July 31, 2014

Updated: Analysis shows intermodal project net loss for GE District

Danedri Thompson

dthompson@gardnernews.com

With the exception of the Gardner Edgerton School District, every taxing entity the intermodal touches will see a net benefit from the project, according to a cost-benefit analysis the city of Edgerton provided to The Gardner News.

The analysis is one factor Edgerton’s city council will consider prior to acquiring loans on behalf of BNSF and the Allen Group for the intermodal and logistics hub project. Council members will host a public hearing on the possibility of letting $500 million in industrial revenue bonds related to the project on Thursday night.

School officials anticipate being on hand at the Thursday night hearing to voice their concerns about the potential costs of the project.

“I think we’re the little bit disappointed in the way these numbers are shaking out,” school business director Eric Hansen said. “When you sit down and start dissecting the numbers it becomes very aggravating to think this is the path we’re headed down.”

Edgerton officials have approved a 75 percent tax abatement for the 1,100-plus acre project.

A consulting firm, Municipal Consulting, provided two cost-benefit projection analyses on the intermodal project. One assumed the entire project would be built out within the first year. A second analysis assumed the project would happen in phases over the course of 10 years. The projected costs and benefits are similar in both scenarios.

According to the analysis that assumes the entire project comes to fruition within the first year, the state of Kansas will earn $148.57 of revenue for every dollar it spends on the project. Edgerton will earn $4.01 for every dollar it spends. Johnson County Community College, the county and Johnson Count Fire District No. 1 also stand to benefit from the project – earning between $1.22 and $3.43 for every dollar spent on the project’s behalf.

It’s a different story for the school district. The school district will lose approximately 46 cents for every dollar it must spend educating additional students generated from the project.

Both analyses assume that 5,674 new jobs will be created and that the school district will grow by 2,183 residents due to the project. According to the cost-benefit reports, that will translate into 182 new students in the GE district.

Hansen believes that estimate is questionable.

“The ratio they used to calculate number of students is grossly inaccurate,” he said.

The district did a few calculations to estimate new students based on the number of new residents provided in the cost-benefit analysis. In 2008, the district had roughly 4,500 students and there were roughly 21,000 residents within the district.

“That tells us that approximately 20 to 21 percent attend K through 12 schools,” Hansen said.

When applied to the 2,183 new residents projected by the analysis, that translates into approximately 236 new students – much higher than the analysis projections. And Hansen said it’s likely that number could be as high as 450 new students.

David Dillner, Edgerton City Administrator, said there’s no perfect way to predict with 100 percent certainty the number of new residents or students that may result from the intermodal. The cost benefit analysis simply provides an estimate.

“There’s no way anyone can actually know how many people will move in or move out of a jurisdiction based on the project,” he said.

The consultant used a variety of figures from multiple sources including information from the county, the schools, and The Allen Group to determine the estimates, Dillner said.

“That all got put into the model the consultant ran and these are the numbers that popped out,” Dillner said.

Steve Robb, consultant with Municipal Consulting, used cost benefit analysis software developed by the League of Kansas Municipalities and approved by the Kansas Court of Tax Appeals for projects that are to receive tax abatements. However, a cover letter from the consulting firm admits that the project’s size exceeds the limits for which the software was designed to analyze. The letter also stipulates that all of the information used to create the numbers was provided by the city’s bond consultants.

“And we have made no attempt to verify its accuracy or whether the projections are reasonable,” the letter reads.

The analysis also assumes that the school district will need to spend an additional $2.7 million over the course of 10 years to educate new kids – or approximately $1,483 per year per new student.

“There is no way it costs us that little to educate our kids. The cost to educate kids is also grossly understated,” Hansen said. “Something else that wasn’t included in this study was the possibility of needing to build new schools.”

Dillner understands that the school district has concerns about the way the project is back loaded.

“The cost-benefit analysis did not show that they’re losing money,” Dillner said. “They’re just not gaining as much as the other taxing entities. The way these projects are typically implemented all the infrastructure is up front. Unfortunately, that means the taxing entities are back-end loaded.”

The analysis suggests the district will earn approximately $99 million in taxes and additional school funding as a result of the project, but will have to spend more than that on the new students generated by the facility.

“For those kids that are starting school today or this fall, they may see very little benefit and yet, think of all the things we’ll have to take on in that time,” Hansen said. “We will have to build new schools. There will be new programs without the resources to compliment them from the project and no way to control the costs of living in our community.”

The Edgerton City Council meets tomorrow, July 8, at 7 p.m. at Edgerton City Hall.

Full cost-benefit analysis reports are available for viewing below.

PDF Cost-Benefit Report-Phased

PDF Cost-Benefit Report-Allen Group-Single Expansion


Comments

  1. The first benefit analysis report completed by Scott Robb (if you will do research on him you will find he is the to-go guy for coming up with these reports) has a cover letter indicating the following:

    “At your request, we have completed the cost-benefit analysis for the above project toaccompany the request for property tax abatement. This analysis has been prepared using the software developed by the League of Kansas Municipalities and approved by the Court of Tax Appeals, along with information provided by you regarding the project. All of that information has been provided by you and others and we have made no attempt to verify its accuracy or whether the projections are reasonable.
    In addition, the sheer size of this project exceeds the audit limits for which the software program was designed to analyze. While it does not appear that exceeding those auditlimits has affected the results of the report, it is important for anyone using the report to understand that results could be affected.”

    The second benefit analysis report is accompanied by the following statement:

    “At your request, we have completed the cost-benefit analysis for the above project to accompany the request for property tax abatement. This analysis has been prepared using the software developed by the League of Kansas Municipalities and approved by the Court of Tax Appeals, along with information provided by you regarding the project. All of that information has been provided by you and others and we have made no attempt to verify its accuracy or whether the projections are reasonable. This report assumes that one-fourth of the project occurs in each of years 1, 3, 5, and 7. The sheer size of this project exceeds the audit limits for which the software program was designed to analyze. While it does not appear that exceeding those audit limits has affected the results of the report, it is important for anyone using the report to understandthat results could be affected.”

    So it appears Kutak Rock LLC, a law firm out of KC, came up with all of the data, etc. for the Allen Group and Robb plugs it into a computer program and gives you a tidey-whitey report to tell you the roads will be paved in gold except those for the school district (where most of your property taxes go – look at your property tax bill) and the people within that school district. No accuracy guaranteed, no checking of the data by another entity, no guarantees whatsoever – do the benefit analysis reports have any merit – I would say NO.

    So this belly-up Texas developer which more than likely can’t get financing on the open commercial market (which also would carry a higher borrowing interest rate)comes to the people to be their mortgage broker thru industrial revenue bonds and then financially rapes you with the incentive they have to have taking millions and millions of school tax dollars from you plus every other taxing entity getting hit. Now how much do you want to bet the worthless politicians will take care of these jaybirds rather than the people they are supposed to support and protect ??????? And I want to remind you the name of the city of Edgerton will be on the deed to each one of these IRB deal properties until those bonds are paid. They might tell you they have an iron-clad lease to whoever on each one of those deals and the people are not responsible but to me when my name is on the line or the deed, I have the possibility of responsibility, costs and losses – a risk I don’t care to take nor do I want to be in the warehouse business as I have told Gardner City Hall on more than one occasion for what good it has done which is absolutely none.

    So citizens you might want to think twice before you rubber stamp a deal for $500 MILLION and you might want to show up at the meeting tomorrow evening and be thinking about whether you might want to voice your opinions about YOUR OWN FINANCIAL STABILITY and also state you expect some accuracy to be involved in the whole mess. And this applies to all citizens in this area and state because you are all affected one way or the other.

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