By Sandy Smith May 18, 2015
Downtown is profitable again. So why are we still paying developers to build there?
The last time Kansas City, Missouri, had one of its major league sports teams in a championship game, it was 1985 and there wasn’t much of anywhere to go to mark the occasion.
The city’s fixed that.
Last fall, when the Royals again gave a championship-starved public
to cheer about in baseball’s World Series, thousands of jubilant Kansas Citians filled KC Live, a massive entertainment complex at the heart of the city’s resurgent downtown.
Occupying an entire city block with restaurants, bars, nightspots and shops, KC Live is the shiny center of the city’s Power & Light District, a popular destination on the edge of downtown. Packed with families and young adults during the weekends and on game days, the district would have been unimaginable in Kansas City 15 years ago. “The area was a ghost town then,” recalls Yael T. Abouhalkah, an editorial writer for the
Kansas City Star
and former local news reporter. “People didn’t go there and they had no reason to. … [now] it gets a lot of suburban people to come downtown, which is not something we had before.”
Even if you’ve never been to Kansas City, Missouri, KC Live may seem familiar. Developed by Baltimore-based Cordish Companies, the entertainment district is one of more than a dozen similar complexes the family-owned company has built or begun work on in the years since it ventured into urban redevelopment with its work on Baltimore’s Inner Harbor in the 1980s. Branding itself as “the leading international developer of large-scale, urban revitalization projects and entertainment districts,” Cordish has perfected a formula for turning underutilized downtown real estate into highly profitable, suburbanite-friendly destinations where retail and bar and restaurant chains mix with local tenants and open-air gathering spaces ideal for screening a game, socializing with friends or watching a performer.
“They’re all based on our thesis that the downtown is the heartbeat of the community and on the effect that you get when you bring people together around commerce, or entertainment, or sports,” says Vice President Blake Cordish, one of three sons now involved in running the conglomerate, which also builds casino-hotels, office buildings and more conventional shopping centers. “The broader community is only as strong as its core.”
Typically, Cordish partners with another group on its large, multi-phase entertainment district projects. In some cases, as with Xfinity Live in Philadelphia and
in St. Louis, the partner is a private company with interests in entertainment or sports. The more common model, however, is the public-private partnership, a development model that Cordish has helped to define since the late 1970s. President and
David S. Cordish first learned about working with government when he took a sabbatical from the family company to serve as the first director of the federal Urban Development Action Grant (
) program created by the Carter administration in 1977 to spur private development in distressed urban centers. After returning to the company in the 1980s, David Cordish formed a new division to specialize in the kinds of collaboration these projects demanded.
“My father felt a strong passion for downtowns,” Blake Cordish says. “They play a unique role in the fiber of a community. They can change places from a public sector perspective.”
In 2006, Kansas City decided to take Cordish up on its promise of downtown transformation. The South Loop area where the company wanted to build was a dead zone, and no other developer had managed to successfully complete a project there. That year, the city issued $295 million in city-backed bonds to help the company build the $350 million KC Live entertainment district. The bonds helped finance about $110 million worth of site acquisition and preparation costs, including infrastructure improvements such as roadwork and a full replacement of the sewage system, a costly fix required under mandate from the U.S. Environmental Protection Agency. A parking garage needed to comply with the city’s car-centric requirements and was also financed with the public money. The remaining funds — about $150 million, according to City Treasurer Tammy Queen — went to Cordish to help construct the half-a-million-square-foot retail, restaurant and bar playground and renovate two historic 1920s movie theaters across Main Street from the entertainment complex, the Midland and the Mainstreet. (Cordish says the amount the company actually received for its development was closer to $70 million, with the remainder going to assist with ancillary projects that Cordish was not responsible for but which were related to the overall Power & Light District redevelopment plan, such as the renovation of the President Hotel.)
The city guaranteed the debt under the assumption that new businesses and development in the district would generate $18 million to $20 million in taxes to cover the bond’s annual debt service, allowing the city to repay the bond without digging into its already strained general budget. The project would pay for itself, Mayor Kay Barnes argued back in 2006 when defending the project to skeptics in the City Council and press.
Barnes was off. Way off. The district opened just before the economy crashed. Its thousands of square feet have been slower to lease than anticipated. Annual tax revenues generated in the district have ranged from $4.5 million to $5.4 million in the past few years, according to the city. That means that taxpayers are left on the hook for 70 to 75 percent of the money needed to pay down the debt each year, paying anywhere from $14.9 million in fiscal year 2014 to a projected $8.5 million this fiscal year, according to a recent
Kansas City Star
The nearly $15 million the city spent repaying Power & Light District debt in 2014 was money it couldn’t spend on public libraries, parks, police, blight cleanup and other public services — no small sacrifice in a city that had a general operating budget of
that year. The debt isn’t going away anytime soon either; last year, the city refinanced, which lowered the payments from 2015 through 2019 but extended the debt schedule from 2033 to 2040.
“I don’t think there will be a point at any time in the foreseeable future