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