Dropping the Ball

The Chiefs and Royals could choose to leave Kansas City in just a few years with no financial penalty unless Jackson County soon comes up with millions of dollars for stadium improvements.

Both sports teams use stadiums at the Truman Sports Complex under leases that last through 2015. But only recently have public officials acknowledged that little-known clauses in those contracts may cause the county to default on the leases in the year 2007 — freeing both teams to leave. The leases, negotiated in 1989, require Jackson County to spend millions on improvements, with the most substantial work to be done by 2007. But officials admit that the county simply doesn’t have enough money to fulfill those requirements.

This looming deadline has been left out of public debate while business leaders and politicians from both sides of the state line have argued over whether a new bistate regional sales tax should be put to voters. Such a tax increase may be essential — and needed soon — to keep the teams in Kansas City.

“Unless we negotiate new leases, because of increased costs there is a high probability that by 2007, there will not be sufficient funding for the 1990 master plan,” Jackson County Executive Katheryn Shields acknowledged in a written statement to the Pitch. “Unfortunately, the teams would then be free to leave Kansas City without having to pay economic damages.”

“If they default the leases, then the teams basically would be free agents,” says Jack Steadman, Chiefs chairman. “We don’t want that to happen. They don’t want that to happen.”

The sports teams and Jackson County in October announced a deal that would tie both teams to town for 25 years and require as much as $354 million in public funding and $65 million from the Chiefs and Royals for stadium improvements — but only if a new bistate tax is approved by the end of 2004.

But negotiations over a new bistate tax have been characterized mostly by bickering between officials in Jackson County and Johnson County, Kansas, over whether a new tax should benefit sports teams, the arts, schools or a combination of all three. Approval of a bistate tax would require a majority vote in both counties. Johnson County Commission Chair Annabeth Surbaugh says a new regional tax would have a better chance of passing in 2006.

But by that time, it would be too late to improve the stadiums and keep the teams.

Surbaugh admitted that she was unaware of the 2007 deadline.

“I guess I thought it was later than that,” she tells the Pitch.

She’s not the only one in the dark. The 2007 deadline has not been part of any public discussion of stadium improvements or a possible bistate tax.

The Chiefs chairman confirmed the deadline only after he was told that the Pitch had confirmed it with county officials. “Unless Jackson County makes it public, that’s not our place to announce that,” Steadman says.

Jackson County Financial Advisor Jack Holland acknowledges that local leaders are generally ignorant of the impending cutoff. “I don’t think the metropolitan political leadership or the business community is that well-versed on the issue,” he says.

Holland says the situation was created in 1989, when county and team officials were scrambling to negotiate a new lease agreement to replace the original deal signed when the stadiums were built in 1970.

“The idea was, the stadiums had to be maintained as state-of-the-art,” Holland says.

The 1990 lease agreements include master plans for each stadium, with lists of improvements to be made by certain dates. For example, the county agreed to put a new concrete coating on the dugout roof at Kauffman Stadium by year two, build a Royals hall of fame by year five and renovate the water fountains behind the outfield by year ten. Arrowhead’s contract requires similar year-by-year improvements.

But after the first decade, the improvements increase in cost. By year seventeen — 2007 — the county is supposed to have renovated the press boxes, the security offices, the team facilities and the administrative offices at Arrowhead.

But the list doesn’t include cost estimates or a cap on expenses. “If they had more time, they might have negotiated some of the finer points on this cap,” Holland says. “You’ve got a fixed funding amount, but the cost of improvements goes up with inflation.”

The county has been trying to honor the improvement requirements with expenditures of $8.5 million a year, which comes from a voter-approved Jackson County bond issue ($3.5 million), money from the city of Kansas City, Missouri ($2 million), and from the state of Missouri ($3 million).

Jackson County barely came through with the improvements required by the year 2000. It issued bonds to replace the seating at Arrowhead — bonds that are costing $3.5 million a year to pay off.

But the county won’t squeak by in 2007.

“There won’t be sufficient funds available from the current revenues to continue to make all the master-plan improvements,” Holland says. Holland estimates that funding for stadium maintenance and improvement is $5 million or $6 million short each year.

In other words, the county will be in default in three years, and the teams can take their balls and go elsewhere.