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When Will They Ever Learn?

Don’t risk taxpayer money on development!

From today’s Wall Street Journal:

Urban Center Is Budget Hole

Kansas City, Mo., Must Set Aside Millions as Complex Falls Short of Projections

 KANSAS CITY, Mo.—The tab is mounting for this Midwestern city on a bet it made during the real-estate boom on an $850 million entertainment district meant to breathe new life into its struggling downtown.

While the eight-block restaurant, nightclub and retail complex named the Power & Light District is mostly complete, traffic and sales are well below initial projections when construction started in 2006.

Such woes are common among real-estate developers who imagined values and rents in a fast-growing U.S. economy would continue to rise for years.

But the Power & Light District stands out because it was financed through a technique that seemed like it would pay for itself. Kansas City directed future sales and property taxes in the district to pay back the $295 million in bonds that the city issued for the project, which went toward infrastructure and to directly support the development. In the event there weren’t enough taxes, the city agreed to pick up the difference.

Today, the project, which sits near the onetime headquarters of Kansas City Power & Light Co., generates less than one-third of what is needed to cover the debt service on the bonds. The city is setting aside $12.8 million in its budget for the fiscal year that starts next month to cover the gap, a notable hole in a $1.3 billion budget that calls for $7.6 million in cuts to the fire department.

So what was learned?  Nothing.

 The city’s new mayor, Sly James, said last week that while debt is a concern, he has embraced Power & Light for what it has done for the downtown. “There was a value judgment made to make that investment,” he said. “I think it was valid then, and I think it is valid now.”

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