Memorandum

City of Lawrence

City Manager’s Office

 

TO:

David L. Corliss, City Manager

 

FROM:

Diane Stoddard, Assistant City Manager

Britt Crum-Cano, Economic Development Coordinator

 

DATE:

 

September 24, 2013

 

RE:

Industrial Revenue Bond Ordinance: Kansas Athletic facilities at Rock Chalk Park

 

Please add the following item to the October 1, 2013 City Commission meeting agenda:

 

Adopt on first reading Ordinance No. 8862 authorizing the issuance of $40 million in industrial revenue bonds for the KU Athletics portion of Rock Chalk Park Project. 

 

Background:

Rock Chalk Park will be a sports campus to be located near the northeast corner of the 6th Street and K-10 intersection, off of George Williams Way.  KU Endowment has announced plans for KU Athletics to proceed with developing a new seated competition track and field stadium for KU Track & Field, new competition outdoor soccer facilities for KU Women’s Soccer, and a softball facility for KU Softball.  Construction on the KU facilities has commenced at the site.  KU has also invited the City to locate its new recreation facility on the site, creating unique synergies between the City and the University of Kansas athletics. 

 

The City portion of the project will automatically be exempt from sales taxes on construction materials as well as property taxes.  Current Kansas Athletic facilities also enjoy a property tax abatement by right.  These facilities when constructed by the University are also exempt from sales tax on construction materials.  However, the structure of construction and lease of the new Kansas Athletic facilities at Rock Chalk Park by Bliss Sports LC may not carry an automatic property tax exemption.  For this reason, the applicant (Bliss Sports LC) requested a 10-year, 100% tax abatement for the KU portion of the project.  The mechanism to accomplish this is the issuance of Industrial Revenue Bonds, which also provides a sales tax benefit on materials used in construction. 

 

Industrial Revenue Bonds are a conduit financing mechanism whereby the City issues bonds on behalf of the applicant with the applicant being responsible for bond issuance costs and all of the principal and interest payments on the bonds with absolutely no financial obligation for the City.  Typically, the actual financing arrangement is very similar to conventional financing with a private purchase of the bonds by a bank or the bond recipient.  Industrial Revenue Bonds allow the opportunity for the applicant to access certain tools, such as a property tax abatement and the sales tax benefit on materials used in construction. 

 

At its meeting on March 5, 2013, the City Commission approved a Resolution of Intent to issue up to $40 million in Industrial Revenue Bonds on behalf of the KU portion of the Rock Chalk Park Project, along with a 10-year, 100% property tax abatement.  Staff completed the necessary analysis related to the property tax abatement request and notified the other taxing jurisdictions: Douglas County and the Perry-Lecompton School District. 

 

Next Steps:

The next step in the process is for the City Commission to consider adoption of an ordinance that authorizes the issuance of the bonds.  After the publication of the bond ordinance, the bonds can be closed. 

 

Suggested Action:

Adopt on first reading, Ordinance No. 8862, authorizing the issuance of $40 million in industrial revenue bonds for the KU Athletics portion of Rock Chalk Park Project.