The City of Topeka is in the process of purchasing Heartland Park Topeka (HPT) and expanding the STAR Bond district that currently encompasses HPT property.
Expanding the STAR Bond district simply means the State's portion of the sales taxes levied in the district will be reallocated to the City. The plan will not raise taxes or create any new ones for anyone.
On August 12, 2014, the City Council voted to approve the purchase of Heartland Park and the STAR Bond district expansion. This acquisition will allow the City to meet its ongoing debt obligation associated with Heartland Park. If the plan does not move forward, the City would face an $8 million shortfall for the City in the coming decade.
Under the proposed plan, the City will meet its financial obligations without having to raise any taxes.
Latest Commonly Asked Questions
Questions below were recently submitted to the City. Find more Q&A from two live blog sessions with cjonline.com posted at http://cjonline.com/news/2014-10-23/city-officials-answer-heartland-park-questions-during-live-blog and http://cjonline.com/news/2014-10-17/read-what-city-officials-said-heartland-park-live-blog.
What brought us to this issue in the first place? What happens if the City does buy the track? What happens if they don't buy it? What are the end result consequences or advantages to the taxpayers, in either case?
When the City Manager was initially hired, he identified Heartland Park as a growing concern as the revenues from the STAR (Sales Tax Revenue) bond district, as currently constructed, was not meeting (and had never met) the debt associated with the racing facility.
A STAR bond district is simply a geographical area associated with an entertainment venue of some sort. In a STAR bond district, sales taxes being collected by both the City and State within the district are diverted to the City to address STAR bonds issued in relation to the venue. To have a STAR bond district, you must have a plan that is approved by the State of Kansas. In this case, the plan is acquisition of real property, which is the land and racing facility known as Heartland Park Topeka.
Once the City Manager identified Heartland Park as a significant financial issue for the City, conversations began with the State of Kansas to expand the current district. By expanding the district, you expand the amount of State sales tax that can be diverted to the City to address debt associated with Heartland Park. Through months of negotiations, the State agreed to expand the district north from Heartland Park on Topeka Boulevard all the way to Croix. This is a significant expansion of the current district. Based on the existing sales tax being collected, the expanded district will generate $16.4 million in new revenue to the City to address debt service over the next 12 years. Without the expanded district, the City will have an $8 million deficit. This deficit is the result of the current district generating approximately $203,000 in yearly revenue, versus $1 million in yearly debt service.
As stated earlier, to have an expanded district, you must have an approved plan. The only plan the State would approve was acquisition of Heartland Park by the City of Topeka in a manner that provides the City with clear title to the property. The plan is to issue $5 million in new STAR bonds to acquire the property and pay off the debt associated with the property. By issuing the new STAR bonds it brings the STAR bond debt from approximately $10 million to approximately $15 million. That total amount of debt will be paid by the $16.4 million in new revenue generated by the district.
In the simplest terms, the City is purchasing Heartland Park for $5 million dollars, and in exchange, is receiving $16.4 million dollars in sales tax revenue from the State. The State is willing to do this because they recognize Heartland Park as having a “significant economic impact on the state attracting people inside and outside the State of Kansas.” This economic impact also allows the all Kansans to assist with debt service, rather than just the citizens of Topeka.
This plan is similar to the expansion of the T-Bones STAR bond district to incorporate portions of the legends in Kansas City to address the debt service associated with the construction of the T-Bones stadium. The Unified Government of Wyandotte County purchased the T-Bones Stadium and in exchange the state allowed them to expand the district to increase revenue to address debt service. This is a mechanism that has been used statewide for projects from the salt mine museums in Hutchinson to the NASCAR facility in Kansas City. It is a mechanism that allows for local use of state sales tax dollars to encourage local economic development.
Many people have seen this as the City getting into the racing business which is in no way the plan of the City. To repeat: the City of Topeka has no interest or plans to run a racetrack. The City is in the process of identifying a management group with expertise in the racing industry and the financial ability to effectively manage the track. The City has been contacted by three different entities interested in managing the facility. All three entities have expertise in racing and the financial ability to manage the facility. The selection will go through a public and competitive Request for Proposal process and the best organization will be identified by a committee of internal and external experts in racing, finance and entertainment venues.
One of the most exciting aspects of this plan is that the NHRA has committed to continuing their relationship with Heartland Park for an additional 3 years if the STAR bond plan is completed. They have also committed to devoting their extensive marketing and promotional department to assist in making sure the event is as successful as possible. The ability to identify a first class organization to manage Heartland Park and garner $16.4 million in new revenue for the City to address debt service with the full support of the NHRA is a unique and exciting opportunity for the City.
What happens if Topeka does not issue additional bonds on HPT?
CoreFirst will most likely foreclose on the property and the property will be sold pursuant to foreclosure. The foreclosure by CoreFirst would most likely be a long, protracted process and might result in substantial additional litigation. The district would not be expanded creating an $8 million deficit in the City budget. If the current plan put forth is executed, the STAR bond district will be expanded, and $16.4 million in state sales taxes will be allocated to the City to address the STAR bond debt associated with Heartland Park. The $16.4 million is not a tax increase, it is simply taking sales tax money currently being collected by the state and diverting it to the City.
When Heartland Park wad first constructed, Topeka spent $7 million on it. What did we purchase?
In 1988, Lario Enterprises deeded the land commonly known as Heartland Park to the City. The City issued $7.5 million in general obligation bonds for improvements and construction on the land.
How long is it expected to take the expanded district to achieve the $266.7M in sales needed to generate $16.4M in state sales tax?
Who approved soliciting the opinion of Lathrop and Gage on the validity of the petition to vote concerning Heartland Park? What day was the approval? How much did the opinion cost?
The opinion of Lathrop in Gage was approved administratively on October 2, 2014. The opinion was originally given on October 14, 2014, and no payment was made for the opinion. As Mr. Imming stated in his public comments to the Council, it is the responsible thing to do and the right thing to do to protect the validity of any ballot measure.
If/When the city sells the track, will the STAR bond district end earlier, since the city will have been reimbursed for the expenditure of buying the track and should be able to pay down that debt?
The STAR bond district will collapse once the debt service has been paid related to Heartland Park.
Why all the hand wringing over the loss of revenue for the area from Heartland Park? It has been stated repeatedly that the economic impact of Heartland Park is $160M. Comparing that to the GDP for the Topeka area of $7.5B (excluding government functions) it seems the value of the track is minimal compared to the money spent to keep it operational.
By expanding the District, the City will receive $16.4 million in new sales tax revenue to address the debt service associated with Heartland Park. If the district is not expanded, it will create an $8 million deficit in the budget that must be addressed through either cuts in City services or an increase in taxes and fees. There is no plan for the City to be involved in operations or operational costs of the track. The $160 million is money spent at local retail establishments, restaurants and hotels.
How does the city owe $10.8M from the 2005 STAR bond? It was originally issued for $10.4M and the city now claims the amount owed is higher than the amount borrowed. Where did the increased amount come from and why hasn’t any of the payments these past 10 years decreased the principle owed?
In 2005, an additional $5 million in general obligation bonds was issued, along with the original $10 million in STAR bonds.
Has the City made public all annual reports to Secretary of Commerce required by KSA 12-17, 169 (c)?
Yes, they are all public documents.
At http://www.topeka.org/HPT/faq.shtml, the City says: Expanding the STAR Bond district simply means the State's portion of the taxes levied on the properties in the district will be reallocated to the City. The deal will not raise taxes or create any new ones for anyone.
That's inaccurate, is it not, since the State levies no taxes on the properties in the district but, rather, it's the State's portion of the retail sales tax assessed and collected that would be diverted to the ownership of the City?
You are correct the State levies no property taxes, and we can see how that answer could be interpreted as referencing a property tax, not a sales tax. Sorry for the confusion. The $16.4 million in sales tax collections would be diverted from the State to the City to address debt service.
On what basis were the new boundaries of the expanded project plan determined and does there exist a detailed report to supplement the "Expanded District Financials" posted at http://www.topeka.org/pdfs/Expanded_District_Financials.pdf?
The boundaries were developed through a year-long negotiation with the State of Kansas.
Why was the project plan not expanded even further or wider in order to obtain a greater amount of sales tax collected and reduce the duration of the STAR bond amortization?
The State has to approve of the district. There was a significant amount of negotiation between the City and the State related to the District and the final district is the result of those negotiations.
While it's been reported that contracting for the management of HPT and/or the sale of HPT would be subject to a request for proposal process, has the City Council established either a committee devoted to this undertaking or does the City have a contingency plan in the event nobody wants either to contract to manage it or buy it?
The City Manager has put together a team of professionals both internally and externally to review the RFP process. Once we have a judicial determination regarding the petition, the RFP process will move forward. Three separate entities have come forward expressing significant interest in managing or purchasing the property. The City has no plans to manage the property.
The biggest event held every year at Heartland Park in the NHRA event held around Memorial Day. Is there any signed commitment from NHRA that they will continue this event in 2015 or in the future?
Yes, we have a signed contract from NHRA to continue their current commitment to Heartland Park for three more years. The contract is contingent on the current STAR bond plan being executed.
Why is the city paying an outside law firm to represent it during the process of determining the petition validity?
Catherine Logan from Lathrop & Gage, LLP, is representing the City, along with Shelly Starr, the City’s Chief of Litigation. The City wanted a third party to review the petition and provide an opinion. Lathrop & Gage have worked with petition cases in the past. They bring an objective opinion and specialized knowledge of the case.
The City is in the process of purchasing Heartland Park Topeka and expanding the STAR Bond district that currently encompasses the Heartland Park property.
On August 12, 2014, the City Council voted to approve the purchase of Heartland Park and the STAR Bond district expansion. This acquisition will allow the City to meet its ongoing debt obligation associated with Heartland Park. If the plan does not move forward, the City will face an $8 million shortfall in the coming decade.
Expanding the STAR Bond district simply means the State's portion of the taxes levied on the properties in the district will be reallocated to the City. The deal will not raise taxes or create any new taxes
Under the proposed plan, the City will meet its financial obligations without having to raise any taxes.