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