26 November 2010

The Profit & Loss District.

Saw this chart from localfirst.com over at Sully's blog. It quite nicely expresses why corporate welfare districts like Kansas City's Power & Light District are not merely bad economic policy, they're actually counterproductive in terms of building the local economy and enhancing the local taxbase.

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buy local restaurant image

As a preliminary matter, former mayor Kay Barnes and the nitwits in charge of Kansas City politics bought into Chicago-based C.H. Johnson Consulting Inc.'s fantastically rosy and spectacularly incorrect financial forecast, and with cartoon dollarsigns in their eyes and delusions of adequacy, decided to put the local taxpayers on the hook for $295 million to construct a mall-like "main street" designed to appeal to suburbanites and tourists. They also agreed to keep the taxpayers on the hook until 2033 to fill any revenue gap created by the consultant's over-sell and corporate underperformance.

It is difficult to overstate just how wrong C.H. Johnson was, so here's the numbers: for 2009, they projected sales of $240.7 million, but actual sales were $65.2 million. C.H. Johnson's epic failure has so far cost taxpayers an additional $16 million — and that's probably going to be the case every year for another generation.

Honestly, if you'd have just pulled a number from your ass you'd have probably gotten closer then these "experts."

But C.H. Johnson's incompetence absolutely pales in comparison to the gaggle of lackwits who comprise Kansas City Council. They actually — and no, I am not kidding — re-hired these same dumbshits and awarded them another $130,000 contract to study proposals for a new convention center hotel. 

Yes, a new taxpayer-subsidized hotel, even though 38% of the city's existing hotel rooms sit vacant. A new taxpayer-subsidized hotel to directly compete against several existing taxpayer-subsidized hotels.

The city has already spent a half-million dollars over the past decade trying to polish this turd of an idea, and there's a fair chance that the city earnings tax is going to be eliminated in the very near future meaning residential property taxes will skyrocket while property values freefall, driving more folks to the suburbs and eroding the tax base to something frighteningly Detroit-esque.

But I digress.

Besides thrill-seeking suburbanites boldly braving the mean streets of Kansas City, the true beneficiary of the P&L district is the Maryland-based Cordish Corporation, a privately owned, multibillion-dollar retail and casino development and operations conglomerate. Cordish touts the P&L District as having "more than 50 unique and captivating shops, restaurants, bars, and entertainment venues" in a 9-block "neighborhood."

By "unique" they mean "almost exclusively out-of-town corporate chains," including 801 Steak & Chop House (Des Moines), Bice Bistro (New York, abandoned P&L site), Chipotle Mexican Grill (Denver), Famous Dave's Legendary Pit Bar-B-Que (Minnesota, leaving P&L site), Flying Saucer Draught Emporium (Dallas/Ft. Worth), Fran's Restaurant (Toronto), The Fudgery (Georgia), GNC (Pittsburgh), Genghis Grill (Dallas), Gordon Biersch Brewing Company (Chattanooga), Hilton President (Virginia), Jos. A. Bank (Maryland), Kobe Japanese Steakhouse (Virginia), McFadden’s Sports Saloon (New York), Standard Parking (Chicago), Ted's Montana Grill (Atlanta, leaving P&L site), and T-Mobile (Germany). Although it's difficult to establish precisely, it seems that Cordish itself owns and operates several of the P&L District venues and chains, including Angel's Rock Bar, Fuego, Howl at the Moon Piano Bar, Lucky Strike Lanes, Maker's Mark Restaurant, Mosaic Lounge, Pizza Bar, PBR Big Sky, Raglan Road, Shark Bar, and Tengo Sed Cantina.

Yes, these marketing whizkids thought folks would drive into the urban core of Kansas City for...Atlanta steaks and Minnesota barbecue.

Way to have your finger on the local pulse, Cordish. Very impressive.

As a privately held company, Cordish is free to keep its finances and operations secret, and it certainly does. Although I don't have the financial breakdown of which company is making how much money, just by way of comparison, if you take the pie-chart figures above against the actual 2009 sales figures, you can see how dramatic the difference can be: if all tenants were non-local: 57% of $65.2 million = $37.164 million goes elsewhere, keeping $28.036 million in KC; however, if all tenants were local: 32% of $65.2 million = $20.864 million goes elsewhere, keeping $44.336 million in KC.

Ultimately, the city government is forcing taxpayers to subsidize a wealthy private out-of state company to operate for its own benefit and other mostly out-of-state companies, meaning 57% of those receipts go somewhere besides Kansas City.

We're not just hemorrhaging cash, we're paying somebody to keep stabbing us.

2 chimed in:

Mo Rage said...

terrific insights.

Now, let's get some charts that also show a) how expensive it is, per household, to pay for revamps of the two stadiums and b) how unfair it is to have us pay for those revamps when the companies using them are making millions and millions of dollars.

We have to stop this ransom.

Next time they ask for a re-do, let's tell 'em they can pay for them themselves, as they should.

Mo Rage said...

Still more thoughts:

--it's hard not to come to the conclusion we're dopes;

--this shows why we need to stay terribly involved in local politics'

--this also shows why we need not just a local newspaper but one that isn't in the pocket of local businessmen and one that has the resources to press the local government on what's happening, what's being planned and in asking the tough questions so we can find this kind of crap out ahead of time and hopefully avoid this.