Wichita city leaders are considering a(nother) sweetheart deal that would transfer even more taxpayer money to EPC Real Estate Group for its project surrounding Riverfront Stadium.
The developers are demanding an additional $11.3 million from the Tax Increment Financing district surrounding the baseball stadium and threatening to pull out of the deal without it.
According to the Wichita Eagle, the Wichita City Council was told if the carve-out from the TIF funds — which were supposed to be used to pay off debt for Riverfront Stadium improvements — EPC Real Estate Group wouldn’t build the hotel, apartment complex, parking garage, and 10,000-square-foot retail space.
The carve-out would be functionally no different than creating a new TIF district around the proposed development.
EPC is effectively demanding a guaranteed return on investment.
According to the Eagle, Wichita Assistant City Manager Troy Anderson told the council EPC will not move forward with the project unless the city approves the $11.3 million subsidy and that the change is needed because EPC “won’t be able to see a large enough return on its investment to get underwriting for the development without the additional incentives.”
The additional incentives would give EPC Group a return on investment of 8.5%, or $9.35 million. “Anderson said the city would still receive $39 million in other revenue from the completed project over the next two decades, some of which could be used to help pay for the stadium’s $83 million debt,” the Eagle reported.
That $39 million is down from previous projections of $42.4 million in 2022, the Wichita Business Journal reported.
The problem, however, is that in 2019 and 2020, the City of Wichita built one of the most expensive ballparks in Minor League Baseball, with the deal hinging on a sale of four acres of riverfront land for a dollar an acre, luring the Triple-A New Orleans Baby Cakes — now the Wind Surge — to the city.
When the deal predictably sparked criticism, the Wind Surge management brought out plans for restaurants and bars on a riverfront boardwalk on the west bank of the Arkansas River, a pedestrian footbridge to connect the stadium to downtown, an outdoor ice skating rink, and a “massive Ferris wheel illuminating the entire area in a whimsical glow of pink and orange lights,” according to the Eagle — none of which has actually been built.
“Instead, over the past four years, public investments and subsidies have increased while the projected money coming back to the city has dropped by millions of dollars,” the Eagle reported. “Elected officials are starting to question whether the development plan is working, as developers seek additional subsidies before they’ll agree to build supporting development that would eventually ease the city’s cost-burden for the stadium.”
Investigations find STAR bond projects ineffective
In 2020 the city had already approved a “Community Improvement District” around the ballpark, which increased the sales taxes in the area from 7.5% to 9.5%, and the cost to taxpayers for the roughly $210 million project will be at least $100 million.
In 2022 it was discovered that the owners of the Wind Surge had tacked a pre-tax 8% surcharge, called a “Ballpark Development Fee,” onto sales at the park.
The TIF district is in addition to some $42 million in STAR bond funding for the park and related development.
STAR bonds are a controversial economic development program that is designed to “assist the development of major entertainment or tourism destinations in Kansas,” according to the Kansas Department of Commerce.
However, an August 2021 audit by the Kansas Division of Legislative Post Audit found not only have STAR Bonds been misused — only three of the 16 attractions reviewed met the tourism-related requirements — but the program was sold on the idea that out-of-state sales tax revenue would pay for the developments within 20 years, which turned out to be wildly optimistic.
The audit reviewed three separate projects — including one in Wichita — and concluded it could be more than a century before one of the projects would pay off, and in all three cases, the district was likely to be developed without STAR bond financing.
Additionally, another study by Dr. Arthur P. Hall for the Kansas Policy Institute — which owns the Sentinel, found that STAR bond projects in Wichita simply shifted existing money to other parts of the city. And instead of creating new jobs for the city, employment mostly shifted as well.
All for a team that was downgraded to Double-A before it played its first game in Wichita, had its first season canceled by the pandemic, and had dismal attendance for the first two seasons thanks to higher-than-expected ticket prices and the aforementioned “development charge.”
A new ownership team has started to turn some of that around, lowering ticket and concession prices and increasing attendance by 40%.
The council will be holding a public hearing on Nov. 21 on the changes to the West Bank Redevelopment District.