Sports stadium owners need to address the slings and arrows of public financing
To stadium or not to stadium?
The Chiefs and Royals want to ask you for a billion dollars.
That’s what all the chatter around the stadiums boils down to. The Chiefs are listening to offers from KCK developers while the Royals are seriously eyeing a move downtown.
Honestly, if taxpayers subsidize two stadiums, a billion dollars may be too low of an estimate. Just look at comparable situations in the pro sports world.
Dr. Michael Kelsay, professor of economics at UMKC, says that high-dollar public financing doesn’t happen in a vacuum.
“When figures are thrown around, they never mention the opportunity cost,” says Kelsay. “The money you spend on stadiums is money you aren’t spending on public services that pay tangible dividends, like helping those without homes, education, healthcare, or infrastructure.”
Royals owner John Sherman said the team would ask for a public-private partnership to establish funding for a downtown stadium. The Chiefs are watching carefully; they will want anything the Royals get and then some [more on that later].
Ph.D. candidate and urban planner Erin Royals says asking the public to pay for stadiums is ethically bankrupt.
“These owners have more money than most of us could ever imagine, and they want us to build them a new stadium? Just saying it out loud is offensive,” says Erin Royals. “People are working their jobs every day to try to get enough money to pay their bills, and the hard work that we’re doing is then going to be funneled into a huge megaproject. Is that really what we’re working a 9-to-5 for?”
The past as prelude
Arrowhead and Kauffman Stadiums have stood side-by-side at Truman Sports Complex in the far east corner of KC proper since 1971. In 1968 residents approved the most significant bond measure in city history—$712 million in today’s dollars—to build the stand-alone football and baseball stadiums to ensure KC remained a major league town.
Only 22 cities in the U.S. have both an MLB and NFL team to call their own. Owners often threaten relocation to leverage money for a new stadium, and commendably, the Chiefs and Royals owners have not done so. But the prestige of having both teams has cost taxpayers repeatedly.
Jackson County and Kansas City, Missouri taxpayers footed an $850 million bill for stadium renovations completed in 2009, but now both teams are likely to come back, hat-in-hand, asking for more.
The lease at Truman Sports Complex runs through 2031, but the Royals are in a hurry to move downtown. This has progressed so quickly that they may even have a bond measure related to the relocation on ballots as early as this November.
KC’s tax dollar gambling problem
Tax increment financing (TIF) and municipal bonds aren’t sexy subjects, but once you see their impact on corporate welfare, greed, misuse of funds, and further scandals—well, this whole stadium issue starts to swim in murky waters.
If you’re not an urban planning nerd:
- TIFs are a way to fund development where a city or state doesn’t make a company/developer pay taxes for several years (usually five to 30) in exchange for investing in a blighted area.
- Municipal bonds are assets that a city or state can sell to raise upfront money that the city (read as taxpayers) will then repay with interest over years.
Here’s an oversimplified explanation of how these processes are supposed to work:
- A city has what they’ve classified as a “blighted” area, so the city goes to a developer and says, “Hey, if you build something here, we’ll give you some incentive—a break on your taxes, pay for construction materials, cash upfront, or sometimes all of the above.”
- The city then improves said “blighted” area, jobs are created, property values go up, and eventually, the city makes its money back. Another win for speculative real estate and capitalism.
Except, that’s not how they’ve been used locally.
“They’re supposed to help avoid blight, but in KC, most TIF money goes to the district with the highest per capita income in the city,” says Kelsay.
Kelsay also says developers have promised 20,000 jobs from TIF projects in recent years, only to produce 4,500. There isn’t an enforcement mechanism to hold developers accountable for their promises, exacerbating the problem.
Alternative fundraising mechanisms include raising Kansas City’s already too high sales taxes or property taxes, and neither option is particularly appealing.
“Sales tax and property tax are the most regressive taxes there are, meaning working-class people will feel a disproportionate impact by stadium funding if they go that route,” says Kelsay.
TIFs and bonds are the likely avenues for developers in any would-be stadium project, and the city’s history is, at best, mixed. KC gave a $35 million TIF to build Waddel & Reed a new headquarters, only to see them merge with another company and never move in. The building went up anyway and remains vacant.
The city gave a $292 million TIF to build H&R Block’s headquarters. That investment only returned $47.6 million. So, we lost nearly $250 million, but at least the building isn’t empty.
Kelsay says that TIFs are always a gamble, with the city betting on development by mortgaging their future tax dollars. According to Erin Royals, businesses often leave before their tax bill comes due, moving on to the next location that offers them incentives. “Capital is not loyal,” says Erin Royals.
It is doubtful that the Royals would skip town. But it should be remembered that KC’s original MLB team was the Athletics, who left for Oakland after voters passed a bond measure funding Truman Sports Complex, which, ironically, is how we got the Royals.
Estimates for a shiny new downtown baseball stadium range from $500 million to $1 billion. Royals ownership has pledged a substantial investment in the stadium, but the exact ratio of public vs. private money is still in the air.
Construction firm JE Dunn is part of the Royals ownership group, and in theory, could help ease some of the building costs. Kansas City is also home to some of the leading sports architecture firms in the world, which should be champing at the bit to show off in their hometown. One already mocked up a potential stadium design pro-bono.
Undoubtedly, a new stadium would bring new investments to an area it inhabits. In its first year, Minneapolis saw $36 million solely in construction permits within five blocks of their new downtown ballpark.
Cities like Cleveland, Cincinnati, Pittsburgh, and Milwaukee have remade themselves in recent years by building or rebuilding new stadiums in their downtowns. They’ve attracted more developers, more businesses, and ultimately more tourism dollars.
Kelsay says that the economic impact of new stadiums cuts both ways. Unrelated businesses near a stadium, such as a furniture store, may as well close on game days as locals wouldn’t want to deal with the traffic and congestion.
“While there are some positives, 83% of economists say that publicly funded stadiums cost more than they benefit a city,” says Kelsay. “Stadium advocates routinely ignore the idea that residents would have still spent entertainment dollars elsewhere if there wasn’t a stadium.”
What a downtown stadium does do, is redirect funds into an area around the ballpark. This is repeated in Washington D.C., Minneapolis, San Diego, and other cities that took old warehouse districts or otherwise underutilized areas and reimagined them completely.
“There has not been a downtown baseball stadium built in the last 20 years that has not been a massive success in terms of breathing new life into the sport and breathing new life into the real estate around it,” said David Ficklin—who helped design Children’s Mercy Park and the Sochi Olympics—to The Kansas City Star in Sept. 2021.
So, where the stadium ends up is meaningful. City Manager Ben Platt told the Royals that any potential project or partnership should help address the city’s priorities, including, among others, investment and development on the city’s East Side.
This brings us to every urban planner and city official’s favorite word…
Roughly three sites are being considered for a downtown stadium, but it’s an open secret that the most likely location is just west of 18th and Vine. That potential site would connect the booming Crossroads Arts District with the Historic Jazz District.
Adding visibility and investment to 18th and Vine has long been a city goal, but there would be repercussions, particularly for historically Black neighborhoods nearby.
“The way gentrification works is that it’s always going to hit the areas with the highest potential profit,” says Erin Royals. “A stadium there will have ripple effects driving up rents and property values in the Crossroads, but it’s gonna have even more drastic effects in neighborhoods like Wendell Phillips, Downtown East, and Parade Park.”
Higher property values mean higher property taxes. Public funding means higher sales taxes in the area around the potential stadium. This wicked combination could lead to residents in these historic neighborhoods getting priced out.
Some economists like Joe Cortright argue that this is a net positive because residents will make a handsome profit on their homes, selling them for a much higher figure than previously possible—a notion that Erin Royals takes issue with.
“Not everything is a commodity; a place can have more meaning than just a dollar figure. Especially to Black homeowners who worked really hard, against all odds, to buy that house,” says Erin Royals. “You’re going to tell them, ‘fuck it, just cash out’ because the property values are going up? It’s insulting and frankly demeaning.”
Royals Vice President of Communications Sam Mellinger says any downtown ballpark project has “real considerations” toward gentrification. In September, Royals owner John Sherman also spoke on the subject when the team first went public with their desire to move downtown.
“We would hope that we could stimulate development that would increase amenities for different income levels, with housing, jobs, on a long-term basis,” says Sherman. “If we do something, and everybody that lives there moves out, and it’s not improved for their quality of life, I don’t think that’s a win-win.”
Erin Royals said that the team should explore community benefit agreements like the Yankees did in New York—assuring a certain number of year-round jobs for those who live in the area. But she also says those agreements are only as good as the developer.
“We are talking to people, not just developers,” says Mellinger. “Addressing gentrification is something that is front of mind; it’s something that we’ve thought about and will be part of the project.”
Erin Royals says the team could contribute to affordable housing in the area or some financial consideration to offset higher property taxes. She also says that if the baseball franchise asks for a high dollar figure to fund a stadium, why not have some public ownership of the team in exchange?
In such a scenario, the team would share profits generated from the new ballpark with the surrounding neighborhoods and with the taxpayers who helped fund it.
Kansas City may need such a windfall. While the city may be able to afford one sparkling new stadium, they’ll be simultaneously asked for two.
The Chiefs cash in on a border war
The Hunt family lives in Dallas, and they see the mega-stadium complex that the Cowboys have. They’ve seen a $5 billion stadium built in LA, and the Chiefs’ ownership is starting to feel left out.
For context, most revenue is shared equally in the NFL between teams, with some notable exceptions: concessions, parking, luxury boxes, personal seat licenses, special events, team-owned hotels, and restaurants.
That money lines the pockets of team owners directly.
The Chiefs want these revenue streams, and they are willing to exploit civil-war era divisions between Kansas and Missouri to get it.
Mark Donavon, who’s in charge of the team’s business side, casually mentioned to a national reporter that the Chiefs are listening to developer offers from Kansas. This, of course, is nothing new. Over the past few decades when the Chiefs look for money from the public, the idea of moving the team across state lines tends to surface.
What’s different now is that there will likely be a change at Truman Sports Complex. The Chiefs have three options if the Royals move downtown. They can renovate Arrowhead, build a new stadium where Kauffman once stood, or they can move to Kansas (likely in the Legends shopping complex).
Followers of Missouri vs. Kansas politics may recall that the two states were engaged in an economic border war that hurt both states as they used incentives to lure businesses across state lines. In fall 2019, the governors of both states signed a truce to put an end to the practice.
“The truce doesn’t include the Chiefs,” says Kansas Governor Laura Kelly.
This likely means that the state of Kansas has earmarked a substantial sum to lure KC’s football team to the other Kansas City.
It’s worth repeating: capital is not loyal, and the Chiefs will very likely go with the highest bidder. The team has already spent half a million dollars to study which of their options is the most fiscally beneficial.
“They’re getting played,” says Erin Royals. “When you have a bidding war, the only one that wins is the owner.”
This sentiment was echoed by Kelsay, who described a bidding war as a zero-sum game where the “winning” proposal will cost taxpayers far and above the ask that would exist without a fiscal border war.
All because feel-feels
Public funding of sports stadiums makes little economic sense. According to Kelsay, 86% of economists are against subsidizing sports teams. A bidding war with your neighbor is even more nonsensical, especially when the parties involved could still see a Chiefs game on one junction of I-435 and I-70 or the other.
Mayor Quinton Lucas once said, “A downtown baseball stadium is like a Maserati, it’d be cool to have, but I can’t afford it.” He’s since walked that back; now, he’s milling around the Maserati dealership. And when it was reported that the Chiefs are flirting with a move to Legends, you’d think Mayor Lucas was responding to a ransom note.
Mayor Lucas is not alone. The reason professional sports teams are able to leverage public funding is civic pride. We have a lizard-brain reaction: “THAT’S MY TEAM!” And we open our wallets every time. It makes us feel good to see KC’s most-handsome-boy contestants, Bobby Witt Jr. and Patrick Mahomes, representing our city on television.
Is that feel-good worth a billion dollars? Or do we call the owners’ bluff?