The Power & White District is doing good

[Titty Meat]

http://www.kansascity.com/2010/07/13...-need-big.html


Power & Light District will need big subsidies from city
By KEVIN COLLISON
The Kansas City Star

KEITH MYERS | The Kansas City Star
The Power & Light District, where restaurants were busy on Tuesday evening, is still viewed by city leaders as a long-term benefit to downtown despite Tuesday’s news.
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When the city in 2006 approved issuing $295 million in bonds for the downtown entertainment project, it was conceived as a self-sustaining venture. But a delayed opening, the economic downturn and higher-than-expected borrowing costs have meant that so far it has not generated enough revenue to cover debt payments.

“It will probably never fully cover itself,” acting City Manager Troy Schulte told The Kansas City Star in an interview. “We’ve built into all of our long-term projections the assumption of a $10 million to $15 million annual debt subsidy.”

Given Schulte’s estimate, to subsidize the district, developed by the Cordish Co. of Baltimore, city taxpayers would have to shell out at least an extra $230 million by the time the bonds are due in 2033.

Schulte said the subsidy would be built into future budgets, and he and City Councilwoman Deb Hermann said the project, which replaced acres of urban blight, was still a good investment for downtown.

The chief architects of the redevelopment plan, former Mayor Kay Barnes and former City Manager Wayne Cauthen, continue to support the project and are skeptical about the city’s new assumption.

“I would not assume that situation will continue into the future,” Barnes said. “Five or 10 years out, it may look very different and much closer to the earlier projections.”

And the Cordish executive in charge of the district said the company remains bullish on the project.

Schulte, who was not involved in the original Cordish negotiations, said that taxpayers still should be pleased with the investment.

He said much of the money went toward rebuilding crumbling downtown sewers and streets, and the project has greatly improved downtown’s reputation.

“20-20 hindsight is always good, but I’d tell taxpayers to come down and enjoy downtown, because you’re paying for it,” he said.

“The project has benefited the city enormously in a variety of ways and will continue to do so.”

Cauthen, who’s back in Colorado after losing the city manager job in November, was surprised that his successors at City Hall were calculating such dismal long-term financial returns.

“No disrespect to these guys, but I think it would be prudent to speak to the people who put the expectations together,” Cauthen said.

The former city manager said the arrival of a professional franchise at the Sprint Center, the opening of the Kauffman Center for the Performing Arts, a potential new convention hotel and several other unknown variables could mean more business at the Power & Light District and more revenues for the city.

“I agree with the assessment this project was the right thing to do,” Cauthen said. “You never would have had the NAACP in Kansas City the way downtown looked in 2003, or the Big 12 basketball tournament.”

Schulte said he hopes the project will beat the city’s latest projections.

“It’s my hope that an economic recovery and Cordish fully leasing the project will mean that subsidy number goes down,” he said.

The 511,000 square feet of retail space in the Power & Light District is now about 75 percent occupied, according to the city.

Rob Hunden, the Chicago consultant who prepared the revenue projections the city based its assumptions on in 2005, believes that big factors in the shortfall were the delayed opening and continuing vacancies.

The report by C.H. Johnson Consulting assumed that the development would be fully operational with 90 percent occupancy by March 2007 and that it would generate $17.7 million in sales-related tax revenues its first year. Instead, the first two businesses didn’t open until November 2007, and only about a dozen were open by spring 2008.

“The primary assumption going into the analysis was that it would lease up and be completed in the time we estimated, and neither of those things happened,” Hunden said. “The tenants who have opened have performed as projected; the problem is, not enough tenants have opened.”

For their part, city officials are not blaming Cordish for missing the financial projections. They assign the blame to the weak economy, higher-than-expected infrastructure costs and higher-than-expected borrowing costs, again, a factor of the national downturn.

“The deficit is not the result of Cordish,” Schulte said. “They continue to open more retail and restaurants in one of the worst economic conditions the city has ever faced.

“We simply built too much infrastructure on an uncertain revenue stream and optimistic assumptions about the global credit markets.”

Cordish estimated $212 million out of the $295 million in bond proceeds went toward rebuilding the infrastructure in the Power & Light development area. That figure, however, includes two city-owned underground parking garages specifically serving the project.

“This new public infrastructure, which traditionally would have been paid for out of public works, supports the entire downtown, and these expenditures absolutely had to be made if downtown was to continue to be viable,” Nick Benjamin, executive director of the Power & Light District, said in a statement.

The remainder of the bond proceeds went toward developing the project itself. Cordish officials have said their company has invested at least $150 million in the development.

Benjamin also said the project has generated far more tax revenues for the city than have been captured within the development itself for the purpose of repaying the bonds.

“If one includes all the incremental tax benefits that have accrued to the city from the decision to build the district … the Power & Light District is covering not only its own costs, but those of the rebuilt city infrastructure as well.”

Schulte agreed it would likely have cost the city about as much as the annual subsidy if it had issued general obligation bonds to do the infrastructure work.

But the district was touted as being a redevelopment project that would pay for itself, not a long-term obligation of the city.

“I probably would have sold it on the infrastructure component and talked about how a downtown that shut down at 5 p.m. is now almost a 24-hour operation,” Schulte observed.

The continuing subsidy should not require any future cuts in the city budget because, Schulte said, funding has been built into future budget calculations. Still, the subsidy subtracts from money that could be spent on other city needs.

“You might have $10 million or $15 million to do something else,” he said, “but then if you didn’t have the district you might continue to see businesses leave downtown, and there are costs associated with that.”

As for the Kansas City Council, the city manager believes the projected long-term subsidy should not be a surprise.

“I think they see it as an investment that will pay off, maybe not to the general fund, but from an overall community standpoint and to the benefit of downtown,” Schulte said.

Mayor Mark Funkhouser was on vacation and could not be reached for comment.

Hermann, who leads the council’s finance committee, said that while the city analyzed the original deal with “rose-colored glasses,” the project was still worthwhile.

She agreed with the city’s latest projection.

“Regardless of what the projections were, we need to make it a success,” Hermann said. “Over half of that money that was spent went to infrastructure.

“We were projecting just 100 percent coverage on the payments, and that was rose-colored glasses, but that doesn’t mean it was a bad project.

“We should have been more transparent, but then the economy went bad and we should have talked about where the money was going to come from.”

[Mojo Jojo]

Originally Posted by RJ

I don't think it was Cordish. I believe most of the ESPN Zones around the country were closed.

But inner harbor and the complex the ESPN Zone was in are Cordish developments. I said earlier that Cordish developments have a history of high turnover. While Cordish may not have been the final reason it just goes to show that they get big flashy national name places to attract crowds, and at some point the new wears off and pow...empty space. That is going to be a lot of square footage to fill.

[RJ]

Originally Posted by Mojo Jojo

But inner harbor and the complex the ESPN Zone was in are Cordish developments. I said earlier that Cordish developments have a history of high turnover. While Cordish may not have been the final reason it just goes to show that they get big flashy national name places to attract crowds, and at some point the new wears off and pow...empty space. That is going to be a lot of square footage to fill.

When I lived in Baltimore the only time I ever went to those places was when we had company from out of town. I think that's true for most of the natives. With fewer tourists you can probably look forward to more turnover.

[Iowanian]

Originally Posted by billay

Apparently not much if the city is having to pay 10-15 per year.

I think you have shit in your pants, but that's only because it's near where you keep your brains most of the time

[Mojo Jojo]

Originally Posted by RJ

When I lived in Baltimore the only time I ever went to those places was when we had company from out of town. I think that's true for most of the natives. With fewer tourists you can probably look forward to more turnover.

That is part of my point when it is new it is cool for locals to go. Then after awhile it becomes old, and you only go for special events or when friends or families come to town. P&L is never going to be more popular than it is right now. For all the regulars...five years from now you won't be. It is a basic business truth when it comes to destination locations in a city.
The same holds true for sports teams and new stadiums. Year one and two large crowds and a lot of excitement, but if the product isn't good and the newness wears off attendance goes way down. Look at the Nationals and their new stadium. Hard to get in year one...now you can count the people in the stands on most nights.

[Saul Good]

Originally Posted by billay

You listed 3 bars in Westport out of how many? A place like Barleys closed because of PNL. The point is there were a handful of other bar districts PNL wasn't nessecary at all and the long term sustainability is questionable.

Have you ever been to the Plaza? Those places turn over constantly. That's the way retail goes.

[Saul Good]

Originally Posted by billay

Apparently not much if the city is having to pay 10-15 per year.

That was always going to be the case. The P&L is basically bringing in as much money as they could possibly hope to bring in. The city knew that it was going to have to subsidize it because of the overwhelming nature of the project.

Normal bars don't have to pay to build parking garages and redo streets in addition to paying their rent. I just listened to an interview with the Funk, and he said as much. He know going in that this was going to happen.

You can give a kid $1,000,000 to build a lemonade stand and tell him to pay you back the money over 30 years, but he's never going to sell enough lemonade to pay the bill. Even if the kid has 50 people in line 24 hours a day, the math just doesn't work. That doesn't mean that the lemonade stand isn't doing well. It just means that the expectations were ridiculous.

[WilliamTheIrish]

Originally Posted by billay

You listed 3 bars in Westport out of how many? A place like Barleys closed because of PNL. The point is there were a handful of other bar districts PNL wasn't nessecary at all and the long term sustainability is questionable.

billay,

The bars in Westport have always turned over. I've been through the thick and thin in Westport and in those times I can thing of a maybe 5 places that have stood the test of time.

Bar business has always been that way. The overwhelming majority of failed businesses in Westport would have failed with or without P&L.

[WilliamTheIrish]

What Saul said.

[Mojo Jojo]

Originally Posted by Saul Good

That was always going to be the case. The P&L is basically bringing in as much money as they could possibly hope to bring in. The city knew that it was going to have to subsidize it because of the overwhelming nature of the project.

Normal bars don't have to pay to build parking garages and redo streets in addition to paying their rent. I just listened to an interview with the Funk, and he said as much. He know going in that this was going to happen.

You can give a kid $1,000,000 to build a lemonade stand and tell him to pay you back the money over 30 years, but he's never going to sell enough lemonade to pay the bill. Even if the kid has 50 people in line 24 hours a day, the math just doesn't work. That doesn't mean that the lemonade stand isn't doing well. It just means that the expectations were ridiculous.

Funny thing Saul...when I posted that the numbers and payback were wrong from the beginning, and most people knew they were unrealistic. You got on my case for questioning the P&L...while all I was questioning was the bill of goods sold to the public. Now you post, and it backs up what I said. Pick a position dude.

[Saul Good]

Originally Posted by Mojo Jojo

Funny thing Saul...when I posted that the numbers and payback were wrong from the beginning, and most people knew they were unrealistic. You got on my case for questioning the P&L...while all I was questioning was the bill of goods sold to the public. Now you post, and it backs up what I said. Pick a a position dude.

link?

[Mojo Jojo]

Originally Posted by Saul Good

link?

http://chiefsplanet.com/BB/showthrea...=230835&page=4

[RJ]

Originally Posted by Mojo Jojo

That is part of my point when it is new it is cool for locals to go. Then after awhile it becomes old, and you only go for special events or when friends or families come to town. P&L is never going to be more popular than it is right now. For all the regulars...five years from now you won't be. It is a basic business truth when it comes to destination locations in a city.
The same holds true for sports teams and new stadiums. Year one and two large crowds and a lot of excitement, but if the product isn't good and the newness wears off attendance goes way down. Look at the Nationals and their new stadium. Hard to get in year one...now you can count the people in the stands on most nights.

Speaking of stadiums, the harbor area would likely be doing much better if the Orioles were a contending team.

[Mojo Jojo]

Originally Posted by RJ

Speaking of stadiums, the harbor area would likely be doing much better if the Orioles were a contending team.

One of the big risks you take when you develop around a team or venue. That is one reason why it is better for the P&L not have a sports team at Sprint Center. In Houston around Minute Maid most of the development failed and most of the bars in the area are only open on game day.

[Saul Good]

Originally Posted by Mojo Jojo

http://chiefsplanet.com/BB/showthrea...=230835&page=4

That post had nothing to do with the numbers being unrealistic. That post said that it's been great for the city, and I stand by that. The city went into this knowing that they were going to have to subsidize some of it. That doesn't make the district a failure.

The city is much better off now than it was 5 years ago. Without the P&L, this city doesn't sniff an All-Star game. Without the P&L, this city isn't even in the discussion for hosting a World Cup event.

The P&L District and the Legends Shopping Center are 2 of the best things this city has to offer.

The Chiefs and Royals both suck, and they are located out in the middle of nowhere. (How sad is it that they are on the short list of "positives" for the city.

Worlds of Fun and Oceans of Fun are fine, but they are in the middle of nowhere.

The casinos are fine, but they are in the middle of nowhere.

The Plaza is cool.

What else is there? If you take away P&L and the development going on around the Legends (Cabellas, Great Wolfe Lodge, Dave & Busters, the Speedway, Community America Ballpark, the Wizards' Stadium, Nebraska Furniture Mart, Chateau Avalon, Schlitterbahn, Shopping, Dining, etc.), you are left with an arena with no tenant in the middle of a ghost town, and a bunch of marginal activities (Plaza notwithstanding) in the middle of nowhere.

It is unfathomable to me that, out of everything that Kansas City has done wrong over the years, that you are trying to call out the Legends and the P&L district as failures.

[ChiefsCountry]

First of all an average bar is open 5 years then closes. That is just how it is in that industry.