What does Kansas City owe the American Royal?
On November 11, the United Professional Horsemen’s Association national championship started its annual five-day competition here. The event, involving Saddlebred horses, Hackney ponies and road horses, was held at Kemper Arena, with which the American Royal — the UPHA’s host — has a long-term lease to stage various horse and livestock shows and rodeos.
The American Royal, a 115-year-old nonprofit whose stated mission is to “celebrate the region’s rich agricultural heritage through competition, education and entertainment,” has lately soured on Kemper Arena. The organization’s leaders and boosters say the space is outdated and has been inadequately maintained by the city. They want it torn down and replaced with a structure better suited to the Royal’s needs.
Not everyone agrees that this is a good idea. Preservationists argue that Kemper is an architecturally significant building — built in 1974, it was one of Helmut Jahn’s early designs — and are attempting to get it placed on the National Register of Historic Places, which would prevent its demolition. There is also growing public distaste for the $60 million plan put forth by the Royal that calls for $30 million from Kansas City, Missouri, taxpayers, plus an annual operating subsidy of $1 million for 25 years to fund its proposed new facility. (An additional $20 million would come from state and federal tax credits, Royal leaders say; they add that the Royal would raise the remaining $10 million privately.)
However one feels about the future of Kemper Arena, it is clear why the Royal no longer wants to hold its events there. The Friday evening of the UPHA championship, I drove to the West Bottoms to see the Saddlebred show. I parked no more than 200 feet from the building’s main entrance. Nobody there asked me for a ticket. I walked in and took a seat and watched horses prance around on a grass floor.
Kemper Arena holds 19,500, a capacity that only illuminates the Royal’s declining attendance numbers. That Friday night, perhaps 800 souls were present, counting the horses. Given that only 53 people purchased tickets to the UPHA Championship the previous year, the majority of the crowd was likely composed of either participants in the show or recipients of comped tickets.
As synthesized versions of songs popular 80 years ago blared over loudspeakers, horses and riders circled the floor, while men wearing top hats and coats with tails stood and jotted evaluations beside a white picket fence in the middle of the indoor lawn. The arena’s yawning emptiness, combined with the time-warp nature of the proceedings, suggested an unnerving dream or a drug hallucination.
The Royal alleges that the city has deferred $24 million worth of arena maintenance in recent years, and though that number is disputed, it is hard to defend Kemper as up-to-date. The giant scoreboard-and-screen rig dangling from the ceiling is functional, but the resolution is low, the picture small. The typefaces used to label the concession stands are now legitimately vintage. (Only one such stand was serving food and drinks the night I went.) A sign for Replays Bar and Grill leads down a flight of stairs and dead-ends at a locked door. The arena is relatively clean, and the seats are comfortable enough, but Kemper is of a different time — decades past its prime.
So is the American Royal. The West Bottoms was once home to one of the largest stockyards in the world, and the American Royal sprang from that culture, attracting horse competitions and, later, rodeos to Kansas City. The Royal is the reason that the Future Farmers of America held its annual national convention in Kansas City. Agriculture was a defining element of Kansas City’s identity.
Not so these days. The stockyards are gone, and the average Kansas Citian under the age of 40 doesn’t know why KC used to be called a cowtown. (Many of all ages resent that characterization regardless.) Somewhere along the way, the city decided that its livestock heritage was inessential. We now want to be known for tech startups and art galleries, for Sprint and Garmin. We are streetcars, not horses.
The FFA ditched Kansas City for Louisville, Kentucky, in 1999, after 70 years. Since its departure, the Royal has failed to attract new rodeos or stock shows, and other cowtowns — Fort Worth, Texas, and Oklahoma City, for instance — have embraced them. Those places also have earned economic windfalls from those bookings as the Royal has shrunk.
Today, the American Royal’s best-known event is its World Series of Barbecue, the three-day competition that it hosts every October. It’s now the organization’s biggest moneymaker, though it has little to do with what the Royal does — and what it wants to do — the rest of the year.
I asked Dave DeFeo, who owns Lone Wolf Ranch Arena — which holds a rodeo 30 miles south of Kansas City, in Cleveland, Missouri — about the Royal’s place in the industry. He said the Royal’s rodeo was once a top-tier destination for riders but has fallen off, in part, because of too little “added money.” He’s talking about prizes.
“A lot of people who do rodeo are doing it on not a lot of money,” DeFeo told me. “You drive to the rodeo, pay your fees, and hope to come away with enough money to pay for the trip and advance some points to the next event. Added money is what brings people in. It’s what makes it worth it to drive from several states away for a rodeo.
“The Royal doesn’t work for a guy like that — it’s more geared toward a well-to-do participant, and it tends to attract the professionals who have sponsors and endorsement money already. Horses that compete and win are a huge investment in the breeding industry. Average people who work in a rural environment are not going to be able to compete in that environment.”
I asked DeFeo why I’d seen so few people in the West Bottoms that Friday night. “That’s where the rodeo comes in,” he said. “The key to growth and public participation is promotion to all demographics and a boom rodeo. Horse shows tend to attract just the people involved in that showing and their families. If you’re not part of that or some crazy horse nut, it’s not going to be interesting. To get people to come out, you need some real entertainment, like a traditional rodeo.”
Len Brown makes custom saddles in Oak Grove, Missouri. He said he used to participate in the Royal as a vendor but hasn’t in years.
“You go down to the national championship of roping, in Oklahoma City, and there’s 20,000 pickups, trailers, semis, motor homes parked outside the place,” he told me. “They rope continually over 10 days, and everybody there brings their family and sinks a ton of money into the local economy. And they pay out $5 million to the people competing. That’s what the Royal doesn’t have.”
Brown said a major problem is lack of marketing of the Royal’s events. “It’s not promoted,” he said. “They don’t do anything to draw vendors or the public or competitors. You can’t make any money showing horses and pigs and Saddlebreds and show jumpers. Their big event is the five-gaited Saddlebred show, and that only caters to very moneyed people.”
That the Royal largely functions as an equine country club for rich people is a common perception about the organization. It holds a debutante ball, after all: the Belles of the American Royal (BOTAR). And its board of directors is stacked with local CEOs and other high-net-worth individuals. Neal Patterson, CEO of Cerner, bought a $200,000 champion steer at the Royal’s auction this year; he spent $170,000 on one the year before.
There’s nothing wrong with any of that — maybe the Royal doesn’t want to play host to a year-round caravan of rodeo roughnecks. It’s free to be what it wants to be, including a niche organization for horse enthusiasts and well-heeled Kansas Citians looking to dust off their cowboy boots once in a while.
But why lasso the rest of us for millions of tax dollars to pay for a new building?
• • •
The problem is the lease.
Kemper Arena was built for $23 million in 1974. Taxpayers shouldered $18 million of that burden, via bonds and federal grants. Crosby Kemper Jr. donated $3.2 million, and the American Royal chipped in $1.5 million. The Kansas City Stock Yards donated the land.
Over the next two decades, Kemper Arena booked, in addition to American Royal events, two professional sports teams (the Kansas City Scouts, of the NHL, and the Kansas City Kings, of the NBA), the Big Eight and NAIA basketball tournaments, and the 1976 Republican National Convention. In 1992, what’s known as the American Royal buildings went up, a cluster of white buildings adjacent to Kemper Arena that the Royal also leases from the city: a 96,000-square-foot exhibition space called the Governor’s Building, the 5,000-seat Hale Arena, an American Royal Museum, and offices for American Royal staff.
In 1995, following years of financial disputes, the city renegotiated the American Royal’s lease. To that time, the Royal had been paying $1 a year in rent for Kemper and the American Royal facilities but had been responsible for paying all of the buildings’ utilities and for paying city employees who worked at the shows. Under the new lease, which extends until 2045, the city is responsible for maintenance, staffing and utilities. The Royal is supposed to pay a floating base rent of $150,000 a year, for which it has use rights that include 20 days a year at Kemper; between 35 and 70 days a year at the adjacent American Royal buildings (such as Hale Arena); and year-round, rent-free, utilities-paid tenancy at the American Royal Museum and the American Royal offices.
That means that if the city wants to do something about Kemper Arena — blow it up, sell it to a private developer, whatever — it must reckon with the American Royal, which is legally entitled to use Kemper for 20 days a year until 2045. Pat Riha, who produced shows at Kemper for two decades, told The Kansas City Star in 2011: “It is absolutely the worst agreement ever written in the history of the city.”
How bad is it? City records show that the Royal has paid nowhere near $150,000 annually in recent years. A clause in the contract stipulates that the $150,000 in rent is subject to percentage adjustments based on the Royal’s gross revenues. In 2009, the Royal paid $69,000 in rent to the city. In 2010, it paid $80,000. The last two years on record, 2012 and 2013, it paid $56,000 and $55,000, respectively — a third of the revenues that the city expected when it agreed to the 50-year lease in 1995.
There’s more. Revenue generated by American Royal events has dropped 62 percent since the lease was signed. From 2010 to 2013, total paid attendance at American Royal events fell 40 percent. Total paid attendance in 2013 was 39,074, and more than 80 percent of that was from the barbecue event. Take out the meat, and the Royal averaged 110 tickets sold for each of its other 65 events in 2013.
The city’s annual lease settlements with the American Royal in recent years strongly suggest an unusually cozy relationship between the Royal and the city. For example, the 1995 lease stipulates that the Royal is allowed to use the Governor’s Building for 35 days a year as part of its base rent; it must pay a daily rate on any extra days it uses the building. Yet the city’s records show that the Royal used the Governor’s Building 167 days in 2013 — 132 more than the lease allows — but was charged for only 42 of them. In 2012, the Royal used the Governor’s Building for 106 days — 71 days over — and did not pay a single cent in extra rates that year. These uncollected fees could amount to several hundred thousand dollars of losses to the city over the past decade.
As executive director of convention and entertainment facilities for the city, Oscar McGaskey is the point man on these matters. He told me that those extra days are known as dark days — days when the Royal is storing dirt and equipment in the facility but not using it for an event. Under the agreement, the Royal is supposed to pay $50 per dark day (as opposed to $800 for an event day) at the Governor’s Building. McGaskey allowed that the city had not fully charged the Royal for its usage of the facilities but estimated the losses to be around $6,000.
“We should have charged them for those dark days, and we intend to go back to the Royal and collect that money,” he said.
The rate on those extra days — anything more than 20 days a year in Kemper, for example — is supposed to be reviewed every two years and adjusted based on the rent that other groups are charged per day. Riha, who produced the home and garden show at Kemper for many years, paid $29,500 to do so in 2000. In 2005, he was paying $40,000. In 2015, the home and garden show’s contract is for $46,475. That’s an increase of more than 50 percent in 15 years.
The Royal’s extra-day rates had not been changed once in 19 years, until two weeks ago, when McGaskey raised them 5 percent.
There also are indications that the city has been less than diligent in monitoring the Royal’s ticket sales. As part of the facilities agreement, the city receives a $2 user fee on every ticket that the Royal sells to its events. When AEG was managing Kemper Arena, in 2010, paid attendance was 64,385. Two years later, a year after the city took over management of Kemper, paid attendance was down to 40,453 — a drop of close to 24,000 tickets in just two years.
As part of its contract, AEG had a financial incentive to maximize ticket sales at Kemper — it got a bonus if it hit certain numbers. In theory, the city should be similarly motivated: More ticket sales at Royal events equals more $2 user fees going to the city. But for unclear reasons, the city collects $2 user fees only on the Royal’s sales through Ticketmaster. This leaves on the table potential user fees from wristbands sold at the events and from bulk tickets sold through the Royal’s website.
McGaskey’s explanation is unsatisfying. “We don’t count registration and wristbands as tickets — we just never have,” he told me.
I asked why a wristband should be counted any differently from a ticket if it granted a guest the same experience.
“It’s a matter of semantics, I guess,” he said. “It’s not a ticket; it’s a wristband.”
Two conclusions can be drawn here. One is that the Royal is so uninteresting to the public that it experienced a 40 percent drop in sales between 2010 and 2012. (Attendance continued to dip in 2013.) The other is that the city is looking the other way while the Royal withholds money from it. Neither is a scenario under which the Royal should feel entitled to make demands.
Korb Maxwell, attorney for the American Royal, declined to get into specifics about the numbers. He blames lagging attendance on the lack of care given to Kemper by the city.
“This is a facility that everybody recognizes as old, outdated, blighted, and in need of $24 million of deferred maintenance,” he told me. “The monster-truck shows won’t even come there anymore. You can’t hold an organization responsible for folks not coming out to its events in a situation like that. Facilities make a difference. Look no further than Sporting KC. That team was at Arrowhead. Nobody wanted to go. Then it was at the T-Bones stadium. Nobody. Then you give them their own specific, well-thought-out facility, and it’s a huge success.”
• • •
Connecting the good will enjoyed by Sporting KC to the American Royal appears to be the Royal’s latest strategy, following a month when its approach was tone-deaf and arrogant enough to mobilize what had been an apathetic public.
R. Crosby Kemper Jr. and Mariner Kemper first floated their plan to raze Kemper and replace it with a 5,000-square-foot, livestock-centered facility back in 2011. But it wasn’t until earlier this year, when an alternative plan conceived by local private development firm Foutch Brothers began to circulate, that the Royal started acting with more urgency and force. Under the Foutch Brothers’ plan, Kemper would remain standing, be declared a historic structure (Foutch specializes in historic renovations), and be converted into a regional youth-sports facility. The city would get Kemper off its books, and a historic structure would avoid the wrecking ball. The only things asked of the city were a 10-year property-tax exemption and a nominal sum for Kemper.
The city liked Foutch’s youth-sports angle and the fact that this plan would be cheaper for the city.
The Royal did not.
The Royal responded by teaming up with Sporting KC to conceive a similar youth-sports-programming plan for its proposed new facility. Then in October, 75 “business leaders” — including Mariner Kemper, Patterson and Terry Dunn (of Dunn Construction; he’s also the new chairman of the Greater Kansas City Chamber of Commerce) — sent a letter to city officials laying out why the city should go with the Royal’s new plan. The letter closed with a threat: “If the city chooses to support the other plan, the city risks the American Royal leaving the West Bottoms.”
Also in October, Chase Simmons — like Maxwell, a Polsinelli lawyer representing the Royal — sent a letter to Foutch Brothers threatening to sue the firm for encouraging the city to break its lease with the Royal. The tactic worked; shortly thereafter, Foutch announced that it had dropped its Kemper proposal. This appeared to clear the way for the Royal to get its way and knock down the arena.
Then the press reported on Simmons’ letter, and the Royal once again lost public sympathy.
By the time a hearing on the matter was held at City Hall November 13, the Royal seemed to recognize that using threats was not the way to win hearts and minds. Or maybe its leaders calculated that many more people in Kansas City know and like Sporting KC than remember the American Royal. Either way, Maxwell showed up to the hearing with Sporting KC owners Robb Heineman and Greg Maday. “Any plan must have the net effect of SAVING the city money,” was the first bullet on Maxwell’s PowerPoint presentation.
Maxwell told the City Council that the status quo at Kemper was unacceptable for both the Royal and the city. He laid out numbers showing that the city was on track to lose $188 million on Kemper over the life of the lease. The Royal’s proposal, conceived by architecture firm Populous — Heinemann told the council that he thought the new Royal facility could be fully programmed with events before steel was even erected — would actually save the city $100 million.
Later in the meeting, though, the city’s finance director, Randy Landes, called Maxwell’s numbers an exaggeration. The city had come up with the numbers, on which the Royal had based its $188 million-loss claims, as part of a previous analysis comparing the Foutch plan, the Royal plan and the status quo. Landes said the American Royal was “torturing those numbers to tell the very worst possible story” about the Kemper Arena of 2014. The Royal’s numbers also fail to note, he said, that the city will have an extra $2.3 million a year coming onto the books in 18 months, following the retirement of debt service on bonds that funded upgrades to Kemper in 1997. That money would presumably be put toward the arena’s deferred maintenance and its $1.6 million operating subsidy.
Dan Cofran, a former city councilman and lawyer who spoke at the hearing for opponents of the Royal’s plan, said: “All these rosy financial projections? They said the same stuff 20 years ago. It didn’t happen. They said they’d attract additional events. It didn’t happen. Why should we believe them now? They want everybody to imagine the future. With the Royal, you have to look at the past. It’s already there. We’ve seen what they do.”
Cofran argued that the real status quo would be much less than $188 million — around $58 million over the life of the lease.
“Does it zero out?” he told me later. “No. It’s a public facility. The city owns it. It costs money to maintain. We shouldn’t be shocked about that. We don’t make money on City Hall, fire stations, police stations.”
Cofran favors the historical-registration path for Kemper, and he supports the city’s recent indication that it would open up Kemper’s future to a nationwide request for proposals. He has also suggested that it would be within the city’s rights to simply seize the lease through eminent domain and pay the Royal fair market value for it.
“There are several options here,” he told me. “Maybe we board up Kemper and make the white buildings first-class for the Royal and wait for something that fits. We did that with Union Station. It sat vacant for decades until we finally developed a proposal that worked. There’s no urgency to this. We have time to think it through and do what’s in the best interest of taxpayers. The city is carrying a billion dollars in debt already.”
• • •
The title of the Royal’s presentation at the November City Council hearing was “The American Royal + Sporting Club: The Catalyst for West Bottoms Redevelopment.” Many in the Bottoms would argue that positive change is already well under way there.
Dozens of vintage stores open the first weekend of every month, drawing thousands — many from out of state — to the neighborhood. Good restaurants, such as Voltaire and Genessee Royale, are within a block of Kemper Arena. And the city’s arts scene has spread to the Bottoms. Bill Brady Gallery and Haw Contemporary, two of the metro’s top galleries, are there. City Ice Arts is on track to relocate nearby. A solar-paneled art space called 50/50 is being built inside two shipping containers on a paved lot across from the arena.
Bill Haw Sr. and his son, Bill Haw Jr., own much of that property. At the November 13 hearing, Haw Sr. stood up and explained why he considered the Royal’s proposal a bad idea for the Bottoms. He lamented that the Foutch proposal — which he had supported and in which he had offered to invest a half-million dollars — had been derailed by threats from, as he put it, “so-called powerful people in Kansas City.”
“I made my living in agriculture for 40 years, and I’ve invested $23 million of my own money over the last 20 years in redeveloping what we call the Stockyards District,” Haw said at the hearing. “The Livestock Exchange Building, which I own, is now 93 percent occupied. The Telegram Building is 100 percent occupied. We’re building an $8 million apartment project. The things we’ve done have been successful in changing the environment in the West Bottoms from abandoned stockyards to a vibrant area. And the American Royal has had not one single iota of influence on any of those projects, and I have no reason to believe it will going forward.”
I asked Haw Jr. how the Royal had affected business in the Bottoms.
“Most business owners in the area would tell you that there is a negligible impact,” he said. “To be fair, the American Royal currently doesn’t seem to be courting spectators and appears more exhibitor-focused. That model doesn’t generate meaningful activity in the area, though, and it’s hard to believe they’ll suddenly start bringing in thousands of people to their events. Kansas City just doesn’t seem to have the same level of public interest in these types of events as cities like Oklahoma City and Fort Worth. The numbers clearly prove that.”
He added: “The barbecue does bring a lot of people down, but the traffic is only significant on one night. It’s hard to see how it justifies their ask to the city. Realistically, they don’t need to knock down Kemper to have their actual needs addressed, so their insistence feels like it comes at the expense of the neighborhood, and the city overall.”
Last week, the Royal’s attorneys, Korb
Maxwell and Chase Simmons, sent a letter to the City Council informing it that the Royal would not submit a proposal and had instead suspended all “planning, participation in hearings and fundraising” regarding Kemper Arena.
It is not yet clear whether the letter marks the first step toward finding a new home for the Royal — Wyandotte County, home to Sporting KC and a Cerner campus, has been kind to Heinemann, Maday and Patterson in the past — or simply recognizes that its most recent tactics have failed.
Mariner Kemper told KCTV Channel 5 the day the letter was sent that the city already knows what the Royal wants: $30 million and an annual operating subsidy of $1 million. He said the conversation about the arena’s future had become a debate that was unhealthy for the Royal. He’s not wrong about that.
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