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City's Public Incentives Review Committee to consider Rock Chalk Park property tax abatement today; member raises questions about city's analysis

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The proposed Rock Chalk Park sports village in northwest Lawrence will create all types of exercises. Today, it will be a math exercise.

The city’s Public Incentives Review Committee will meet at 4 p.m. today to consider making a recommendation on a request for $40 million in industrial revenue bonds for the KU facilities that will be at Rock Chalk Park. The $40 million in IRBs come with a 10-year, 100 percent property tax abatement for the project.

It appears today’s meeting of the Public Incentives Review Committee won’t be without questions. Former City Commissioner Rob Chestnut, who also is a candidate for City Commission in this year’s race, is a member of PIRC. His full-time job is as a chief financial officer for a Topeka-based company, and he was appointed to PIRC to fill the position reserved for a financial analyst.

He seems to be taking that job seriously because he has put together a memo questioning whether the city’s financial analysis of the project is accurate. In short, Chestnut raises questions about whether the amount of incentives the city will be providing to the project will be greater than what it will receive in return.

“I believe the city could lose money on the proposed project,” Chestnut writes in his memo.

That runs counter to what the city’s financial analysis has shown. The city has run a “cost-benefit analysis” that shows for every $1 in incentives offered to the project that it will receive $1.62 back in benefits. That’s important because the city has an economic development policy that says projects receiving tax abatements should have a cost-benefit ratio of at least 1 to 1.25.

But Chestnut makes two major points about the city’s analysis:

• The city’s analysis assumes the $50 million project will start paying property taxes after the 10-year tax abatement has expired. But that does not appear to be the plan in reality. I’ve heard from multiple people that the developers of the project — Thomas Fritzel’s Bliss Foundation, and various KU entities — believe the project should receive the automatic property tax exemption Kansas University receives for its property. The state has not granted that exemption because the facilities will be owned by Bliss — a private, for-profit company — rather than KU. I believe the plan is to use the next 10 years to win such an exemption from Kansas lawmakers.

According to Chestnut’s memo, the city’s model assumes property tax payments in years 11 through 15, and counts them as a benefit that will be received by the city. With those property tax payments, the city’s cost benefit ratio reaches the $1.62 in benefits for every $1 in incentives. Without the property tax payments, though, Chestnut says the project falls into negative territory. His calculation is that the project receives 98 cents in benefits for every $1 in incentives.

• The city’s analysis doesn’t count one item that could feasibly be considered an incentive to the project: the amount of infrastructure the city will pay for Rock Chalk Park.

How much money the city will pay in infrastructure costs for the project isn’t yet known, but it very easily could be several million dollars. The amount the city will pay in infrastructure costs will be determined by how much the city pays to build its recreation center building. The city will pay $25 million for its share of the Rock Chalk Park project, which includes the recreation center building. If the bid for the recreation center building comes in at $22 million, the city’s current estimate, it will pay $3 million in infrastructure costs. Some of that infrastructure is expected to serve both the recreation center and the KU portion of Rock Chalk Park.

But for the purposes of the cost-benefit analysis, the city did not input any infrastructure number into the model. Chestnut notes that if the city even included just $1 million of infrastructure costs in the cost-benefit model, it would create a significant reduction in the city’s cost-benefit ratio.

It will be interesting to see how the PIRC meeting goes today. The committee has some members who are known for asking tough questions. In addition to Chestnut, former City Commissioner Boog Highberger also is on the committee.

Much of this discussion probably hinges on how people view the nature of the project. Most of the city commissioners I have talked to have viewed this property tax abatement issue as more of a technicality than anything else.

They’ve noted that if KU Athletics owned the facilities, rather than leased them, the property automatically would be property tax exempt.

But in recent weeks, new questions have arisen about how much Fritzel’s Bliss Foundation will be able to use the facilities as a privately run, for-profit events venue. The agreements between Bliss and the various KU entities seem to give Bliss much leeway in hosting events at the facilities.

It has been unclear how many and what type of non-KU events Bliss may seek to host at the facility. When I asked KU Athletics about it last week, the response was that the issue was still a matter of “ongoing discussion.”

Another issue to keep in mind is that the model the city uses may not be the best for capturing all the possible benefits of the proposed Rock Chalk Park.

The city’s model seems to be pretty heavily weighted toward measuring how many new jobs will be created by a project. That number has been uncertain with this project. The original application for the IRBs used a jobs figure of two jobs for the project. Then Bliss filed an amended application that says the project will involve 17 jobs. I’m not up to speed on what led to the difference.

But the main economic development part of this project long has been considered to be the amount of visitor spending it can attract to the community. I’m not sure how much the city’s traditional model accounts for that type of benefit.

Plus, supporters of the project would argue an immeasurable benefit is what this project does for Kansas University. It can help with recruitment, it can free up funding to do other improvements — such as at Memorial Stadium or Allen Fieldhouse — and it possibly can solidify KU’s position as a member in good standing with the Big 12 Conference.

Those benefits are hard to measure in any type of model.

So, we’ll see how it goes at this afternoon’s meeting. Ultimately, the PIRC recommendation will only matter so much. The City Commission still makes the final decision on the IRB request.

Commissioners are scheduled to vote on that IRB request just hours after the PIRC meeting. City Commissioners meet at 6:35 tonight at City Hall.

Comments

mysterion 1 year, 6 months ago

My guess is that Chestnut's release of this memo has more to do with his relatively poor showing in the primary than anything else. These models are inherently flawed and in most instances this is a best guess on anyone's part.

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jhawkinsf 1 year, 6 months ago

"These models are inherently flawed and in most instances this is a best guess on anyone's part". - If there are better models available, use them. But if the choice is between a best guess or a lesser guess, I'd choose the best guess.

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jafs 1 year, 6 months ago

If you want to do that with your money, go ahead. But not with mine, please.

Also, if you look at it, they didn't even include the infrastructure costs, which obviously count as costs to the city.

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jhawkinsf 1 year, 6 months ago

Do what with who's money?

My question is that if we're not going to use the best available information, then upon what information will we be making decisions? (Assuming even the best available information is frequently wrong).

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jafs 1 year, 6 months ago

Come on, we've had this discussion enough times you know what I mean. Don't gamble my money on this project, or others like it.

There's a big difference between best "information" and best "guess" - in this case, the infrastructure costs are clearly part of the "best information" we have, but are being ignored.

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jhawkinsf 1 year, 6 months ago

Sure, we've had this discussion before. But my response was to another poster who said that the model used was flawed and amounted to no more than a best guess. My question stands, is there a better model? If not, then what should we substitute for best guesses? Lesser guesses? Approach each and every project like a blank sheet of paper? What?

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jafs 1 year, 5 months ago

Well, since I oppose tax abatements on principle and generally, I don't have to make that determination.

Makes it a lot easier :-)

And, I don't think cities should be engaged in speculative development either, so it's the same for me. Cities should collect taxes and provide services, that's it. None of these public/private deals for me.

So, using that in this case, we wouldn't be "partnering" with KU/Fritzel at all. If we need another rec center, then we'd build one, using normal practices, like competitive bidding without exclusions or the ability of one bidder to submit a last minute lower bid (which is the case here).

The city would own it and run it, as a public service should be operated.

KU can do what they like, as long as it's legal and conforms with zoning requirements.

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repaste 1 year, 6 months ago

The models are not even a guess - they are developers fiction, nothing more. Mr. Chestnut is aware of this.

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just_another_bozo_on_this_bus 1 year, 6 months ago

I've heard from a couple different sources that Chestnut has been very skeptical of the financial shenanigans (my term, not his) behind this project

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scaramouchepart2 1 year, 6 months ago

Actually, whether Chestnut is trying to gain votes or not. His numbers are similar to others who have taken the time to study this and not rely on the highly flawed report done for the city.

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irvan moore 1 year, 6 months ago

i find it interesting we have this meeting a couple of hours ahead of the commission vote, every detail of this project has been rushed through. shame on this city commission and the city manager, i don't think it's going to make much difference what the pric thinks, pretty sure it's a done deal

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msezdsit 1 year, 6 months ago

This whole scam just needs to be shelved. That answers all the questions the commissioners are skirting or at best just misleading on.

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LadyJ 1 year, 6 months ago

"Will create jobs" Are they going to guarantee the jobs will go to locals and not workers brought in from elsewhere?

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msezdsit 1 year, 6 months ago

Not even guaranteeing the jobs. Appears to me they just floated that number anyway. Like all the rest of their numbers. They only have to work long enough to get the cities signature and then its too late for any eleventh hour sabotage of the commisioners and frizzles pet project.

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lawrencereporter 1 year, 6 months ago

Cindy Yulich of Emprise Bank should abstain from participating in today’s PIRC meeting due to the fact that it is understood that Emprise Bank is involved in the financing of this project.

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smileydog 1 year, 6 months ago

Every big project in Lawrence is a shell game, period. Which shell does one look under? Confusion, let the information slowly trickle out, add more confusion, then be told what a great deal will be had by one and all because some authority figure says so. Nothing changes around here.

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Matthew Herbert 1 year, 6 months ago

it's amazing how the city's math falls apart as soon as someone who actually knows how to read a proposal and add without using his fingers takes a look at the project. Rob Chestnut just earned my vote.

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Bob Forer 1 year, 6 months ago

Chestnut raises good points. The mere fact that we don't know the answers to some of the questions indicates that the project has never been ripe for a final decision. Its utterly amazing that the City Commission has already approved the project with so many loose ends still dangling and a lot of unanswered questions.

Nonetheless, the findings of the Review Committee will mean nothing, as it is merely a recommendation and the CC appears hell bent on pushing this through regardless of right or wrong.

BTW, great reporting job, Chad.

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Mark Currie 1 year, 6 months ago

This whole deal with all it's ifs & buts just smells to me. I agree with the person that said it should be shelved, or trashed. 25 million is so much money to invest in economic hard times, when there are other, greater needs in the city than a fancy playground. Put it ti a vote, let the people of Lawrence decide.

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2002 1 year, 6 months ago

I would be much more willing to buy Chestnut's argument if he, and others like him were consistent. If it is truly going to be that the City only will pay for what pays for itself then don't ever invest in parks and don't pave streets or plow snow in the older parts of town as often because they don't pay as much property tax. And if cost-benefit is the only standard then stop spending money on homeless issues unless you can prove that the cost of the services are balanced out by reduced law enforcement costs. That all sounds crazy, but why is there a different standard.

Chestnut is grandstanding. Regardless of whether the sports village is a good idea or not, we need Commissioners that are more focused on making the community better than they are assuaging their ego and worshiping idealism.

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Rob Chestnut 1 year, 6 months ago

Dear 2002:

I agree with your comments regarding parks, snow removal and other services that do not pay for themselves. My analysis is done as a Public Incentive Review Committee member. Our responsibility is to analyze the analysis done by the city staff. In this case, I felt that the benefit-cost analysis did not come to the desired 1.25:1 ratio specified by the policy. That is why I could not support it.

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Eride 1 year, 6 months ago

The only thing I know for a fact regarding this project is the city shouldn't be spending tax dollars when there are so many unresolved details.

This is beyond foolish. The general contractor at issue has a history of not living up to the spirit (if not out-right violating) the terms of his contracts. The contractor screwed a different municipality out of millions of dollars and still owes that city millions of dollars in taxes that he refuses to pay. The contractor has LIED about the details of this project from the start. Is that the kind of individual that you would want to TRUST.

The contractor claims the city is getting a building worth more than the city is paying. Besides ignoring the freaking obvious economic fact that if the city is getting something worth more than it is paying then that means the contractor is giving the city essentially a donation (and with this contractor's history that is not believable), instead focus on the fact that there is insufficient cost-benefit studies that actually prove this. In fact, the city doesn't have a clue what the building will even cost at this point! Yet the city is already planning on committing almost 3 million dollars to the project! The city is planning on handing out millions of dollars of taxpayer funds with ZERO idea of the benefit to the city, the end cost to the taxpayers or even the property rights the recipient of the handout will have with the taxpayer funded infrastructure when all is said and done.

With each passing day more details from this project come to light. Each detail makes it seem more and more shady. I don't feel like this project is above board and I believe it is something that the city will end up regretting. I smell legal action in the future.

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scaramouchepart2 1 year, 6 months ago

It is good see a candidate for city commission support their concerns about the Rec. center with facts and not just complaints. I know other candidates have concerns, but many are just nimby type comments. It's a done deal before the elections, unless our present City Commissioners finally are going to put their foot down and only pay out the original amount. We have too many expenses. The library, police station, Farmland, promises to several developers for insentives we pay out now and maybe they pay back later, broken infrastructure at a rate of one or more a month, bus expansion ( if we keep moving the city west and east we have to provide bus service), more police - that has been promised over the next couple of years and others. We don't have the taxes to run amuck as we did in the 80's. We lost tax dollars from machine/equipment, property taxes are still going down, and we are not growing as we use to. We don't provide the jobs people leave Lawrence and to KC for and with the economy those same people are moving closer to work. We have big financial problems coming and we need to not lose money on big projects or at least not lose more money on a rec center then we do on all the other rec. centers. By the way, Parks and rec does provide income to the city to help pay their costs.

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hipper_than_hip 1 year, 6 months ago

Chestnut campaign signs are on property owned by the Schwada's.

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Steve Jacob 1 year, 6 months ago

Is Chestnut violating any rules or laws when his signs say "re-elect" when he is not currently on the Commission?

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Catalano 1 year, 6 months ago

Seriously? You think there are laws regarding what you can put on a campaign sign? ROFLMAO.

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scaramouchepart2 1 year, 6 months ago

Not a surprise. He also has neighborhood leaders on his letterhead.

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JrMints 1 year, 6 months ago

Mr. Chestnut appears to be trying to play on both teams. I've heard him say he supports the project, but now it appears he wants to oppose. Which one is it Mr. Chestnut? The more you waffle, the more votes you will lose...mine included (and I voted for you in the primary).

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Rob Chestnut 1 year, 6 months ago

Dear JrMints:

I am not playing on both teams. The role of the Public Incentive Review Committee is to determine if the benefit-cost analysis done meets the criteria set up by the policy. I noted a number of issues that I felt were important that dropped the benefit of the project below the set criteria. The decision as a PIRC member is purely on the analysis done on the tax abatement, not the broader project.

The project is a good one. In one form or another, we need both the KU Athletic facilities to fulfill their Title IX demands and recreation space for the public. It is up to the City Commission to consider the broader impacts for the community. That was not my charge, and I was making a decision based on the information given to me.

I hope that clarifies my position. If not, please email me at robchestnut@sunflower.com. Thanks for your vote in the primary!

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Catalano 1 year, 6 months ago

Wow. Dever is totally dissing you at the moment! Like you turned in your report too late. Not acknowledging that you were working with staff to get information in order to complete your report. Good luck working with him if you get elected. He just can't pat himself on the back enough on this issue. And, pray tell, if you want...WHY is it the city's job to fix KU's problems with Title XI?

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Catalano 1 year, 6 months ago

I think I just fell in love with Joe Harkins. Who says hair is everything?

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Richard Heckler 1 year, 5 months ago

If voters want a change in local government or any government it cannot be accomplished by sending the same names back in office. It will change nothing. Any former city commissioner or planning commissioner will likely repeat the past 6 years or 25 years with damn few exceptions.

Those with close ties to Chamber money and names will likely do the same. Best do some homework.

Change can never occur by replacing current thinkers with like thinkers.

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jhawk1998 1 year, 5 months ago

I am very disappointed in the rush to pass this without all the answers and necessary information.

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