The Kansas City Chiefs and the State of Kansas have announced an exclusive public-private partnership, with involvement from Wyandotte County, Johnson County and the cities of Kansas City and Olathe, for a two-phased sports-anchored mixed-use development project to be primarily financed through public funding commitments, which will bring professional football along with 20,000 jobs and more than $1 billion in annual economic impact, to Kansas.
WHERE IS THE PROJECT LOCATED?
The Star Bond Agreement details the structure and key terms for development of a new domed stadium in Wyandotte County (comparable in overall quality and features to Mercedes-Benz Stadium in Atlanta, Georgia, New Nissan Stadium in Nashville, Tennessee, State Farm Stadium in Glendale, Arizona, and U.S. Bank Stadium in Minneapolis, Minnesota). Under the Agreement, the Chiefs will acquire real property generally located at the intersection of I-70 and I-435 no later than February 28, 2027, for stadium development.
The Agreement also includes plans for ancillary development, which includes a new team headquarters and practice facility in Johnson County, entertainment venue, retail and restaurant spaces, hotel, residential (including at least 10% designated as workforce and affordable housing) and office space, medical facilities, community parks and paved and/or structured parking in Wyandotte and Johnson Counties.
HOW IS THE PROJECT FUNDED?
The total budget for stadium development is estimated at approximately $3,000,000,000, with an additional $1,000,000,000 budgeted for ancillary development. Development costs will be financed through public and private funding commitments. Any cost overruns will be solely the responsibility of the Chiefs. Public funding commitments are capped at $2,775,000,000 and will be primarily funded by the proceeds from the issuance of tax-exempt special obligation bonds pursuant to the Kansas sales tax and revenue (STAR) bonds financing act. K.S.A. § 12-17,160 et. seq.
Public funding for stadium development shall not exceed the lesser of 60% of total stadium development costs or $1,800,000,000, with private funding required to cover no less than 40% of total stadium development costs.
The State will allocate up to $975,000,000 to the Chiefs for ancillary development in a three-tiered payment structure:
1. An amount equal to 60% of the initial $500,000,000 in ancillary development costs, but not more than $300,000,000.
2. An amount equal to 65% of the next $500,000,000 in ancillary development costs, but not more than $325,000,000.
3. An amount equal to 70% of an additional $500,000,000 in ancillary development costs, but not more than $350,000,000.
The Chiefs are required to fund or cause to be funded at least $1,000,000,000 in ancillary development costs from private sources.
The Secretary of the Kansas Department of Commerce may establish a STAR bond district of flexible size and location deemed appropriate to generate enough new sales tax revenue to satisfy the STAR bond commitments, which will include the stadium site, and generally align with the above map.
The STAR bonds will be repaid over 20 years from (i) tax increment revenue received from State sale and use taxes collected from taxpayers doing business within the STAR bond district, (ii) tax increment revenue received from city and county sales taxes and transient guest taxes collected from taxpayers doing business within the portion of the STAR bond district comprising the stadium site, and (iii) tax increment revenue generated within the STAR bond district from the sale of alcoholic liquor.
The Chiefs may also request approval for one or more community improvements districts (CIDs) pursuant to K.S.A. § 12-6a26 et. seq. to impose a 2% sales tax (with a carveout for NFL ticket sales) pursue the establishment of one or more tax increment financing (TIF) development districts pursuant to K.S.A. §12-1770 et. seq. and the issuance of one or more series of industrial revenue bonds (IRBs) pursuant to K.S.A. §12-1740 to obtain abatement or exemption of ad valorem real property taxes. The State will cooperate with the Chiefs in obtaining ad valorem real property tax abatement or exemption for the stadium site and surrounding property. The State will also pledge 65% of the funds deposited into the “Attracting Professional Sports to Kansas Fund” pursuant to K.S.A. § 79-4801(b) or K.S.A. § 74-8711(h) to be used solely for acquisition, construction or development.
WHEN WILL THE PROJECT BE COMPLETE?
The Chiefs must use commercially reasonable efforts to complete and open the stadium by August 1, 2031 (or by the start of the 2031-2032 season). The team will lease the stadium from a governmental entity for an initial term of 30 years (subject to a non-relocation agreement), with six optional 5-year extensions. The Chiefs will operate and control the project, including payment of all operating expenses, and in exchange will retain all revenues generated from the ownership, development, operation, use, leasing, marketing and licensing, including the naming rights. The Chiefs will pay $7,000,000/per year in base rent, subject to annual escalations. Rent payments (net of $350,000 retained by the governmental entity, subject to annual escalations) will be deposited into a repair/maintenance/operations fund (RMMO) up to a set annual threshold (initially $17,000,000, subject to annual escalations) and then into a community impact fund (CIF). The RMMO fund will support capital repairs, preventative maintenance and repairs, and ongoing oversight, administration and performance of activities required to keep the stadium open, functional and maintained in a first-class manner (i.e., security, janitorial, parking and other facility-related services). The CIF fund will be used towards building sports, athletic and wellness facilities, youth-oriented facilities or programs, or other projects of community, recreational or economic significance.
The Chiefs must also use commercially reasonable efforts to complete and make at least $1,000,000,000 in ancillary development operational by December 31, 2038; however, the team headquarters and practice facility must be completed by the start of the 2031-2032 season. Minimum geographic allocation and sales-tax generating floors with respect to ancillary development costs apply across Wyandotte County and Johnson County, with limited allowance for projects elsewhere in Kansas.
Sandberg Phoenix has a team of skilled real estate attorneys with a wealth of experience in public incentivized development projects available to assist your needs.
