Just in case you thought the city actually had learned its lessons from the Power & Light District debacle, recent reports will disabuse you of that notion. We were initially told that there only would be a $35 million payout from the city, financed by bonds. The rest of the $150 million in city support would be made up of abatements, TIF, and a Commercial Improvement District (CID) tax.
Steve Vockrodt at The Pitch considers other costs that the city doesn’t seem to be including in their estimates:
The property upon which the hotel will be built (bound by Truman Road and 16th Street and by Baltimore and Wyandotte) is mostly city-owned, which means that it currently generates no property taxes. Troy Schulte, the city manager, has said the land is worth $13 million.
Assuming that valuation is correct, it means that the land—if the city sold it to a developer and it returned to the tax rolls—would generate $333,998 a year in property taxes. Under TIF, the development captures all that money.
Given these arrangements, then, the public subsidy for the hotel is going to be a lot more than $35 million. About half the cost of the $300 million project will wind up being paid for by public taxes.
But wait, there’s more. The Kansas City Business Journal adds:
In addition, the just-released copy of the memorandum states, the city will pay fixed annual management fees to the hotel owner through the 15-year catering agreement. The fees, ranging from $2.4 million to $5.4 million, have a net present value of $47.3 million, according to the [Memorandum of Understanding] MOU.
And if event gross revenues are insufficient to make the scheduled fee payment, the MOU states, “the city shall pay from any legally available city funds.”
In other words, if the project underperforms, taxpayers will make up the deficit. Sound familiar? The MOU also requires that taxpayers subsidize the construction of the hotel by forgoing tax income on the materials; income from the sale of the site to be used; and a cap on the fees required for construction. These costs likely are not counted in the project total, but they are real funds the city would forgo. The Journal continues:
In addition, the developers will receive a sales tax exemption on construction materials, and the city, which owns three-quarters of the proposed hotel site, will donate that land (though it will be due payment if the hotel is ever sold).
The MOU also calls for the city to cap the developer’s fees for zoning, permits, inspections and reviews at $800,000 and to provide no subsidies to any competing hotels for 10 years after the new Hyatt’s opening.
That last part is the kicker. Hyatt realizes that the deal it wants—with its myriad subsidies, tax breaks, and payouts—if directed toward other hotels, would hurt their business. It only follows that the deal they are asking for now will hurt the hotels already downtown.
Who on the City Council is going to stand up for (1) those existing hotels who likely will be hurt by this project and (2) the taxpayers who are being asked to underwrite something that will undercut previous subsidized investments?