December 12, 2008
subsidy won’t fix empty Bannister Mall
It was repeated more than once, the developer’s mantra.
“This redevelopment project is not feasible without a significant public financing component,” said Ed Spivey, a consultant hired by the Kansas City TIF Commission, quoted in The Kansas City Star (11/8/07).
“This project would not happen without an incentive package,” said Owen Buckley, president of Lane4 Property Group, to Midwest Real Estate News (Sept. 2008). The same quote was picked up in a story that same month at REJournals.com.
Lane4 owns the most of the former Bannister Mall/Three Trails site at I-435 and Bannister Road. The company got the acquisitions rolling with an initial loan from Commerce Bank. But in true faux capitalist form, they also went after and got taxpayer money. Last month the final chit came from the taxpayers via budget-numb state officials — $30 million in tax credits from the Missouri Development Finance Board.
That money will be part of an even bigger giveaway of taxpayer money, courtesy of the Kansas City MO City Council. The council approved some $273 million in TIF and Super TIF assistance to Lane4 and its development partner OnGoal, LLC, which bought the Kansas City Wizards Major League Soccer team in 2006 for $15 million. The two entities have formed Three Trails Redevelopment, LLC to pursue their joint plans.
As it is when developers seek to burden taxpayers with risk they won’t fully assume themselves, the numbers are all over the place. The $273 million figure in TIF assistance has also been listed as $267 million and $260 million — it all depends on which media outlet is reporting. Nailing down the total cost for redeveloping the abandoned Bannister Mall area also depends upon which news outlet referenced. The Kansas City Star first reported $943 million, a year later $949 million, the Kansas City Business Journal duplicated the Star’s figures and, until recently, Lane4 uses the same amount on its www.thetrailskc.com website. A $1 billion to $1.1 billion pops up in articles from commercial real estate development trade publications and websites, and on blogs commenting about major league soccer.
Whatever the amount — one that will grow in recession-battered 2009 — taxpayers are reported to be posed to shoulder nearly 30 percent of the total cost of the development and nearly 55 percent of the first-phase costs, reported at $143 million (and growing).
And for taking on this outrageous burden, what will the taxpayers get? As consumers fear more job losses, as businesses continue to layoff employees and retail consumption falls to record lows, Lane4 proposes over 1.1 million in retail space, 1.7 million in office space, 12 soccer fields, a hotel and an 18,500-seat soccer stadium for the Wizards.
In typical blowhard developer-speak, Owen Buckley, president of Lane4, described the development to the Kansas City Business Journal as something that will “resemble The Legends at Village West” in Wyandotte County, and with its mixed uses, including a hotel, “resemble the Country Club Plaza.”
Buckley has said The Trails development differentiates itself by being a future shopping center “that has access to 1.1 million people living within a 20-minute drive.” A ridiculous statement considering the same could be made of the Power & Light District downtown and Independence Shopping Center at I-70 and 291 Highway. Buckley also claims the development, once built, will draw over 2 million people annually — a figure that approaches the combined home attendance figures of the Royals and the Chiefs. Which raises another question:
If combining office and retail development with a sports stadium is such a great idea, why haven’t the Royals and Chiefs proposed the same type of plan at the Truman Sports complex? After all, the teams’ owners have had a few decades to think about it.
Lane4 appears not to have the research to prove retail, office and soccer fields will attract 2 million people a year. The company hasn’t spelled out how it will develop and draw youth soccer participation, particularly in the face of new soccer field development in Overland Park in soccer-mom heaven Johnson County. Saying that the love of soccer will absorb any additional taxpayer-subsidized field construction in Jackson County is like saying any new retail center will prosper because people always will shop — a premise now laughable amid the economic downturn.
What Lane4 does have is a 2008 retail report, including a shopping center survey, indicating that both south Kansas City and eastern Jackson County vacancy rates in shopping centers with more than 50,000 square feet are above the metropolitan area’s average of 8.3 percent. South Kansas City, with 6% of the total square footage available in metro KC, has an 11% vacancy rate; eastern Jackson County with 17% of the total has a 13.5% vacancy rate.
As for attracting more residents (i.e. more potential shoppers and soccer lovers) to those areas, housing starts began a big decline in 2007, dropping 70.6% in Independence, 69.9% in Kansas City, 9.6% in Lee’s Summit and 54.5% in Blue Springs from the previous year. For 2008, those numbers remain in the negative.
Buckley admitted the down retail market in a Sept. 19, 2008 article in the Kansas City Business Journal: “I think Eastern Jackson County is a lot like other parts of the city that are pretty well retailed and probably needs to take a little breather,” he is quoted.
It must of have a quick turnaround in market forces because on Sept. 4, 2008, Buckley was quoted on the REJournals.com website as stating, “There is a huge void of retail in this area.”
The only consistent argument made by Lane4 about the attractiveness of the development is with the completion of highway construction at the so-called Grandview Triangle, the intersection of I-470, I-435 and US 71 Highway, The Trails is “easily accessible to so many people,” Buckley has said.
Of course, easy access doesn’t mean people will stop and shop, or watch their kid play soccer, or attend a Wizards game. If that was all it took, Bannister Mall may never have failed.
The economic reality, in part, has Lane4 adjusting its approach. Building the soccer stadium for the Wizards now seems to be the top priority, which includes getting the city of Kansas City, MO to own the facility and lease it back to the Wizards. Such a prospect just compounds the taxpayers’ risk even more, one on a redevelopment that has been accepted more on its emotional pull in the community in replacing an abandoned shopping center than the reality of the market and what’s good for taxpayers.
Add to that the lousy research Kansas City and the state of Missouri did in calculating whether this redevelopment will repay the taxpayers and then some.
Major League Soccer will never, in the foreseeable future, gain the attendance or revenues of major league baseball, football or basketball, which, in themselves, are facing hard economic realities: The NFL has been discounting tickets, MLB has had attendance declines and the NBA is cutting administrative staff. As for the Wizards, they are last in attendance in MLS. For 2009, the Wizards have announced the team will lower ticket prices.
For 2008, the KC Wizards averaged 10,685 in attendance — 14th in a 14-team league and down 7.8% from 2007. Wizards’ supporters argue that the team’s attendance was hurt because it played at the small CommunityAmerica Ballpark in Kansas City, KS at The Legends. The argument has some merit considering the team averaged 11,585 in attendance in 2007 while still at Arrowhead Stadium., yet it also was last in attendance for the league that year. In a July 22, 2007 game against the Colorado Rapids, the Wizards attracted the “lowest single game attendance” for the MLS at 7,101.
Overall, MLS attendance has dropped 1.9% for 2008 from 2007. Because of those numbers, expansion plans for the league are meeting resistance. Montreal, one city talked about for expansion, has its opponents to a MLS team there and there’s talk of an all-Canadian soccer league instead of going with MLS franchises. In summing up a MLS team in Montreal, Pat Hickey wrote on www.canada.com, “Looking for growth? It’s nonexistent. The average attendance is lower than it was in the league’s 1996 inaugural season.”
Even MLS’s cable viewership has decreased. In 2007 with 25 team broadcasts, the number of viewers averaged 289,000; in 2008 with 26 broadcasts, the average was 253,000. Both years marked a 0.2 audience rating. In 1996, when the league was established, the rating was 0.9.
So if retail is in the dumps, local office vacancies are high and major league soccer isn’t drawing a growing audience, why pursue the soccer stadium and Trails redevelopment?
The two big reasons: taxpayer support is in place and no developer wants to walk away from that, and Lane4’s partner OnGoal wants to recoup its investment in buying the Wizards and make a profit when it decides to sell the soccer franchise.
Principals in OnGoal LLC include two Cerner Corporation executives, co-founder Neal L. Patterson and co-founder Cliff Illig. Both men are heavyweight civic leaders who get their phone calls returned from elected officials. Pat Curran, David French, Greg Maday and Robb Heineman have experience in private equity and banking. Also Heineman’s family owes a team in the NBA Development League. One can assume buying the KC Wizards was an investment for the six, community spirit notwithstanding.
In 2007, the average MSL franchise was said to be worth $12 million. Compare that to $24 million for a team in Brazil or $130 million for a team in Britain’s Premier League. With the exception of a superstar as David Beckham, player salaries in the United States are way below what other professional sports pay. Beckham makes approximately $7 million a year not including endorsements. The minimum salary for a MLS player, according to Yahoo Sports, is $12,900.
Obviously, MLS wants to increase the worth of its franchises. One of the ways the league believes it can do that is through expansion into cities that will provide a team a “soccer-specific” stadium. Such a facility — goes the theory — will increase attendance, or if not, at least increase the worth of the team’s franchise and overall MLS.
According to www.majorleaguesoccertalk.com, MLS is asking for $40 million for an expansion franchise. If such an average figure is reached for all MLS teams, OnGoal could make a tidy profit in a sale of the KC Wizards.
If the status and image of MSL continues to lag behind other sports in attendance and in sports media coverage, the value of the KC Wizards won’t go up much, even with a new soccer stadium. And if Kansas City assumes ownership of a proposed stadium, it could be saddled with another financial drain similar to Kemper Arena.
TIF and other taxpayer subsidies shelter Lane4 and OnGoal somewhat. In this deal, in this economy, with guidance from this Kansas City mayor and city council, the taxpayers may experience an abandoned Bannister/Three Trails site again in twenty years.
Bruce Rodgers can be contacted at publisher_editeKC@kcactive.com.
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