STAR deal crashed after developer asked for more incentives

City, master developer expect another partner to step forward

 

By Sam Jack

GODDARD – A deal between STAR bond district master developer Goddard Destination Development and the Garden City-based S&O Investments fell apart after S&O asked for additional incentives from Goddard, according to the city.

S&O introduced the requests for new incentives in mid-January, city administrator Brian Silcott said – on the eve of a closing that would have finalized the deal and transferred ownership of the Goddard Destination parcel from Goddard Destination Development to S&O Investments.

S&O asked for property tax abatements from the city.

“The city has already provided STAR bond reimbursement and other infrastructure contributions, and adding property tax abatement on top of that was too large a request,” Silcott said. “It would not have been a prudent use of our neighbors’ tax dollars.”

S&O also asked to have some of its costs reimbursed “with revenues that were already pledged to pay STAR bond debt,” according to Silcott, who said the city would not have been contractually permitted to grant that request.

Neither the city nor S&O would attach numbers to those incentive requests.

Finally, S&O wanted to reduce the scope and cost of the aquatic component of its development, which was to have included an indoor water park, competitive lap and diving pools, baseball fields, a hotel, an Old Chicago restaurant and spots for additional retail and restaurant development.

Granting the request to remove components from the aquatic facility could have jeopardized the availability of financing through a sales tax revenue bond, because the state of Kansas gave approval for that financing based on a market study that might have been rendered inapplicable.

The weeks between S&O’s mid-January requests and the city’s Friday, Feb. 9, announcement that the deal had fallen through were taken up with three-way talks between S&O, Goddard Destination Development and the city.

Silcott said that the latter two parties tried hard to salvage the deal but ultimately had to acknowledge it wasn’t going to happen.

“Both Goddard Destination and the city know that this is a quality project. We’ve now had numerous market analyses completed and revised to show that the project is top-notch, and we’re optimistic that we’ll have additional information in the coming weeks regarding the next hotel developer,” he said. He added that at the time Goddard Destination Development chose to partner with S&O, other developers had also expressed interest in the project.

Goddard Destination Development principal Rick Worner echoed Silcott’s optimism.

“The project’s going forward, just not with them (S&O),” Worner said. “That’s all I can tell you at this time.”

S&O said in a statement that after signing on to develop the STAR bond project, the company realized the original deal was not going to work out for them financially.

“We had devoted a considerable amount of time and resources putting together private financing, design plans and development alternatives. For a period of time, the parties still tried to negotiate a revised structure that would work for everyone, but unfortunately, were unable to reach again an agreement. … We wish the city of Goddard the best moving forward.”

‘The city is not out anything’

Silcott said that “the city is not out anything” as a result of S&O’s withdrawal.

He emphasized that the city still stands to benefit financially if and when the STAR bond project is completed.

Almost $30 million in development incentive is being financed through the redirection of future sales tax revenues in the Goddard STAR bond district, which includes the Goddard Destination parcel as well as Goddard’s Walmart.

When the project is built, sales tax at the water park, restaurant, hotel and any other businesses on the Goddard Destination parcel will be 1 percent higher than in the rest of Goddard. That’s because of a community improvement district sales tax. The CID sales tax will allow the STAR bond to be paid off faster, and revenue generated through the tax will ultimately reimburse Goddard for the infrastructure improvements the city paid for up front.

“This is all just within the STAR bond district, and it does not include the city at large,” Silcott said. “That is something I would like to impart to the public. I feel like due to the complexity of the public-private partnership that is being used, there’s some understandable misinformation out there; I don’t think it’s anything intentional.”

One point of possible misunderstanding: The city’s voter-approved 1-cent local sales tax is unrelated to the STAR bond project.

“The local sales tax dollars from outside of that (STAR bond) district have not been utilized in any function for the project,” Silcott said. “All of the sales tax that’s been collected outside of that has been used for annual road maintenance and sealing projects, and, most notably, the 183rd Street pathway project, the Linear Park splash pad and the Linear Park pavilion.”

Once completed, the first phase of the STAR bond project will generate more than $415,000 in annual property tax revenue for Goddard, the city estimates. That figure does not include additional retail and commercial development that could come later.