In another ”good deal” gone bad for taxpayers, Kansas Citians are being asked to pay $10 to $15 million per year to make up a shortfall on the Power and Light economic development project.
KC officials approved a financing plan for the Power and Light District in 2006 that included letting $295 million in city-backed bonds with the idea that the project would be self-sustaining.
In what is becoming a near daily occurrence, another city is finding that letting millions of dollars in bonds for economic development projects might not be in the best interests of its citizenry: last week Topeka announced Heartland Park was in need of a taxpayer subsidy.
To be certain, the Power and Light project hit unforeseen snags from almost the outset. (What large project doesn’t?) Its opening was delayed, and of course, the entire country is laboring under an intense economic downturn.
Those two snags are leading city officials to a pocket-grabbing conclusion: The project will likely never fully cover itself, and city coffers will need to subsidize the project to the tune of $10 million to $15 million per year – or according to estimates, $230 million by the times bond are due in 2033.
KC Councilwoman Deb Hermann admits that council members may have viewed the project with “rose-colored glasses,” which is exactly how it appears Edgerton officials are looking at the intermodal project.
With nary a foot near the brake pedals, the Edgerton council approved an intent to let $500 million in industrial revenue bonds to secure debt on the project. Already, a cost-benefit analysis has shown the school district will lose money on the project for the next 10 years. (Yes, they’ll make some money eventually, but they’ll have to spend more than they pull in to stay afloat. If the school district won $1 million in the lottery, but purchased $2 million worth of lottery tickets – they’ve lost money.)
There are no guarantees that the projections that suggest Edgerton will make $4 for every $1 it spends will hold true. In fact, we’d argue if the Edgerton council removed their rosy glasses, they might see a cautionary tale in the making. First, there’s Kansas City’s and Topeka’s most recent examples.
The Allen Group – which will oversee development of the KC Logistics Hub in Edgerton – has tried a logistics park next to a rail intermodal before. Their Texas affiliate declared bankruptcy on just such a project last year.
Maybe local officials should take a lead from Herington, Kan.’s, city manager. They recently turned down a project projected to bring 1,400 jobs to their area due to perceived problems and “red flags” with the company financials.
When asked if this meant they didn’t want the deal they responded simply: show us the money, and we’ll consider the project.
Apparently, this smaller community’s leaders have more common sense than area officials who are dazzled by the zeroes generated in a $250 Cost Benefity Analysis on a software program hosted by a paid lobbying group, and intimidated by a bond counsel who stands to make a tons of money off the project.
Kansas City, with its population of 475,000 people, may well be able to handle a piddly $230 million budget taxpayer subsidy over the course of 10 or 15 years. That’s on a debt much smaller than the one Edgerton officials are salivating to obtain. If the intermodal project goes belly-up – or even if it’s successful like the Power and Light district, but fails to meet projections – Edgerton’s 1,800 citizens will have a tough time footing a taxpayer subsidy on $500 million of debt.
Officials have assured us that won’t happen. Those are the same assurances Topeka and Kansas City officials made.
Edgerton officials should take off their rose-colored glasses and look at the shortcomings of other projects before potentially saddling its citizenry and Gardner Edgerton School District patrons with massive debt on behalf of the intermodal project.
We also believe they, and any other officials who helped bring this debt goliath to Gardner-Edgerton, need to sign personal guarantees in case the project fails.
If they want to play at business using other people’s money (taxpayers), they should be willing to take the same risks homeowners and smaller businesses take.