Kansas City invested in the Power & Light District using questionable data from C.H. Johnson Consulting

Last week, I played watchman at the Power & Light District, walking through the downtown fun-o-rama and pulling on doors to see how many of them actually opened.

Parts of the taxpayer-subsidized district opened a year and a half ago. Others parts remain dark. I encountered two dozen or so sets of locked doors. Tarps in festive colors hung in the windows of shops that lacked merchandise and had floors of gravel.

More venues will open, of course. The six-screen Mainstreet movie house is set for a May 1 grand opening in the old Empire Theater, a 1921 beauty nearly lost to demolition. Wolverine ticket buyers will walk on the building’s original terrazzo floor.

That’s cool, but my inspection was prompted by a dour financial report. In February, the city’s Finance Department reported that last year’s sales in the district missed projections by a tidy 84 percent. That’s quite a shortfall, and it has meaning for people who live and work in Kansas City. The city will reach into the general fund this year to make up for Power & Light’s inability to deliver tax revenue.

To be sure, the Cordish Co., the Power & Light District’s developer, has been slow to lure tenants. But that isn’t the whole story. Can’t be. There’s too much happening in the district for 16 percent achievement to make sense.

So I asked the city for more information.

As it happens, tenancy explains only about half of the shortfall. According to the city’s Finance Department, occupancy at year’s end was 43 percent of what had been projected.

Clearly, then, the bars and restaurants that have opened aren’t doing as well as the district’s backers had hoped. Testifying to this condition, Cordish and area contractors have sued some of the restaurant operators for payment.

Just how poorly are the businesses doing? The city says sales per square foot are 63 percent of projections.

Of course, the economic downturn is to blame for some of this. Spending $30 and upward on a slab of steak is nearly pornographic when people are losing work and accepting pay cuts.

But just as likely, the city relied on junk data when it made an unprecedented financial bet.

Running the numbers was a Chicago-based outfit called C.H. Johnson Consulting.

C.H. Johnson’s math whizzes took their first look at the Power & Light District’s possibilities back in 2004, at the request of the city-funded Economic Development Corporation. They wrote a report that was used to convince the state of Missouri to approve $106 million in subsidies.

The project evolved, and in 2005 C.H. Johnson’s abacus squad revisited their projections. The data was crucial. The city and state ultimately committed more than $500 million. The breathtaking investment was to be repaid with the taxes generated once the project was up and running.

C.H. Johnson’s 2005 report looks thorough. It contains maps, charts and graphs. It analyzes effective buying income, population growth and hotel-room stays.

Its conclusion: A properly executed entertainment district would attract visitors, capture the wealth of Kansas residents and remake downtown.

The report made it seem as though the city would be foolish not to do the Cordish deal. The C.H. Johnson team calculated that the district would produce $619 million in tax revenue over 25 years — more than enough to cover the bonds the city issued to acquire the land and assist with construction.

Armed with C.H. Johnson’s data, city officials projected confidence. Deb Hinsvark, the city’s chief financial officer at the time, told the City Council in 2006 that the city was prepared in the event the Power & Light District fell short of expectations — though she thought that was unlikely. Mayor Kay Barnes, who pushed for an array of taxpayer-supported economic-development projects, said the city was in “excellent” financial shape.

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But the Power & Light District’s actual performance looks nothing like C.H. Johnson’s predictions.

According to the city, the district generated just $4.1 million in taxes last year. (Cordish is contesting its property-tax bill, which may reduce this number further.)

Cordish officials promise that more businesses are coming soon. As it stands, Jos. A. Bank menswear is the only shop to open on the retail block south of the Midland.

But the city and the state aren’t counting on dry-goods merchants to carry the day. C.H. Johnson’s 2005 report imagined that two-thirds of the new spending would occur in restaurants — the piece of the entertainment district that’s mostly complete.

To make up for C.H. Johnson’s misguided projections and the district’s sluggish delivery, the city will spend a $3 million reserve fund that it set aside when the bonds were sold. An additional $4.6 million will be sucked from the general fund, which pays for police, trash removal and other city services.

C.H. Johnson officials, for their part, suggest that it’s unfair to judge their work by, well, reality.

I e-mailed Charles Johnson, the company’s president. I asked if he had any idea what was keeping the district from meeting its sales-per-square-foot projections. He, in turn, wanted to know if the project had been built as specified “or is it smaller, hence not achieving critical mass?”

Johnson then took the tack that asking him to be accountable was unfair.

“It is absolutely essential to recognize the gap from when our projections [were] done and the product actually built — there are years and decision[s] we are not party to,” he wrote in an e-mail. “We prepare work at a snapshot in time and thousands of changes happen from whence our report is issued, none of which we are party to.”

Which is another way of saying, We’ll cash your check, but don’t expect us to stand by our work the moment the report touches your hand.

In fairness to Johnson, his consultants had no way of knowing that Cordish would overstate its ability to attract tenants. It has been four years since Blake Cordish told reporters that 80 percent of the tenants were “signed and sealed.” Apparently not.

But C.H. Johnson’s body of work suggests that the company is more a cheerleader for development than a cold-eyed arbiter.

In Boston, acting at the behest of the Chamber of Commerce, the company studied the economic impact of replacing historic Fenway Park. The 1999 study concluded that a new ballpark would create $204 million annually in new spending and create 3,000 jobs. City and state leaders ultimately discarded the recommendation. It was a wise choice. Instead, the Red Sox added seats to the existing park, which remains a huge attraction. The team is able to command $20 for a standing-room ticket.

Consulting is a sweet gig, in that a job for one client can help create another job further down the line.

In 2003, the C.H. Johnson crew did a study encouraging the city of St. Charles, Missouri, to build a convention center. A few years later, the consultants were back in neighboring St. Louis, telling the city that its facilities were falling behind.

The left-behind argument figured prominently into C.H. Johnson’s study of the Power & Light District. The consultants warned that a lot of the cool, new stuff was being built on the Kansas side of the state line.

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Kansas City got its shiny toy.

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