City to consider issuing industrial revenue bonds for Rock Chalk Park project
The Rock Chalk Park project is back at Lawrence City Hall, and it hasn’t gotten any cheaper during its time away.
City commissioners at their meeting Tuesday will be asked to approve up to $40 million in industrial revenue bonds, a type of special financing that won’t obligate the city to pay for the privately owned sports facilities but will allow the project to receive a 10-year tax abatement.
Approval of the bonds is expected to be relatively routine because a majority of city commissioners in March approved a resolution of intent to issue them.
But the bond activity has provided an update on the estimated costs for the project, which includes a track and field stadium, soccer field, softball stadium and several other amenities that will be owned by a firm led by Lawrence businessman Thomas Fritzel but leased to Kansas University Athletics.
Dale Seuferling, president of the Kansas University Endowment Association, a partner in the project, said the estimated construction costs of the stadium and improvements is $40 million, which is unchanged from what developers estimated in March.
But since March, questions have been raised about the accuracy of cost estimates related to the city’s 181,000-square-foot recreation center immediately adjacent to the Rock Chalk Park project and designed by many of the same architects who have designed the Rock Chalk Park facilities.
In May, the city received a bid to build the recreation center for $10.5 million, even though the project’s architects estimated construction costs at $18.4 million to $20.7 million.
Unlike the city’s recreation center, the Rock Chalk Park facilities are not going through an open bidding process. Instead, KU officials chose Fritzel’s Bliss Sports firm to build and develop the project.
Seuferling said that despite the greatly lower-than-expected bids on the recreation center, KU officials haven’t questioned the accuracy of the cost estimates for the Rock Chalk Park project.
“We’re comfortable with the value of the project,” Seuferling said. “The scale is significantly different on this project, and we had certain standards of quality that we really insisted upon with this project.”
Seuferling referred other questions about the cost estimates to Kansas Athletics, which will be the main tenant for the project, or to Fritzel. Attempts to reach a spokesman with Kansas Athletics were not successful Friday, and Fritzel declined to comment.
It was not clear on Friday what the original $40 million estimate made in March included. An attorney representing Fritzel said he could not immediately determine whether it included the cost of shared infrastructure for the Rock Chalk Park and the city’s recreation center.
That’s important because the infrastructure costs certainly have changed since March, when the city was estimating that it would pay about $3 million for the shared infrastructure. But the final development agreement approved this summer has the city paying about $12 million of the shared costs.
City Manager David Corliss said today’s $40 million estimate for Rock Chalk Park should not include the $12 million the city is paying for infrastructure because that’s being paid for through a separate set of bonds.
Corliss said he also wasn’t sure what today’s $40 million cost estimate included.
Also creating questions about the cost of the project is a construction mortgage that Fritzel’s Bliss Sports has taken out on the Rock Chalk Park property. Emprise Bank in March placed a $17.1 million mortgage on the property.
Generally, construction mortgages are roughly equivalent to the cost of the project, with the difference being made up in cash financing supplied by the developer. In this case, a $40 million project would require Fritzel’s Bliss Sports to put up about $23 million in cash for the project.
Seuferling said large equity investments by developers are not unheard of, but he didn’t provide any details about how much cash Bliss Sports is bringing to the project. Fritzel also declined to comment.
As for the city’s role in the project, Corliss said the cost estimates largely aren’t a concern to the city because the city will not be responsible for paying any of the industrial revenue bonds. The bonds largely are a technicality in this case because Fritzel’s Bliss Sports is buying the bonds and receiving the bond proceeds. In other words, if $40 million in bonds are issued, Bliss Sports will be responsible for providing $40 million in funds to the city’s bond trustee. The bond trustee then would allow Bliss Sports to withdraw up to $40 million in funds from the account.
Curtis Petersen, an attorney with the Polsinelli law firm representing Bliss, said the bonds are being issued for tax purposes. If the sports complex were wholly owned by Kansas University it automatically would qualify for a permanent property tax exemption. But since Fritzel’s Bliss Sports will own the stadiums and facilities and lease them to KU, the project does not qualify for the automatic tax exemption. A state law, however, allows projects financed with industrial revenue bonds to receive a 10-year exemption.
Commissioners meet at 6:35 p.m. on Tuesday at City Hall.