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.”

[Saul Good]

Originally Posted by Mojo Jojo

I think almost everyone wanted development downtown. The problems from day one were:
The way the development was to be financed and the payback period. Most people didn't believe those were realistic numbers and time line, at guess what those people were right.
The city brought in Cordish, a company that has a history of going over budget and not meeting deadlines on these type of projects. Guess what; they went over budget and didn't meet the promised opening date.
Most people are just upset at the way this has been handled from day one...typical KCMO.

The next big hurdle will be in about two years when the first set of leases come up...how many will renew and how much turnover will happen. This is currently going on at the Legends...many companies couldn't afford to renew leases and there are several available store fronts. In fact the Legends is now repositioning themselves as an outlet shopping area.

I was at Legends yesterday and didn't notice any vacancies. Haven't they always been outlet stores? How is that different?

P&L is great for the city. It gives people somewhere to go besides the plaza. In 10 years, nobody's going to remember that it opened late, but it will still be one of the top entertainment districts in the country.

If you want to bitch about KC, go with the schools or the stadiums or the airport or the roads or the city council. Legends and P&L are two of the biggest successes the city has ever had.

[jiveturkey]

Originally Posted by Saul Good

I was at Legends yesterday and didn't notice any vacancies. Haven't they always been outlet stores? How is that different?

P&L is great for the city. It gives people somewhere to go besides the plaza. In 10 years, nobody's going to remember that it opened late, but it will still be one of the top entertainment districts in the country.

If you want to bitch about KC, go with the schools or the stadiums or the airport or the roads or the city council. Legends and P&L are two of the biggest successes the city has ever had.

I too thought that the Legends was an outlet mall.

That area could use more office complexes and housing. I've heard that they have staffing problems due to the fact that there aren't a lot of people that live out in that area. The restaurants have had some turnover in that area as well, which was due to a lack of lunch biz.

I still think it's a great development and the new stadium and casino will only help.

[KCUnited]

I saw back to back store vacancies at Legends 2 weeks ago and even commented to my wife about it.

[|Zach|]

Originally Posted by Chief Henry

Whitlock will be on it fast...

Do you actually read his columns lately. It might mess up your knee jerk view of the world.

[Mojo Jojo]

Originally Posted by Saul Good

I was at Legends yesterday and didn't notice any vacancies. Haven't they always been outlet stores? How is that different?

P&L is great for the city. It gives people somewhere to go besides the plaza. In 10 years, nobody's going to remember that it opened late, but it will still be one of the top entertainment districts in the country.

If you want to bitch about KC, go with the schools or the stadiums or the airport or the roads or the city council. Legends and P&L are two of the biggest successes the city has ever had.

I don't think you understand what I said. As for The Legends...it started as part outlet/part retail and the business plan was to limit the outlet side. When the leases started expiring many of retail spots didn't or couldn't re-up, so there has been a lot of turnover at the Legends...hence the change in plans to go after more outlet stores. I'm not calling The Legends a failure in fact that developer was able to payoff obligations early unlike Cordish who is asking for more money.
If you know anything about Cordish you will understand that in three years there will be a fair amount of turnover in the P&L, and new clients will need to come in to fill those spots. It is their track record. I just pointed out that hiring Cordish was a big mistake by KCMO. While many will forget that it didn't open on time KCMO tax payers are going to remember for a long time that the project went way over budget and no one was held accountable. On the flip side KCMO teaming up with AEG was/is a great partnership.
I like the Legends. I go there often. P&L not really my scene at night, but it was fun during the Big XII Tourney and the World Cup.

[Titty Meat]

Originally Posted by Deberg_1990

Would anyone really prefer blocks of crumbling old buildings and parking lots to a nice entertainment area and arena? Some of you guys kill me.

A downtown stadiumn would have been much better.

[Mojo Jojo]

Originally Posted by billay

A downtown stadiumn would have been much better.

A downtown Stadium would have been nice, but you will still need to build/create a taxpayer funded entertainment area. If you look at the downtown stadiums with strong development around the stadium...all taxpayer funded such as St. Louis and Baltimore.

[|Zach|]

Originally Posted by Mojo Jojo

A downtown Stadium would have been nice, but you will still need to build/create a taxpayer funded entertainment area. If you look at the downtown stadiums with strong development around the stadium...all taxpayer funded such as St. Louis and Baltimore.

You mean the Cordish development right by the stadiums in Baltimore?

http://www.powerplantlive.com/

[kcchiefsus]

Originally Posted by RedNeckRaider

I guess it is the want to be "seen there thing" but paying ten bucks for a drink is rather steep for me. Put me down on the "not wanting to be seen there" list

Your not paying $7 a drink if you get a beer or a well drink. You can get any of those for $4 a drink. Sure its more than I would prefer to spend but it isn't $10 a drink.

[Mojo Jojo]

Originally Posted by |Zach|

You mean the Cordish development right by the stadiums in Baltimore?

http://www.powerplantlive.com/

Yes, and Cordish also did a lot of the development in the inner harbor back in the day. That is how they made their name...they are a Baltimore company. I don't know how often you go to Baltimore, but I am there two or three times a year, and the turnover in the inner harbor is unbelievable. Outside of the ESPN Zone and a couple of other restaurants I don't think many originals are still there.

[Titty Meat]

Originally Posted by |Zach|

You mean the Cordish development right by the stadiums in Baltimore?

http://www.powerplantlive.com/

Hey Zach hows the KC economy doing? Are you going to argue that Cordish hasnt hurt the KC economy? Westport says whats up.

[|Zach|]

Originally Posted by billay

Hey Zach hows the KC economy doing? Are you going to argue that Cordish hasnt hurt the KC economy? Westport says whats up.

Westport, another place there are tons of people at every time I go that way. Kelly's has been hurt pretty bad. But they do fine during peak times and always do really well during the fall after football games and what not. That deck new deck they have is awesome...

McCoys...Foundry...always people there.

My favorite place Harry's...always people there...

The area does well for itself during lunch.

I would say the hardest hit by P+L is 810 Zone. Even with some places hardest hit...the death of a lot of Kansas City places has been greatly exaggerated.

Grinders...does great business still...

The Phoenix...great business its packed even when they charge for music...

[Iowanian]

Originally Posted by billay

Yup so much money that it needs subsidies from the city. Reading is your friend.

How much is the city bringing in with sales tax on concerts, food and drinks in the area, in addition to property taxes on those facilities in P&L, and other ancillary income from fuel tax, hotel tax, permits, parking tickets etc?

[Mojo Jojo]

Originally Posted by |Zach|

Westport, another place there are tons of people at every time I go that way. Kelly's has been hurt pretty bad. But they do fine during peak times and always do really well during the fall after football games and what not. That deck new deck they have is awesome...

McCoys...Foundry...always people there.

My favorite place Harry's...always people there...

The area does well for itself during lunch.

I would say the hardest hit by P+L is 810 Zone. Even with some places hardest hit...the death of a lot of Kansas City places has been greatly exaggerated.

Grinders...does great business still...

The Phoenix...great business its packed even when they charge for music...

The difference is that the places you list have built businesses on their own...they were not subsidized by tax payer dollars for start up. I think that a lot of local businesses resent losing money to the city's publicly funded pet project.

[Titty Meat]

Originally Posted by |Zach|

Westport, another place there are tons of people at every time I go that way. Kelly's has been hurt pretty bad. But they do fine during peak times and always do really well during the fall after football games and what not. That deck new deck they have is awesome...

McCoys...Foundry...always people there.

My favorite place Harry's...always people there...

The area does well for itself during lunch.

I would say the hardest hit by P+L is 810 Zone. Even with some places hardest hit...the death of a lot of Kansas City places has been greatly exaggerated.

Grinders...does great business still...

The Phoenix...great business its packed even when they charge for music...

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.