The city council of Kansas City, Missouri, approved an agreement for a bond-funded baseball stadium for MLB’s Royals last week, despite red flags that could endanger the deal. 

Processing Content

The stadium plans face both legal risk and political headwinds. City leaders are racing to the finish line to avoid both in a process that has left them open to criticism from residents, stakeholders and policy experts, who say they the deal is being rammed through to avoid public participation and accountability.

The agreement approved Thursday commits $600 million from the city toward the $1.9 billion total stadium project cost — $510 million in city-backed bonds, plus $90 million in infrastructure funding from the city. 

The bonds will be funded by city tax increment financing, as well as potentially state TIF and an “impact area,” city staff told councilmembers in a committee meeting.

The bonds will be special obligation bonds issued by the city and carrying the city’s annual appropriation pledge, said Jackson Overstreet, public information officer for the city manager’s office. The vote approving their issuance will happen after the approval of repayment sources including the TIF plan, he said by email.

“We’re also working with Gov. (Mike) Kehoe and the state of Missouri closely on this project,” Brooks Sherman, president of real estate and development for the Royals, said at a Tuesday committee meeting.

The $3 billion P3 agreement calls for $1 billion in total public funds from the city and the state, and $2 billion in private funding, Sherman said. The stadium and surrounding infrastructure will cost $1.9 billion; an adjacent real estate development in concert with the privately held Hallmark Corp., which has a headquarters, visitor center and shopping center on the Crown Center site, will cost over $1 billion. Hallmark’s current headquarters will be demolished to make way for the stadium.

The Royals now play at Kaufman Stadium on the outskirts of town; their lease there with Jackson County expires after the 2030 season.

Political headwinds

The vote came in the face of a citizen petition drive seeking a public vote on the use of public funds for the stadium.

The petition organizers can have the city clerk put the question to voters if the city council doesn’t act on the petition by the end of this month; the question would then appear on ballots in April’s election, according to the Kansas City Star.

“I suspect the public is more likely to reject these than city councils and county commissions,” said Patrick Tuohey, senior fellow at the Show Me Institute, a Missouri think tank that emphasizes free markets. “In an ideal world, they’d say no. These teams are all very profitable, and perfectly capable of building their own stadiums… (But teams) know that if they ask, cities and states will offer them money.”

Voters in Jackson County, which includes Kansas City, in 2024 rejected a sales tax to build a Royals ballpark in a different downtown location and fund upgrades for the Chiefs football team to Arrowhead Stadium, which is next to Kaufman Stadium. The Chiefs have since agreed to decamp across the state border to Kansas, at the there.

The funding agreement approved by city council calls for the Royals to cover cost overruns.

“The bonds will not be authorized… unless and until all conditions precedent in the funding agreement are met,” Overstreet said.

But Tuohey argued that in offering to back the bonds, Kansas City is relieving the team of the burden of poor decisions. “If they don’t generate enough money to pay off bondholders, taxpayers will do it,” he said. “Debt is a huge motivating factor, and if you don’t have that, your whole decision matrix changes.”

The debt service payments are subject to annual appropriations. But Kansas City officials know that if they fail to appropriate funds, their bond ratings will suffer, he said.

Touting economic development

“This step advances what will be the largest public-private economic development project in Kansas City,” Royals Chairman and CEO John Sherman said in a statement. “It will bring Royals baseball to the center of our city, creating jobs, housing and year-round economic activity, advancing Kansas City’s terrific momentum.” 

Mayor Quinton Lucas said in a statement the city council vote helps Kansas City to retain “two great brands,” Hallmark Cards and the Royals.

“I look forward to opening day in 2030 and the thousands of good-paying union jobs to come to our downtown,” he said.

“They don’t have much of the information they need to make an informed choice,” Tuohey said. “I don’t think the public should be funding these private projects at all… The city isn’t even pretending to be financially responsible, or a good steward of public funds.”

Legal challenges loom

Thursday’s city council vote came shortly after the finance, governance and public safety committee recommended passage of the agreement and a rezoning ordinance for the stadium. It followed a marathon Tuesday committee meeting that devolved into shouting at multiple points during public comment. 

“You’re about to sign agreements… that don’t even have exhibits attached to them,” David Byrn, a former Jackson County judge and vice president of the San Francisco Towers Owners Association, which represents residents near the proposed stadium site, and which has retained counsel and may sue, told the committee Tuesday.

“Look at the staff report,” he said.

“You’re not following, with respect, your own rules and process. That staff report identifies multiple factors that are required to be considered by the city. Not a single one of them have been evaluated,” Byrn said.

“Where I think the Royals and the stadium would have potential… is in building up community. And I think that’s where they have failed to this point,” said Rabbi Doug Alpert at Tuesday’s meeting. “What is needed (is)… a community benefits agreement with real teeth.”

The community benefits agreement calls for a $55 million commitment from the team over the 30-year term of the lease agreement, which the Royals have the option to extend to 40 years, per KCTV 5. 

Other speakers at Tuesday’s meeting defended the stadium agreement.

“Baseball isn’t just part of our history; it’s woven into the fabric of Kansas City,” said Floyd May III, president of the Civic Council of Greater Kansas City.

“This is a regional competitiveness issue. Many other regions want a major league baseball team, and are ready to make offers to lure ours away,” he said.

“One of the things that makes this proposal so compelling is the partnership between the Royals and Crown Center,” said Joe Reardon, president and CEO of the Kansas City Chamber of Commerce.

“This is about much more than a new ballpark. It’s bringing together two iconic Kansas City institutions around a larger vision,” Reardon said, referring to Hallmark, arguing that the agreement “gives us the opportunity to leverage public investment” to revitalize underutilized areas, renovate old properties and build new ones, and better link Crown Center with downtown.

‘Significant cloud’

“The problem with these projects is, the costs are diffuse and the benefits are concentrated,” the Show Me Institute’s Tuohey said. “So every team has every incentive to fight for every dollar. And voters have a much lower incentive to protect every few cents, because they don’t see the full impact.”

Pro sports teams have “got a pretty good deal going in the status quo,” he said. “They’d be foolish not to ask. But I wish cities and states would stop doing this.”

As for the various legal challenges hanging over the project, Tuohey noted that petition signatures have already been validated, and the case could make its way to the Missouri Supreme Court.

“State Supreme Court history suggests that once you have a valid public vote pending, the courts do not take kindly to the legislature fussing around with the issue,” Tuohey said.

“There is a significant cloud hanging over this,” he added. “They want to try to button up as much of this (as possible) so that if there is a public vote, the city can say, ‘Gosh, too late, we’ve already signed these agreements.’ But they signed the agreements knowing that there was a vote coming.”