Downtown convention hotel figures to be a money loser for Kansas City Public Schools, others
Public financing for the downtown convention hotel could cost Kansas City Public Schools $4.7 million over 30 years due to public financing for the project, according to an analysis of the project.
On the other side of the equation, Kansas City stands to make nearly $50 million. Jackson County would emerge $23 million ahead, according to the analysis.
Springsted Inc. prepared a cost-benefit analysis of the convention hotel ahead of Tuesday’s hearing for the project. Kansas City leaders announced the plan for the long-sought convention hotel as a means to increase the city’s standing in the competitive convention business.
The Springsted report shows that KCPS bears the largest total financial risk from a public financing plan for the hotel project, which includes two types of tax increment financing, a sale-leaseback arrangement to redirect property taxes back to the development and other forms of assistance.
Other taxing jurisdictions that could lose money over a 30-year term, according to the report, include the Kansas City Public Library ($779,095), the Jackson County Mental Health Fund ($322,623), Developmental Disability Services of Jackson County ($173,004) and the Metropolitan Community College system ($1.2 million).
The hotel development team, which includes local lawyer Mike Burke, will argue that incentives are needed to make the project financially feasible. The Springsted report says that without incentives, the convention hotel would generate a 2.4 percent internal rate of return. With the incentives, that rate of return grows to 12 percent.
The overall cost of the project, originally pegged at $300 million, is now listed at nearly $311 million in the latest report. Of that $311 million, public sources account for $164 million, or more than half the cost of the project. That $164 million doesn’t count the extra $15 million that the city will pay in financing costs for its $35 million contribution to the project through the convention and tourism tax.
The rest of the project costs come from private equity ($51.7 million) and private debt ($92 million).
The current development pro forma puts development fees for the project at $9.6 million, or 3 percent of the overall project cost.
A separate analysis by Springsted shows that when the hotel opens in 2018, it will employ 550 people, supported by a $20 million payroll. Divided equally, that works out to a $36,363 average wage, or close to $17.50 an hour. The Missouri Department of Economic Development lists Jackson County’s average wage at $50,052, or $24.06 an hour. [Update: Roxsen Koch, an attorney representing the hotel development team, says the development team’s numbers contemplate 400 full-time equivalent positions, which works out to $48,571 per job, which includes taxes and benefits]
