Sign in / Join

KC voters approve stadium subsidies

From Commercial Property News:

In a referendum this week, voters in Jackson County, Mo., which includes Kansas City, voted 53 percent to 47 percent to raise the local sales tax by three-eighths of a cent to fund renovations at the Truman Sports Complex, which includes Arrowhead (pictured) and Kaufman stadiums, used by the NFL's Kansas City Chiefs and MLB's Kansas City Royals. A separate question on the ballot to fund a retractable roof for either stadium failed by a narrow margin.

All together, the successful measure is expected to raise approximately $850 million over 25 years, $425 million of which will be used for construction expenses. The rest will be earmarked for interest and as a reserve for future repairs at the twin-stadium facility, located southeast of Downtown Kansas City, Mo., on I-70. Under the terms of the referendum, the Chiefs and Royals will kick in an additional $100 million between them for construction, and the state of Missouri will provide $50 million more in the form of tax credits.

The stadium question inspired an unusually heavy voter turnout for an off-year referendum, with more than 92,000 people voting, about twice the usual number for this kind of vote, according to election officials. With the passage of the measure, both teams are committed to staying in Kansas City until 2031.

Here is the view of a KC Chamber of Commerce spokesman:

"The renovation vote was important because of the jobs at the complex it protects and the construction jobs it will generate," Pam Whiting, vice president of communications at the Greater Kansas City Chamber of Commerce, which supported both questions, told CPN this afternoon. "It was also important for Kansas City's image as a major-league town." Whiting also noted that the vote, especially because of its positive psychological impact, might have an indirect impact on real estate in the area, though historically the sports complex hasn't been a development hub. She added that another vote on the retractable roof might well be put on a future ballot, and if it succeeds it too would have a strong economic impact, because it would allow the complex to host a Super Bowl.

Judging from Pat Rishe's study of the economic impact on Detroit, a Super Bowl in KC would generate a net increase in KC spending of around $200m. This might happen once every twenty-five years. There are presumably auxiliary benefits from a roof, but the annuitized gain from hosting a Super Bowl is not very large. The voters were wise to reject that project.

The value of the jobs protected and created by construction are similarly weak economic justifications for levying the tax. Far more significant is the existence value of the team to KC residents who enjoy the games even if they don't buy tickets, and KC's "image as a major-league town." These are hard to quantify though.

And of course KC's major league "image" is an artifact of the closed league structure of MLB and the NFL, which strictly limits the number of franchises. This creates rents for teams whenever a location threat can be employed. Thus, the real winners of the vote are the Chiefs and Royals. Their relatively modest contribution of $100m for renovated stadiums seems proof of that.

Who's next?

See Dennis Coates' post for a pre-vote analysis of the KC issue.