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Agreements indicate multiple ways for Fritzel entities to profit from Rock Chalk Park project

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An entity controlled by Thomas Fritzel will be the exclusive provider of all concessions on the Kansas University portions of the proposed Rock Chalk Park project, according to documents released today.

And that's not the only way Fritzel or his related entities could turn a profit from the project that has been billed largely as a public sports village.

I’ve quickly read through four separate agreements involving Fritzel’s Bliss Sports, Kansas University Endowment’s RCP LLC and Kansas Athletics. The documents are complicated, and I’m not promising I’ve caught every detail. I’ve put a call into Fritzel for more explanation, but haven’t yet heard back from him. But here’s what I’ve gleaned from the documents.

• A signed operating agreement between KU Athletics and Bliss Sports states Bliss “shall have the exclusive right to control and manage concessions associated with any use of the stadiums, including athletics-sponsored events, developer-sponsored events and third-party sponsored events.”

In other words any event held on the KU portion of Rock Chalk Park — this agreement doesn’t cover the city’s recreation center — will have its concession needs served by Bliss Sports.

But the agreement goes on to say that “any net revenues” generated from concession sales will be deposited into a special escrow-like account called a “maintenance fund.” That fund can be used by KU Athletics to make repairs at Rock Chalk Park over the years.

That sounds like a pretty good deal for the university, and it may well be. But what is not clear from the agreements is what, if any, controls will be placed on how Bliss runs the concessions.

For example, would Fritzel be allowed to create another entity — let’s call it Fritzel Foods — that would serve as the supplier for the Rock Chalk Park concessions business? If so, the hypothetical Fritzel Foods could purchase the supplies needed for the concessions business, turn around and sell the supplies to the concessions business for a profit, and seemingly none of those profits would have to be deposited into the maintenance fund.

I’m not saying that’s the intention, but I am asking whether there is anything that prevents it.

The details related to the concessions business were surprising because Fritzel had not made any such details clear when he gave an interview to the Journal-World on Jan. 18.

“It will be run just like Allen Fieldhouse, 100 percent like Allen Fieldhouse,” Fritzel said when describing whether his entities would be in a position to make any money off the Rock Chalk Park. “The important thing is Kansas Athletics controls everything.”

The agreements released by Fritzel today were signed Feb. 12. The documents indicated they replaced a previous set of agreements signed on Oct. 12. What those agreements called for is not known.

• Bliss, in addition to KU Athletics, will have the right to charge “reasonable parking fees” for any event on the KU portion of the project. Both Bliss and KU Athletics must agree to the parking rates, but the agreement states: “It is the intent of the parties that as a general rule, at a minimum, parking fees will be charged for conference-wide collegiate athletic events; statewide, regional, national and world-wide sporting events; and third-party sponsored events.”

City Manager David Corliss told me this afternoon that the city will want to create a separate agreement to make it clear that the City Commission would have to approve any parking fees on a per-event basis. It has been proposed that the city would contribute money to help build the parking lots that would serve both the city and KU portions of the project. Corliss said that means the city will want to be involved in setting parking policy for the development.

Like the concession revenue, the parking money would go into the maintenance fund. Like the concessions revenue, the questions of how Bliss would be allowed to operate the parking system remain.

• Bliss would have the authority to use any of the stadiums and other KU-related facilities rent-free. KU Athletics would have limited ability to deny Bliss use of the facilities. Bliss could host private athletic events at the park without city approval. Any non-athletic events hosted at the park would require a special use permit from the city.

• As previously reported, KU Athletics will pay $1.3 million a year for 30 years to Bliss Sports to cover Bliss’ costs to finance the project. Also as previously reported, Bliss will maintain ownership of the facilities for 50 years. What has not been previously disclosed is that the lease also calls for KU to pay lease payments in years 31 through 50 as well. Fritzel made no mention of that provision when interviewed by the Journal-World in January.

The rate of the lease for years 31-50 will be the “fair market rental value” of the property as determined by Bliss and agreed to by Kansas Athletics.

City commissioners tonight are scheduled to take their biggest vote yet on the recreation center project. Commissioners are being asked to approve a development agreement that spells out how the city would help pay for infrastructure at Rock Chalk Park, rebate approximately $1 million in building permit and other city fees the project normally would be required to pay, and provide a 10-year property tax abatement for the project.

Corliss said his recommendation will continue to be for commissioners to proceed on the project. “I’m not seeing anything in these agreements that is still not a good deal for the University of Kansas and the community,” Corliss said.

Commissioners meet at 6:35 tonight at City Hall, Sixth and Massachusetts streets.

The city now has posted the full agreements. They can be found here.

Comments

irvan moore 1 year, 5 months ago

if mr. corliss is not seeing anything in these agreements that that is not a good deal for the city the commissioners might want to hire a city manager with better eyesight

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notaubermime 1 year, 5 months ago

I always click on that link just because the petition is by "Nick Danger".

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msezdsit 1 year, 5 months ago

fritzel is just being a good samaritan, honest, he's not doing it for the "multiple ways he could profit.

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hedshrinker 1 year, 5 months ago

How can the city get in bed with this, which seems totally designed to benefit the developer?I just have to say that I am of course pre-inclined to oppose anything which lines wealthy developers' pockets, along with KU Endowment and KU Athletics. Where is the benefit to the City's regular citizens in this when the City would be at the bottom of the priority list for use of the facilites even , much less considering the cost of land, building and maintenance. Plus it's out on the western fringe, ie not accessible to many regular City folks. No wonder Fritzel neglected to mention the totality of these agreements and/"modified" them in talking with the media, etc. I'm sorry, this totally reeks, unless I'm missing something.....I'd be in a state of Bliss if I was negotiating this sweet deal, too.

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Larry Sturm 1 year, 5 months ago

I think Fritzel should pay all of his taxes on other projects before a penny is spent on this project.

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Phil Minkin 1 year, 5 months ago

After being burned by Fritzel at the Oread, Varsity House, on fake grass issues why does the city continue to deal with this tax evader?

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COjayrocks 1 year, 5 months ago

AS INDICATED ABOVE, these agreements have to do with Bliss and KU Endowment's relationship not the relationship between the city and Bliss, or the citizens and Bliss for that matter. Fritzel made a VOLUNTARY DONATION to the KU Athletics Department and everyone is trying to crucify him for what he could hypothetically make off of concessions, he has a right to make money off of his generous offer. Too many people out there on a witch hunt.

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COjayrocks 1 year, 5 months ago

I promise he won't make money off of recreation center membership sales, parking fees at the recreation center or smoothie sales inside.

This really has nothing to do with the recreation center, in fact, it is fairly obvious now that Chad has an axe to grind with the Fritzel family.

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likeitis 1 year, 5 months ago

How about simply adding an agreement that all proceeds from the operation of this venture will be invested in the Lawrence Public School system?

This would be clear evidence that there is no intent to exploit the public trust.

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repaste 1 year, 5 months ago

Because tax dollars are helping pay for it. We build the parking lots, he gets the money. It might be a stretch to call it a donation ---more like an investment for him, with a 50 year return. Quasi- legal.

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pizzapete 1 year, 5 months ago

I guess it isn't enough that we're paying for all the infrastructure to make his land usable or that we're paying him twenty-five million to put up a building that will make his land more valuable to rent or sell for other commercial uses. It's not enough that we're allowing him to buy building materials tax free, setting aside a special tax district for his profit, and giving him a ten year tax abatement to boot. To squeeze even more money out of us Fritzel is going to set up his own little tourist trap as well. It doesn't matter if you live here or are from out of town, if you want to go to a KU event and need to park, eat, drink, etc., you'll have to pay Fritzel extra for that, too.

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COjayrocks 1 year, 5 months ago

Wait a second, lets get something straight here. The CITY approached KU and Fritzel for the partnership, not the other way around. The success of Rock Chalk Sports Park has absolutely zero to do with the location of the Recreation Center. KU gets tax abatements from the city all the time, but since Fritzel's name is attached suddenly he's "a crook" for doing his job as a developer.

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pizzapete 1 year, 5 months ago

I didn't say he's a crook. I'm just pointing out the many ways he's going to benefit financially from this project. With the financial benefits he's set to realize you'd think he'd at least be donating the land and perhaps split the expense to build the recreation center with the city. What benefit is there to us that we're buying a recreation center from him?

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COjayrocks 1 year, 5 months ago

Here's the main question to me. Why can't he benefit financially? Is that wrong? Second point: he is NOT benefiting financially from the rec center, which after all is what this is about at the meeting tonight anyway. I would imagine he is pretty indifferent toward the construction of the rec center, to be perfectly honest, it doesn't impact what events can and cannot come to the RCSP.

Why should he "at least be donating" anything? Would you? Would anyone else on this website "donate" something to the city because they have more money than someone else? That is completely foolish to think or expect that. It comes across as entitled... Again, why should he "split the expense to build the rec center" if everyone on here shouts at him for trying to make a profit instead of another charitable donation? Actually, he was going to do the city a favor early in the process by effectively financing the rec center as well for the city much like he is doing for the KU Endowment but everyone threw their arms in the air stating he was trying to pull a fast one when in fact, he was allowing the city to get a better product for a smaller price tag.

The benefit to you, the city, is you are paying $25M for a facility that will be valuated FAR higher than that upon completion. And the land? Try buying that lot that the rec center is going to sit on for $785,000 on the open market after this all is built. Impossible. Also, that $785,000 actually will be PAID for by Fritzel when he is tagged with an additional $785,000 bill for the infrastructure costs that THE CITY will now not have to pay because their cap will remain at $25M before and after that $785,000 contingency.

I don't care if everyone has a problem with the way the city does things, but this is not the fault of Fritzel because he is proposing a business model that will work for his company (not charity). There is such a thing as 'mutually beneficial' without it being illegal.

Do not use Fritzel as the scapegoat because you don't think the city needs a $25M facility. That was not Fritzel's idea nor does it benefit Fritzel in any way.

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just_another_bozo_on_this_bus 1 year, 5 months ago

Indifferent about a $multimillion contract-- one he had wanted a no-bid guaranteed contract on? You've got to be kidding.

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COjayrocks 1 year, 5 months ago

The size of the contract does not matter. Most of that $ is a result of materials, labor, and other inherent risks involved with construction (ie insurance, utility payments, etc). He was effectively offering the city a cost-plus arrangement in which case he stands to make very, very little money--if any. The only benefit he would have would be the improvement to the land, which is only slightly improving due to the recreation center and massively improving due to the remainder of the development package.

Just because big numbers are being thrown around doesn't mean he stands to gain very much. These people that are now bidding for the project in the traditional sense are going to make much more money than Fritzel's original offer. Go through the numbers once this is all finalized and you will see.

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deec 1 year, 5 months ago

By taxpayers building the infrastructure, he is benefiting from the city portion of the project. The city isn't getting a deal on the land since they already own a suitable tract near the high school on which to build a city facility. This whole project is nothing but corporate welfare for a businessman who has repeatedly engaged in unethical practices (evading property taxes, fake grass et. al.)

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pizzapete 1 year, 5 months ago

Yes, I would be more than willing to give back to the community if I were set to profit so greatly from the city helping me to develop some farm land that I owned. Because the city is dropping millions of dollars into this project by bringing in the new roads, sewers, traffic lights, etc., Fritzel is going from owning some useless farmland to owning some very valuable commercial real estate. It would be a small gesture on his part to gift the land and the building to us because without the city's help he'd be a long way away from ever developing this land. It's a real simple idea, you know. one of those, we'll do this for you if you'll do that for us, not we'll do this for you (Fritzel) and we'll pay you extra for that.

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COjayrocks 1 year, 5 months ago

Again, check your facts Pizzapete. The most recent estimate for the rec center was right around $22.5M if I am not mistaken. It was in one of Chad's posts. They are also purchasing the land to build the rec center on for $785,000. The city has capped the price tag for the rec center at $25M regardless of the final building price.

That means they have $1,715,000 budgeted for the infrastructure, and that will not change in the current agreement.

Now, go get a quote to prepare the site that everyone is so enamored with the appropriate parking, sewer, electrical, stormwater, sidewalks and landscaping for a facility that is 181,000 sq. ft (or even 140,000 sq. ft if you feel it is too large, which is an entirely different debate) and tell me what the price tag is.

Forgot to mention the 5 mile hiking trail that recreation center visitors will undoubtedly use when visiting the facility as well.

In short, the price tag would be MILLIONS more than 25.

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COjayrocks 1 year, 5 months ago

The old estimate was $18M. The up to date, comprehensive one was reported by Chad as in the $22M range. It was also reported that the land purchase price will sit within the $25M cap. So, you are wrong on all counts.

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Hudson Luce 1 year, 5 months ago

I wonder if Fritzel is putting in pay toilets as well...

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just_another_bozo_on_this_bus 1 year, 5 months ago

"He was effectively offering the city a cost-plus arrangement in which case he stands to make very, very little money

Cost plus means you are guaranteed to make money.

You seem pretty desperate to defend Fritzel. What's your motivation?

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COjayrocks 1 year, 5 months ago

Forgot to mention the $925,000 architectural fees that are included in the $25M mark as well, but I'm not sure if that is part of the $22.5M number or not.

My motivation is I think RCSP and a high end recreation center would be a great addition to the community. Nothing more.

Cmon, Bozo. There is not a businessman worth a salt in any industry in the world that does not include his own costs. Most contracts in the United States for contractors include a 12-22% profit and overhead factored into the overall price of a project. This is true in any country and contractor's office on earth. Fritzel offered 10% for RCSP. Look it up on the lawrenceks.org website right now.

Contractors still have to pay their employees to draw up plans, presentations, contracts, lease buildings for their own employees etc. As far as RCSP specific costs, as an example, if someone in the neighborhood is walking their dog on a sunday and they decide to see what they guys have been up to accidentally hurt themselves on the site, then Fritzel is liable. Liability has a cost. Equipment needs to be cleaned before it exits the site, that goes for every vehicle or piece of equipment that comes throughout a day. That has a cost. Bliss Sports' employees health care, 401K contributions, etc....that has a cost. This just scratches the surface and is why a 22% profit and overhead figure is not at all greedy or conniving or irrational. If someone mows your lawn do they only charge you for the fuel to run the mower? If someone repairs your car do they only charge you for the part? Fritzel's offer is 10%. Less than the minimum national average. He offered this when he wanted a no-compete clause to build the rec center as well.

10% is EXTREMELY generous in the industry. Some people don't recognize that because the term "profit" is by it. He is not being dishonest, he is not being greedy, he is running a business. He does not OWE anyone any justification why he is making a donation to KU. He does not owe anyone any more justification than the city has already asked.

I have never met Gene Fritzel, or any Fritzel, and I don't really want to. Personal vendettas are getting in the way of something that could really benefit us all. You may disagree with the benefiting us all part, which is fine, but I wish people would not make it personal and learn the facts before spewing unfounded garbage.

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Armstrong 1 year, 5 months ago

Multiple revenue streams covering several years. In the real world that is known as a sound business plan.

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just_another_bozo_on_this_bus 1 year, 5 months ago

Only for students from the Rube Goldberg School of Business and Corporate Welfare.

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Keith 1 year, 5 months ago

It's a great business plan, and deserves to see if it can stand on it's own, sans tax breaks.

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Pastor_Bedtime 1 year, 5 months ago

A sound business plan to mooch from the taxpayers. Corporate welfare and insider dealing with a speculator who cannot take care of his existing obligations. So much for the "Free Market."

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Armstrong 1 year, 5 months ago

"the City Commission would have to approve any parking fees on a per-event basis. It has been proposed that the city would contribute money to help build the parking lots that would serve both the city and KU portions of the project. Corliss said that means the city will want to be involved in setting parking policy for the development"

What part of that is corporate welfare. Do you know what corproate welfare means? Do you know what a corporation is? Obtuse statements such as that Pastor_ give you zero credebility.

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Pastor_Bedtime 1 year, 5 months ago

The deal reeks of preferential treatment and a less-than level playing field. No need for a competitive marketplace with a city commission like we have. Perks like exclusive concession deals and tax abatements = corporate (corproate) welfare. Like your guy Sam gets for his "family farm". Enough welfare to support a whole neighborhood of needy families.

And yes, I'm fully aware what a corporation is. Using the definition of your cronies, it's a person.

"Credebility" issue addressed. Next.

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Armstrong 1 year, 5 months ago

Fritzel was asked into this project, he asked for nothing in the beginning. Developing an opportunity is not " corporate welfare ". You should really get your facts straight before spouting off about some non-existent conspiracy.

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Pastor_Bedtime 1 year, 5 months ago

He asked for nothing in the beginning ~ and we all get it in the end.

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Armstrong 1 year, 5 months ago

Actually kind of funny - well played

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Pastor_Bedtime 1 year, 5 months ago

Thanks. Best to you. I just think priorities are out of whack with this project. Fixing infrastructure first makes more sense in these tight times. We can agree to disagree.

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repaste 1 year, 5 months ago

"Fritzel was asked into this project, he asked for nothing in the beginning." I'd bet that is not true. This most likely planed on golf course/barstools.

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Richard Heckler 1 year, 5 months ago

Too many issues keep surfacing on this matter to be approved any time soon IF ever.

Pull it from the agenda...

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jack22 1 year, 5 months ago

I can see it now, we'll drive out to the recreation center on a busy weekend and there will be a guy at the gate asking for $10 to park our car. We'll explain that we're there to use the gym and aren't interested in the sporting event they're hosting and they'll say, "sorry the gym is closed" or "there's no parking available for the gym, please come back some other time." I guess that's the problem when you're building a huge facility with inadequate parking that's supposed to serve both the public and a private institution alike. Instead of both getting exactly what we want we'll each have to share something that should have been built separate from each other in the first place.

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Hudson Luce 1 year, 5 months ago

I'd have to wonder, the way in which this thing is being handled, whether any of the city commissioners have a conflict of interest on this project - they might want to recuse themselves on the vote just in case this winds up in court.

It might be a better idea to table this until after the new commission is sworn in.

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nekansan 1 year, 5 months ago

So KU builds parking and road infrastructure, the City pays for a big chunk of it, and then they capture revenue by charging for parking on said infrastructure and do with it as they please? Sounds like a great deal if you are KU, not so much for me a city taxpayer!

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Pastor_Bedtime 1 year, 5 months ago

You can take "going to get" out of that sentense and it still reads true.

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Richard Heckler 1 year, 5 months ago

Here's another scenario that might come back to bite taxpayers in the butt. This one gets built.

There is an equity issue no matter what and this new giant facility will not make that go away.

That still leaves North Lawrence and Southeast Lawrence without a rec center. Both have had a major influx of population and still growing. SE Lawrence does have Prairie Park Nature Center however athletic events cannot be scheduled.

There is an equity issue no matter what and this new giant facility will not make that go away.

WE taxpayers know this field house scenario will cost we taxpayers more than $31 million after all infrastructure is installed etc etc etc. Traffic Lights/water lines etc etc get expensive.

Considering the total cost will be more than 31 million no matter how the picture is painted why not build a neighborhood rec center in NW Lawrence with 3 gyms, North Lawrence with two gyms, and Southeast Lawrence with 2 gyms ? This is going to come up. Spend an estimated 11 million on each each facility.

Schedule local athletic events according to where most team members reside.

Jumping in a car to drive across town is not practical thinking. Not any longer. 29 cents a gallon polluting gasoline went bye bye bye some time ago. A ton of people in Lawrence do not bring home $60,000 or more in wages such that a lot of the loudest promoters do and some are on a tax dollar payroll.

In fact it seems this 1994 sales tax money was to provide "neighborhood" rec centers. SE Lawrence is going to want a swimming pool one day.

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likeitis 1 year, 5 months ago

Citizens of Lawrence...prepare to bend over as you reach down to pick up the tab... ...and experience true Bliss.

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Sclair 1 year, 5 months ago

Absolutely - this is a done deal. Nothing the citizenry can do. Agree that when it's enevitable, just lie back and enoy it.

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