Kansas local governments sign on to finance NFL Chiefs' move

Pieces of a financing puzzle for a $3 billion, partly bond-financed stadium for the NFL's Kansas City Chiefs and related developments in Kansas began falling into place last week with local governments agreeing to chip in future tax revenue.

The Olathe City Council and the Unified Government of Wyandotte County-Kansas City, Kansas, Board of Commissioners voted in favor of pledging incremental increases in certain sales and transient guest taxes collected in specific geographic areas to help pay off sales tax and revenue bonds that would be issued by the Kansas Development Finance Authority for the project.

The unified government would raise an estimated $350 million to $450 million in a 235-acre district over a 25-year period for an at least 65,000-seat domed stadium, according to a presentation to commissioners on Thursday by consultant Todd LaSala, a partner at law firm Stinson.

In Olathe, where a team headquarters and indoor/outdoor practice facility would be located, an estimated $300 million would be generated in a 165-acre district over a period of up to 30 years for that part of the project.

In December, team and Kansas officials announced the Chiefs' move from Kansas City, Missouri, starting in the 2031 football season. Under what they are calling a public-private partnership, 60% of the stadium project would be financed with STAR bonds with the team responsible for the remaining 40%.

Kansas is pledging incremental increases in state sales and liquor taxes collected in an overall STAR bond district located in Wyandotte and Johnson counties for $1.8 billion of stadium bonds, according to a term sheet for the project. Slices of sports betting and state lottery revenue will also be used to secure bonds for the stadium, which will be owned by a government entity.

A beefed-up version of STAR bonds with a maximum maturity of 30 years was authorized under a 2024 Kansas law aimed at luring major league sports teams from neighboring Missouri. The law allows STAR bonds to cover up to 70% of costs for professional sports facilities that carry a price tag of $1 billion or more.

At a January Kansas legislative joint commerce committee meeting, Korb Maxwell, an attorney representing the Chiefs, said the stadium bonds could be paid off as soon as in 15 years.

"We likely believe that even though there's been authorized a 30-year term, we're talking about more like paying these bonds off in 20 years or below," he said.

Bank of America (BAC) and Wells Fargo (WFC) are the lead underwriters for the bonds. which are not expected to be priced until late this year or early 2027, with Public Financial Management serving as financial advisor, Gilmore & Bell as bond counsel, and Kutak Rock as issuer's counsel.

STAR bonds would also be used to cover 60% to 70% of the cost of some qualified ancillary developments, including the Chiefs' team headquarters, practice facility, and parking facilities, with the state's share capped at $975 million, according to the term sheet.

Wyandotte County would not be on the hook for any impairments on the STAR bonds, LaSala told commissioners.

"We're not credit-enhancing those bonds and the (unified government) is not responsible for any shortfalls on these bonds that the state issues," he said.

In Olathe, City Council Member Dean Vakas said the STAR bonds are sold to sophisticated institutional investors who assume the risk.

"They do the math before they buy the STAR bonds," he said at a Feb. 3 council meeting. "They won't buy the STAR bonds if the math doesn't come together. So we'll find out in a couple of years when the STAR bonds go to market."

There has been one STAR bond default in Kansas, which began in 2023 when sufficient funds were not available to pay the entirety of debt service on nearly $65 million of unrated debt Overland Park, Kansas, issued in 2012 for the 61.5-acre Prairiefire development that includes a museum, retail, offices, and housing.

A January notice to bondholders said only $2.018 million was available to make $12.8 million in principal and interest due and payable that month and noted the balance in the debt service reserve was zero.

Public financing for professional sports stadiums is also happening in Oklahoma and Texas.

Oklahoma City is targeting a mid-year timeframe for pricing about $787 million of sales tax revenue bonds to help finance a 750,000 square-foot arena to replace Paycom Center, the home of the National Basketball Association's Oklahoma Thunder, Assistant City Manager Brent Bryant said on Friday.

The bonds will be sold through the Oklahoma City Public Property Authority in a deal led by Goldman Sachs (GS).

The debt is backed by a six-year extension of a Metropolitan Area Projects one-cent sales tax, known as MAPS 4, beyond its April 1, 2028, expiration that Oklahoma City voters overwhelmingly approved in December 2023 for the arena. The city has projected the tax will raise nearly $976.3 million during the six-year period, based on annual growth of 1.79%.

Oklahoma City is also contributing $78 million in MAPS 4 funds that had been allocated to the city-owned Paycom Center, while the Thunder, which has played there since 2008, is providing $50 million.

San Antonio is working on purchasing property and hiring consultants for a 25-acre sports and entertainment district, according to a presentation to the city council in January. The project includes a $1.3 billion partly bond-financed downtown arena for the NBA's Spurs, a $750 million expansion of the Henry B. Gonzalez Convention Center, an upgraded Alamodome, and a privately funded convention center hotel.

A preliminary schedule indicates definitive documents, including a bond indenture, and agreements with the team and others would be substantially completed by Dec. 31.

San Antonio's share of the arena's cost would be 38% or $489 million, whichever is less, according to a non-binding term sheet signed by city and team officials in August. The city or an entity it controls would issue bonds backed by the team's arena lease payments over 30 years, ground rent from leases of city property to private entities, and incremental increases in property and state hotel occupancy tax revenue generated in downtown tax increment reinvestment and project financing zones.

In November, voters in Bexar County approved a proposition to raise the county's hotel occupancy rate to 2% from 1.75% and continue its 5% motor vehicle rental tax to generate up to $311 million to help fund the arena.

A minimum of $500 million would come from the Spurs, with the team responsible for paying all arena cost overruns. The team would operate and maintain the arena, which would be owned by a city-controlled entity, and would retain revenue from operations and naming rights.

The Spurs currently play in the Bexar County-owned Frost Bank Center, which opened in 2002 and underwent a more than $110 million renovation in 2015.