Corporate subsidies in WyCo: going once, going twice…

There were deals, deals, deals to be had in the basement of Memorial Hall on Friday, June 19.

Higgenbotham Auctioneers was handling the liquidation of a dead Kansas City, Kansas, restaurant called Backfire BBQ. The resulting auction wasn’t the usual drab inventory of tables, chairs, stoves and bar lights. Backfire was a motorcycle-themed restaurant built around the Orange County Choppers brand and brought to KCK by real-estate firm RED Development and the minds behind the T. Rex Café and the Rainforest Café. So racecars and jukeboxes were on the block, along with dozens of vintage motorcycles and other theoretically valuable memorabilia.

Backfire’s owners had spared little expense in decorating their biker-chic palace. And why should they have? They weren’t picking up the tab. Bidders at Memorial Hall who were paying close attention would have noticed that the seller wasn’t Backfire or a title-holding bank. It was instead the Unified Government of Wyandotte County and Kansas City, Kansas. The restaurant equipment, the motorhead gear, the antiques — all of it was purchased for Backfire by Wyandotte County taxpayers, through STAR bonds.

STAR (Sales Tax Revenue) bonds are economic-development tools used by Kansas municipalities to assist developers in financing commercial, entertainment and tourism projects. To crank up Backfire, the UG issued $3 million in STAR bonds, then essentially lent the proceeds to the restaurant’s backers so that they could deck out their spot in the Legends shopping area.

“That was our contribution as an incentive,” Mike Taylor, the public relations director for the UG, tells The Pitch. “The rest was paid for with their [Backfire’s] private money.”


The idea with STAR bonds is that they are repaid through state and local taxes generated by the project. But Backfire didn’t do so hot. Poor planning may have had something to do with it: Two competing barbecue restaurants — Arthur Bryant’s and Famous Dave’s — were already operating in or near the Legends when Backfire opened, in 2009.

Three months after Backfire’s launch, the restaurant was slapped with nine critical violations by the Kansas Department of Agriculture. By the time The Pitch’s restaurant critic, Charles Ferruzza, reviewed it several months later — he called the food “visually embarrassing” and “utterly tasteless” and noted that diners taking a trip to the restroom walked past not one but two plastic depictions of the Statue of Liberty — the restaurant was reportedly having issues with employee retention, due to disorganized management.

Local management company PB&J Restaurants took over day-to-day operations in 2011, but Backfire continued to sputter. It closed in 2013.

So what happens when the UG bets $3 million on a business and then loses? What recourse is there for the taxpayers, the vast majority of whom had no idea that they were providing a corporate subsidy?

None, really, except to take back as much of the stuff as possible that the county paid for and try to sell it off. Hence last Friday’s auction.

Even by the standards of a desperate restaurant auction, the winning bids for Backfire’s inventory were breathtakingly low. Consider:

Custom World War II German military motorcycle with sidecar:

UG purchase price: $18,155
Winning bid at auction: $3,500

Dino Sinclair vintage gas pump:

UG’s price: $15,000
Winning bid: $1,100

1923 Harley-Davidson Model J Motorcycle:

UG’s price: $86,900
Winning bid: $13,000

1912 Metz Model 22 roadster:

UG’s price: $209,000
Winning bid: $6,000

Custom Orange County Choppers–style motorcycle:

UG’s price: $285,000
Holy shit: $6,000

Higgenbotham’s appraisal of the inventory had pegged the total value of the goods at $330,160. But the Backfire auction generated just $174,000 in total revenue — about $2.8 million less than what the county, via STAR bonds, originally laid out.

Taylor says the UG kept about 15 percent of Backfire’s inventory, mostly TVs and kitchen equipment, for its own use. “So $330,160 minus the 15 percent of stuff we kept, means something like $280,160 worth of stuff — based on the auctioneer’s appraisal — went into the auction,” he says. Even by that imprecise calculation, though, the UG came out more than a hundred grand behind.

But Taylor argues that it’s inaccurate to characterize Backfire as a money loser for the UG. Because Legends.

“Despite the shortfall on this specific venture,” he says, “the overall Village West area is so successful, the STAR bonds will be paid off no later than 2017, which is four years ahead of schedule. And the area is generating around $11 million a year in property tax which didn’t exist.”

He adds: “It is accurate to say the Backfire BBQ venture turned out to be unsuccessful and the UG did its best to recover as much as it could.”

Dan Lowe, who was at the helm of RED Development during Backfire’s run at the Legends, told The Pitch that he didn’t know the answers to the bulk of our questions and that he would get back to us. By press time, he had not.

The $174,000 will be placed in a charitable trust for the dozens of small-barbecue-restaurant owners in KCK who have never asked for and never received public subsidies for their businesses.

Just kidding. It’s going into the UG’s general fund.