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Rock Chalk Park project likely to ask for property tax abatement from City Hall; questions about for-profit ownership emerge

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New details keep emerging about Thomas Fritzel and Kansas University’s proposed Rock Chalk Park sports complex in northwest Lawrence.

The newest one is that the developers of the project will be asking for a 10-year property tax abatement from the city. City commissioners also will be asked to provide up to $40 million in city-issued industrial revenue bonds for the project.

That request for industrial revenue bonds hasn’t particularly been talked about a lot so far, but it didn’t come up entirely out of the blue. Kansas University Endowment briefly mentioned the need for industrial revenue bonds in an Oct. 2 letter, and City Manager David Corliss recently reminded city commissioners that such a request may be coming forward. (A quick note on industrial revenue bonds. Technically the bonds are issued by the city, but they are not the responsibility of the city to pay. The city's full faith and credit are not pledged to the bonds. What City Hall ramifications there would be if there was a default on $40 million worth of industrial revenue bonds is an interesting question, but legally, the city would not be obligated to pay the debt.)

The request for a property tax abatement, however, is a new arrival on the public scene. City staff members reported in a recent memo that the current understanding is that the ownership structure of the proposed Rock Chalk Park now may preclude the project from receiving an automatic property tax exemption from the state of Kansas. If that’s the case, then the city will be asked to use its powers to grant a property tax abatement.

From a dollars and cents standpoint, I’m not sure this changes much with the project. I think there had been an assumption that the facilities at Rock Chalk Park wouldn’t pay property taxes. For example, Allen Fieldhouse and Memorial Stadium don’t pay property taxes. Thus a KU track and field stadium, soccer field and softball stadium wouldn’t need to pay property taxes either.

But this latest twist highlights that there is a difference between the ownership structure of KU’s traditional sports venues and what’s proposed at Rock Chalk Park. It essentially can be summed up in two words: For profit.

The ownership of Allen Fieldhouse, for example, isn’t controlled by a for-profit entity. As currently proposed, though, the facilities at Rock Chalk Park—we’re not talking about the city’s recreation center at the moment—would be owned by a for-profit entity, controlled by developer Fritzel.

As we previously reported, the plan is for Bliss Sports — a for-profit, limited liability company controlled by Fritzel — to own the facilities for the first 30 years and lease them back to KU. That in and of itself creates a problem with the project’s ability to get an automatic property tax exemption from the state.

But there is now another question about the ownership interest of the project. It previously has been said that KU Endowment will own the land that the facilities sit upon. Well, a land transfer of the property occurred just prior to the New Year, and the KU Endowment Association does not show up as the owner of the property. Instead, a for-profit entity, called RCP LLC, is now listed as owner. The company is so newly formed that records showing the members of that company don’t yet exist at the Kansas Secretary of State’s office.

But I did get in touch this morning with Dale Seuferling, president of the KU Endowment Association. He assured me that KU Endowment Association is the sole member of the for-profit company. He said the new entity was formed because there obviously will be a lot of activity at the site, and the association felt for liability reasons it would be appropriate to have the land owned by its own entity. He said the association has used such a structure for other active pieces of property it owns.

It is worth noting, however, that the creation of this for-profit entity to own the land is different than what had previously been communicated. An Oct. 2 letter to city officials stated “KU Endowment will purchase the tract of land.” Maybe this is a distinction without a difference. I don’t know.

I think the need for the project to receive a property tax abatement, though, will raise the level of understanding in the community that this project has a significant, private, for-profit element to it. The facilities will be owned by a for-profit company, and technically, so will the land.

Now, the question is whether there is any expectation that a for-profit entity — Bliss Sports would be the leading candidate — will be allowed to conduct activities at the property that generates revenue and profit? In chatting with Seuferling this morning, I’m still not clear on that question. But I’ll keep asking around about it, and report what I learn.

Another interesting issue is the long-term situation with property taxes at this site. A city-issued tax abatement for the property only will be good for 10 years. As proposed, Fritzel’s for-profit entity is scheduled to own the facilities for 30 years.

Will the project have to pay property taxes in years 11 through 30? It has been estimated the KU portion of the project will have a market value of about $50 million. The property taxes on that will be substantial. I asked Seuferling, and he said he didn’t know the answer to that question. He said he hadn’t specifically discussed that issue with anyone.

I’ve heard elsewhere, though, that the project — during the next decade — may seek a special piece of legislation from the Kansas Statehouse that would create a specific property tax exemption for Rock Chalk Park, even though the facilities would be owned by a private company.

I hope to get some answers, and when I do, I’ll pass them along.

Comments

somebodynew 1 year, 11 months ago

"I hope to get some answers, and when I do, I’ll pass them along."

Well, Chad, you are doing a good job, but it seems like the more answers you get the more questions that are raised. So far, most of the answers aren't that reassuring to the taxpayers.

This still looks more and more like a big win for a developer which is being pushed through very quickly by the current Commission (except Amyx).

Keith 1 year, 11 months ago

This needs to come to a halt until we know all the details.

just_another_bozo_on_this_bus 1 year, 11 months ago

This just gets sicker with every detail that gets trickled out of the smoke-filled rooms.

WilburM 1 year, 11 months ago

This just gets curiouser and curiouser; no end of new twists. I've never seen such a huge project put together on the fly, and of course, with no transparency and no real consistency.

Huge rush to get this done before the city commission elections this Spring. I'd love to see this whole thing debated vigorously during the election (and there will be opponents to it in the mix), rather than be pawned off on us as if it were some kind of emergency and an obviously wonderful deal. And please, a thorough, straightforward accounting of the ownership, management costs (realistic!!!), and private/public elements.

Catalano 1 year, 11 months ago

"Now, the question is whether there is any expectation that a for-profit entity — Bliss Sports would be the leading candidate — will be allowed to conduct activities at the property that generates revenue and profit? In chatting with Seuferling this morning, I’m still not clear on that question. But I’ll keep asking around about it, and report what I learn."

Be sure to brush all the smoke away and not look into the mirrors when asking around.

As Nancy Reagan would say: "Just say NO." Oh, wait, that didn't work out too well, did it? We're still fighting that damn war on drugs, so it probably won't work with this city commission, either.

irvan moore 1 year, 11 months ago

wow, the project stinks and so does the manner in which the commissioners are pushing it through

gorilla10 1 year, 11 months ago

This project is sweet for both Lawrence and the University! Everyone needs to quit crying about the deal. It's happening and there is no stopping it. This will bring great things to Lawrence and is definitely worth it both now and in the long run! Rock chalk beatdik

jack22 1 year, 11 months ago

Wait a minute, how much is all his going to cost us? Is the ten year tax abatement for the 20 acre rec center property only or all the land this guy wants to develop? Is the 40 million in bonds to be used for the sports complex or to develop all the hotels, strip malls, and other suburban waste they want to build out there?

Bruce Bertsch 1 year, 11 months ago

OK, lets assume that the Endowment Assn did own the land. NO PROPERTY TAX on the land ever. So under this proposal, you get about the same thing, unless Bliss is allowed to use the facilities to generate a profit. In the meantime, KU gets new and badly needed facilities. From looking at the other comments, "Paranoia strikes deep".

Matthew Herbert 1 year, 11 months ago

paranoia it might be, but unwarranted paranoia it is not.

KiferGhost 1 year, 11 months ago

Enough already!!! First the athletic department brings us the don and his marry band of criminals now they are involved in financial game playing that would make the great cons of 2008 proud.

streetman 1 year, 11 months ago

Looks like the city commissioners are going to have to put more makeup on this pig. Only surprise is that anybody still believes that "it won't cost the taxpayers a cent." Of course it will -- one way or another -- there is no free lunch.

flyin_squirrel 1 year, 11 months ago

So compared to what the city is getting in taxes now on the property, to what the city will be getting for 30 yrs when the project is completed, the net loss or gain is........ $0.

And the added revenue the venues could bring in terms of hotels, restaurants, bars, downtown stores is possibly hundreds of thousands a weekend.

What is the problem???

jack22 1 year, 11 months ago

Changing the staging area for KU track and field from on campus to the middle of a corn field is going to make this place bring in hundreds of thousands of extra dollars every weekend? Or maybe you're thinking that because we'll have a few more spots for locals to play pick up basketball and bad mitten we're going to generate all this new revenue? The cost of maintenance alone should be enough to erase any economic benefit the city might see from this project.

Matthew Herbert 1 year, 11 months ago

perhaps we are all just paranoid, and perhaps all these dealings are above water, but I do not think it would be too much to ask to hold off on a decision until a new City commission has been elected. If it's truly worth doing today, it'll still be worth doing in April. Doing it any other way will make this project feel dirty - a midnight pardon of sorts.

KiferGhost 1 year, 11 months ago

"Allen Fieldhouse and Memorial Stadium don’t pay property taxes. "

That is because it is State property!

KiferGhost 1 year, 11 months ago

The Fritzel son has made Compton look like an upstanding citizen.

Richard Heckler 1 year, 11 months ago

Time to schedule for voter approval in April. Taxpayers getting stuck in back AGAIN.

Taxpayers are being told they will put up 25 million or more for the extravagant field house in addition to no property taxes on the other Fritzel chaotic endeavor.

Put his whole matter to a vote?

This matter should have been in the discussion before the City Commission approved anything. This is unscrupulous behavior.... First Management set the pace.

Do these people not know how to make money without millions in tax dollars holding their hands?

How the well connected stick the rest of us with their bills... http://www.democracynow.org/2008/1/18/free_lunch_how_the_wealthiest_americans

Bill Moyers http://www.pbs.org/moyers/journal/01182008/transcript.html

Richard Heckler 1 year, 11 months ago

Hey Lawrence taxpayers we have Brownback increasing our taxes and the city of Lawrence as well. Let's not forget Sam Brownback is supporting his tax cuts with sales taxes and increased property taxes.

How many more does anyone have for this type of can we say nonsense?

In this country right now, we are spending $2-$3 billion a year subsidizing the big four sports: baseball, basketball, football and hockey. Now we are shelling out more for college sports which in Lawrence KU Sports,Inc seems to have millions upon millions upon millions.

And we taxpayers owe $20 million $$$$ on the USD 497 sports extravaganza .

Why are local taxpayers footing any part of this bill? This still smells like pork barrel money laundering to please the executives in the home building industry which of course includes banks,real estate executives,builders etc etc etc yet none of them want to put their money at risk. Hmmmmmmmm

Put it all up for a vote.... absolutely.

fearsadness14 1 year, 11 months ago

Chad, you have done wonderful things with this town talk segment and all of your investigative reporting!
Would it be possible to get a Cliffs Notes version of what all is happening and how it is happening? I feel so very confused after I miss one or two stories about this project.

correct me if I'm wrong, but my current understanding in conjunction with your article here is that KU endowment pushed the project, told the city Fritzel was going to do the project, and Fritzel told the city he would give us a big project at a discount, own it for 30 years, and then lease it to us? And now it's all going to be for profit and he wont have to pay property taxes?

just_another_bozo_on_this_bus 1 year, 11 months ago

"I feel so very confused after I miss one or two stories about this project."

That's how you're supposed to feel. Just sit back and let the Really Important People work this out among themselves, and don't sweat the details (like the 1/2 percent sales tax you'll be paying on everything you buy for the next 20 years, paid directly into Fritzel's already fat wallet.)

jhawk1998 1 year, 11 months ago

My eyes are bleeding from reading about all the tax abatements and hand outs from this city for development. How about some relief for homeowners? The homeowners will have to pay the tab while taxes are abated.

Lawrence Morgan 1 year, 11 months ago

Chad, this is great investigative reporting!

pizzapete 1 year, 11 months ago

With all this money we're spending is there going to be an indoor pool or skating rink? And if so, are they going to be free and open to the public year round?

rhhays 1 year, 11 months ago

One of the reasons I choose to put my name in the ring to become a city commissioner is because of this very situation. I believe we need complete transparency in government. When it comes to government funds, it is the citizens who are going to ultimately pay for the expenditure and they deserve to know exactly how their money is going to be spent.

While the idea for Rock Chalk Park may good, the method in which it has come about is problematic. Essentially no bid contracts and tax abatements for “for-profit entities” needs to be highly scrutinized to ensure that it is in the best interest for the taxpayers and not a windfall for those who are in a position to benefit from their enactment. This also includes a complete transparent process in which the taxpayers have access to the planning and enactment of the plan. There seems to be a lot of questions without a lot of answers. This should not be the case.

A project this large with a significant impact to the finances of the city over a long period of time should be completed in a systematic process that is well thought out and not hurried in anyway. To ensure the taxpayers want this project, the current City Commission should wait to sign off on any more actions until after the new Commissioners are sworn in. Let the people speak with their votes and allow them to determine whether they want this project to go forward as it has now been envisioned.

I have created a Facebook page at https://www.facebook.com/HaysForCommissioner where I plan on speaking more about the issues that are currently pressing in Lawrence. I also have an election website at http://www.reesehays.com

Reese Hays, Candidate for Lawrence City Commission

KiferGhost 1 year, 11 months ago

pizzapete 34 minutes ago With all this money we're spending is there going to be an indoor pool or skating rink? And if so, are they going to be free and open to the public year round?

Even though, going clear back to the first polls by PLAY, those were the things the city wanted we are getting instead what the fat cats want. Spend millions under Hemenway trying to cook up a winning football team and you can see the developers were obviously involved since the invested so much money, much of it on our dollar since it was tif, around the football stadium. Imagine they'll be as successful with this as they are putting KU on the football map but when you have a visionless commission what should we expect?

Water 1 year, 11 months ago

Geesh, Throw in some heaving bosoms and we've got the makings of John Grisham novel.

Water 1 year, 11 months ago

Why did the KUEA approach the city with this deal? Wouldn't it be better for all if they pitched this offer to say 24-Hour Fitness, Gold's Gym, Planet Fitness, Live Strong, Everlast, etc? A private gym would pay the city taxes or at least not cost the tax payer.

chzypoof1 1 year, 11 months ago

You have GOT to be Kidding me. So we need to give TAX BREAKS to companies building their own facilities...but not to citizens? Is anyone really approving this? Is anyone really listening to this garbage?

Holy crap!

Joe Hyde 1 year, 11 months ago

If Rock Chalk Park (Fritzel-owned) is run as a for-profit operation, then by registering the enterprise as a small business the lucky owner can stop paying Kansas individual income tax on annual earnings, too. Everybody who works there will have state income tax withheld from their paychecks, but not the owner. (New state law, if you recall?)

With so many development and design complexities, so many shades of regulatory gray and ownership vagaries, the city's part of this project needs to downshift into granny gear.

Sue Grosdidier 1 year, 11 months ago

I truly believe that our local government is being bought by a couple of developers. Anything they want they get, without the consideration of taxpayers. I find this so sad that even in a local government we are no longer represented as the people. Since when do we railroad such a big project without the consent of the people that will eventually pay for it. STOP SPENDING OUR MONEY, LAWRENCE IS BECOMING A COMMUNITY IN WHICH YOU CANNOT AFFORD TO LIVE!

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