Secret memo reveals ‘staggering’ cost of new Royals stadium for Jackson County taxpayers

A new Royals ballpark in downtown Kansas City would cost Jackson County taxpayers far more than its $1 billion sticker price.

It’ll be more like $4.4 billion to $6.4 billion, if the stadium sales tax and other payments required by the current lease agreement extended 40 years beyond its expiration date in 2031, as the Royals have suggested.

That’s according to a confidential financial analysis conducted by Jackson County Executive Frank White’s office that was sent to county legislators this week and obtained by The Star.

White, who received eight Gold Glove Awards while playing second base for the Royals, declined comment on the document Thursday. But he has made no secret about his reluctance to obligate county taxpayers to enter into costly long-term leases with the Royals and the Chiefs, who are also angling for taxpayer dollars for stadium upgrades.

“I understand that we’ve been under this lease for quite a while,” he told a Fox4 reporter in a brief, hallway interview on camera this week at the county courthouse, “and it’s not beneficial to the county and we’re just trying to be more equitable partners. Make sure that we can take care of some desperately needed things that the county needs to get done also.”

White’s administration does not consider the document obtained by The Star to be an open record, as it pertains to pending legal matters – lease negotiations – that are exempt from the state’s open records law.

A recipient associated with the legislature provided a reporter with a copy because that person thought members of the public should be aware of the financial burden that might fall on county taxpayers if the Royals leave Kauffman Stadium for a new home in Kansas City’s East Village area.

The Royals are also considering a site in North Kansas City. The analysis does not address what impact that would have on Jackson County finances, as North Kansas City is in Clay County.

Inflation built in

As with anything financed over time, be it a house or a car, the final amount paid is higher than the amount borrowed due to interest payments and inflation. Those assumptions were built into the projections on the spreadsheet that County Administrator Troy Schulte provided legislators.

The spreadsheet is based on a scenario in which county voters would extend for 40 years the current ⅜-cent sales tax that funds the most recent renovations at Kauffman and Arrowhead stadiums. The tax also pays the Royals and Chiefs millions of dollars a year to maintain the venues in good condition.

The projections assume that tax receipts would go up over time and go to retire stadium debt and continue those operating subsidies to the teams.

The spreadsheet focuses mostly on the benefits that would flow to the Royals and not the Chiefs, who have not revealed their plans past expiration of their current lease.

The projections assume that the Royals would continue to receive their half of the sales tax as well as half of the receipts from a park property tax levy dedicated to supporting the sports complex, as well as their half of the annual cash payments that they and the Chiefs receive indirectly from Kansas City and the state of Missouri.

Currently, those revenue sources total $53.4 million a year combined for both teams, according to Schulte’s memo to the nine county legislators.

By extending the leases out to 2071, as the Royals have suggested privately to the county’s negotiators, that figure would grow exponentially.

Schulte estimates that the Royals’s share of sales tax receipts alone would total between $1.3 billion and $2 billion over those 40 years.

The lower figure is based on the county’s estimate that tax revenues would grow 1% a year on average. The Royals estimate is 2.5%, according to the spreadsheet.

The team would also benefit from another $170 million from its half of the county parks levy and payments from the city and state.

Insurance costs

But what shocked Schulte was the $2.9 billion that the county would spend in increased insurance payments for the downtown ballpark over those four decades.

“The property insurance costs are staggering,” Schulte wrote, “given that our current below market costs of property insurance (but still expensive) will need to be adjusted to actual value when a new stadium is opened.”

The county now spends $800,000 a year to insure both stadiums, the spreadsheet shows, but the county’s insurance broker, Lockton, thinks it would cost $4.5 million a year to insure a new ballpark in 2028. And those costs would increase 10% a year, Schulte said, due to rising rates and construction costs.

The Royals declined to comment on the projections. Several legislators did not immediately respond to requests for comment, including two in key positions with regard to the stadium talks: legislature Chairman DaRon McGee and budget committee Chairman Manny Abarca.

Sixth district legislature Sean Smith, one of only two Republicans on the Democratic-controlled body, did respond in a text message, when asked to comment on Schulte’s memo and spreadsheet.

He was skeptical of some of the assumptions in the projections, but also questioned whether county taxpayers should be asked to shoulder so much of the burden of paying for a new stadium.

“I will say that some of the inflationary numbers look too high. Not even insurance goes up by 10% per year,” Smith said.

“More importantly, the Royals are asking for more than Jackson County Taxpayers can afford. I believe Kauffman remains a great stadium and haven’t seen sufficient evidence that it needs to be removed from service.

“If the Royals really believe they need more than a BILLION dollars in taxpayer funding they will need to secure that from a broader tax base. More importantly, I believe if the Royals have a firm dollar figure in mind they should ask for that amount and let elected leaders and voters decide how it will be paid for.”

The Royals have provided the county some notion of what the organization wants.

A resolution passed in a special Tuesday afternoon meeting of the county legislature, saud the team has given the county “a reply offer term sheet” setting out terms and conditions “by which the Royals would develop and finance a new baseball stadium at the East Village…”

The contents of that term sheet has not been made public. The resolution asked White to provide the legislature with his recommendations on what the county’s response should be and gave him 48 hours to do so.

White, who is heading up negotiations with the Royals, cannot be compelled to meet that deadline of late Thursday afternoon by a resolution. But he intended to provide a response by the close of business, his office said.