For new stadium, Royals appear committed to a public financing method others avoid

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Royals owner John Sherman wants taxpayers to pay for a big chunk of the $1 billion it will cost to build the new ballpark he desires. But which taxpayers in this “public-private partnership” will be responsible for paying off the hundreds of millions of dollars the public will end up borrowing?

People who buy stuff in Jackson County or those who shop in Clay County?

Other communities across the nation have managed to build new publicly owned sports venues recently without levying sales taxes that add to people’s grocery bills or the cost of replacing bald tires on their used car.

They instead put the arm on tourists in the form of taxes on hotel rooms or rental cars, or both — the way Kansas City did two decades ago to finance its downtown arena.

Clark County, Nevada, taxes hotel rooms to help pay for the 3-year-old stadium facing the Las Vegas Strip that the NFL’s Raiders now call home. Florida’s Pinellas County recently announced plans to levy new tourist taxes to pay for its share of a planned $1.3 billion stadium for the Tampa Bay Rays of MLB.

Lottery money and rental car fees help pay for the homes of the Seattle Mariners and Seahawks.

Some local governments rely on sales taxes that are only assessed within the stadium itself. At least three big-league cities do this, according to a 2018 report by the Mercatus Center, a libertarian think tank at George Mason University.

Three out of the 32 NFL stadiums have a ticket tax. Others depend upon a combination of those and other financial approaches that put the tax burden more on sports fans than folks who might never attend a game due to lack of interest or they can’t afford to buy a ticket.

“Generally speaking, that’s a much better approach,” says Patrick Ishmael, the Kansas City-based director of government accountability at the Show-Me Institute, a libertarian think tank. “A countywide sales tax is one way to do it, but it doesn’t make it a just way of underwriting an amenity like this.”

Regressive tax

Only 10 of the 30 stadiums in Major League Baseball were supported by a sales tax as of that 2018 report. And at least one of those, in Milwaukee, has since expired.

Sales taxes are the most regressive form of taxation, because poor people feel the burden more than the rich. But so far, that’s the only public financing option the team has put forward to underwrite a possible new Royals ballpark.

Either an extension of the 3/8th of a cent tax now being collected in Jackson County to pay for renovations and current upkeep of Kauffman and Arrowhead stadiums. That would finance a new downtown Kansas City ballpark and more renovations at Arrowhead, because the Chiefs would also continue to get a portion of those revenues.

Or a new sales tax, possibly as much as a full penny on the dollar in Clay, were a ballpark built in North Kansas City.

Along with the Jackson County sales tax money, the Royals organization would also want to continue receiving its half of the $8.5 million that the state of Missouri, Kansas City and Jackson County property taxpayers give each year to support the stadiums at the Truman Sports Complex.

Asked whether the team remains committed to having a sales tax to providing most of the public funding, the Royals issued the following two-sentence written statement that did not answer the question.

“Royals ownership is prepared to invest well over $1 billion of private money to help create a world-class experience for fans and tangible benefits for our hometown. We believe that unprecedented private investment will build upon and enhance a public-private partnership that has served the region well for decades.”

Deadline approaching

The team had planned to announce by the end of September the organization’s preference to build a new stadium and $1 billion in additional commercial development at one of two sites: the East Village in downtown Kansas City or in North Kansas City. But that deadline came and went without any news because negotiations with government officials had barely gotten started.

The deadline for getting a tax issue on the April ballot (the Royals’ preference) is in January, so time is growing short. Because no matter which location the team prefers, the Royals must first reach an agreement with Jackson County.

The team’s 25-year lease of county-owned Kauffman Stadium requires that the Royals play at least 90% of their home games at Kauffman through the end of the 2030 baseball season. That gives the county lots of leverage considering that Sherman would like to have the Royals playing in a new ballpark by the spring of 2028.

That’s not going to happen without Jackson County’s blessing, said one top county official with knowledge of the negotiations who spoke on background because the county and team have agreed not to discuss their negotiations publicly for now.

“The only good thing about that lease is that (requirement),” the official said. “There’s not a monetary penalty. The penalty is specific performance. You’ve got to play there. There is no out.”

Jackson County recently retained the Hardwick Law Firm to represent the county in talks with the Royals. The two sides have been meeting twice a week and are in the early stages of talks that center on the Royals desire to see the current stadium sales tax extended for another 40 years, The Star has learned.

The county relied on property taxes to pay off the debt incurred in the late 1960s to build Arrowhead, which opened in 1972, and Kauffman, which opened a year later as Royals Stadium.

But in 2006, county voters were asked to approve a special sales tax to pay for upgrades that the teams said were needed to keep them financially viable. Although neither threatened to relocate, community leaders and fans feared that the Chiefs and Royals might bolt town because the county was in violation of a provision in the leases requiring county taxpayers to keep both stadiums “state of the art,” and that wasn’t happening.

The county had hoped to push some of that responsibility off on the rest of the metro area. But when four out of five counties rejected that bi-state sales tax proposal in the fall of 2004, Star sports columnist Joe Posnanski predicted doom.

“Yes, this great complex, which is 10 minutes from downtown and has the best parking setup in professional sports … and features two of the greatest stadiums anywhere, is going to die now. It’s only a matter of time.”

Fourteen months later, the teams signed new leases that were contingent on passage of a 3/8th cent sales tax in Jackson County that would pay for the county’s $425 million share of the upgrades at both stadiums.

The voters did just that on April 4, 2006.

Besides requiring both teams to play nearly all their home games in the twin stadiums through Jan. 31, 2031, the leases shifted the responsibility for upkeep of the stadiums from Jackson County taxpayers to the teams.

Sweet deal

The teams got a sweeter deal from those new leases, which they want to hang onto and figures into how a new Royals stadium will be financed.

“Our biggest enemy in our negotiation is the current contract,” the top county official said. “They’ve got the best deal in the country.”

Both the Chiefs and the Royals get part of the money raised by the stadium sales tax to pay their operating expenses and for stadium upkeep. The sales tax took in $48.6 million in 2022, but the debt payment was $25.8 million.

The bulk of the nearly $23 million left over went into a fund controlled by the teams landlord, the Jackson County Sports Complex Authority, which disburses that money to the Chiefs and Royals.

Millions of dollars in parking fees also go into the Repair, Maintenance, Management and Operation Fund as do annual contributions from the city ($2 million), state ($3 million) and county parks property tax levy ($3.5 million) that were first committed to supporting the sports complex in the 1990s.

County officials have challenged the teams to cite other professional sports teams in the United States that have a better arrangement. Whether it continues will be a key negotiating point between the teams and Jackson County.

The county is also asking the team to consider a ticket tax, which the Royals and Chiefs have always opposed in the past. More state and city funding may figure in.

No serious negotiations seem to be underway with North Kansas City and Clay County officials at this time. The most recent public indication of that came late last month when North Kansas City agreed to pay a financial advisory firm up to $25,000 for consulting services, but only if the Royals select North Kansas City as the site for a new ballpark.

Council member Anthony Saper stressed that at the Sept 26 council meeting at which the arrangement with Baker Tilly Municipal Advisors was approved.

“People need to know that this is if — and only if — and when — and only when — some kind of decision favoring the North Kansas City site becomes known,” he said. “Until then, this is sitting there, and it is not something we are actively pursing now. … And of course Clay County would have to agree to pursue it as well.”