a clear example.

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Bruce Bertsch 1 year, 7 months ago

Good grief. All they are doing is granting the same status, eventually, to this property as any other property that is essentially owned by KU, the KU Endowment, or KU Athletics, Inc. The land is owned by an LLC owned by the Endowment Assn. and the buildings are owned by Bliss and leased to KU with ownership transferring after the $39 million construction cost is paid. If all entities were tax exempt, no action would be required, but since the LLC controlled by the Endowment is not tax exempt and Bliss isn't tax exempt, this route is required. Eventually the legislature will more likely than not exempt the entire deal, but until then, this is the only route that can be taken. Some need to unwed their panties.

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flyin_squirrel 1 year, 7 months ago

Agree, and these were the same people crying when the Big 12 was about to fold and KU wasn't being looked at by any conferences because our football stadium is smaller than some Texas High School stadiums.

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leftylucky 1 year, 7 months ago

KU athletics Inc. has a lot of debt, about 40 million in fact. The number seem staggering, but Zanger doesn't think jay hawk fans should be worried.

Pat Kaufman ,chief financial officer for kU athletics, inc. says that,,despite the debt, the,athletic department is financially sound.

In the last 10 years or so years we've funded in the neighborhood of 140 million in capital improvements. Kaufman says.(Lawrence business mag vol 2 no.4)

New television contract for big 12 football. Spent 6 million on Lew,3 million on mangino, 6 mill on gill, and they can't pay for their own sports complex. Give me a break.

Normally a general public instutional district would have an instution and the public involved in the ownership. I see a public but the instutional is a question. Is the instution, Bliss ,courtesy of RCP llc actual owner of record.hidden for 50 years.

Poor KU athletics Inc having to resort to deceit. What a sham.

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just_another_bozo_on_this_bus 1 year, 7 months ago

The city shouldn't be participating in this wholly non-transparent, Rube Goldberg method of subsidizing Fritzel's construction projects. Make this a state project, and the facilities state property, as they should be and eventually will be, and these machinations aren't necessary. The city shouldn't be a party to mysterious accounting tricks for the benefit of no one but Fritzel.

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Richard Heckler 1 year, 7 months ago

Taxpayers cannot use the facility as far as I know....

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patkindle 1 year, 7 months ago

investors are focused on finding the best place for thier money so lawrence is in competition with any other town to attract investors, (this project may differ a bit , but the idea is the same) any city will do what ever they can to invite growth to heir community it is simply who whats to give the most to attract the dollars. the onis who fall short,, simply stay short

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Richard Heckler 1 year, 7 months ago

More tax dollar shake downs on the horizon .....

This entire list is potential tax dollar shakedowns by developers with the help of city government.

Also note item 6 = absolutely a shakedown. http://www.lawrenceks.org/planning/documents/pcagendaJan13.pdf

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Richard Heckler 1 year, 7 months ago

"Either grow or Die" is nonsense.

24/7 tax abated construction growth does not in any way secure new economic growth. In fact one reason for new developments is for property taxes. However abatements and other tax incentives do away with property taxes. Where is the growth?

Saturated markets do not produce economic growth because they are a tax dollar drag on the community which means property owners are forced to pay up to make up for the loss. How does Lawrence afford to remove tax revenue from so many new projects?

Property taxes is the one source of revenue that is locked in that must be paid. All other tax dollar revenue connected to a project is nothing but speculation.

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jhawkinsf 1 year, 7 months ago

"Either grow or die is nonsense" - I googled ghost towns of Kansas and Wikipedia lists 325 meeting that definition, including some local notables as Lecompton and Stull. They didn't grow. They died.

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