Archive for Thursday, September 7, 2000

Dam road is an Oz obstacle

September 7, 2000

Olathe- Oz Entertainment Co. officials apparently didn't give Johnson County Commissioners the right answers during a work session last Thursday.

"From what I heard today, I find it difficult to justify the county building a $6 million to $12 million dam road," Commissioner Doug Wood said at the end of the four-hour work session.

Wood was referring to the road Oz wants the county to build to link Kansas Highway 10 to its proposed $861 million Wonderful World of Oz Theme Park and Resort. Should the county build the road to Oz's most expensive specifications a plan that includes a dam its estimated cost is $13.2 million.

Commissioners scheduled the work session to get answers about the road and other issues county counselor Don Jarrett identified in an executive summary of Oz's redevelopment plan. The work session also addressed the agreements governing the transfer and cleanup of Sunflower that Oz negotiated with state and federal agencies.

The county commission must approve Oz's redevelopment plan before the transfer can occur.

In addition to the road, Oz is requesting a $39 million tax increment financing agreement with the county. The so-called TIF would divert property taxes to paying off bonds used to finance the theme park.

Oz maintains the TIF is justified because the theme park's indirect benefit to the county will exceed its indirect costs by more than $4 million. But after the meeting, Commissioner Johnna Lingle called a presentation on the benefit analysis "weak."

Asked to explain how the county would benefit, Mark Dvorchak of Economic Research Associates the firm Oz hired to perform the financial feasibility study of its proposed development said the park would provide "increased home values" and, therefore, higher property taxes.

That, said Commissioner George Gross, wouldn't endear the Oz development to many county residents.

"I can tell you from my time on this board, that there are many people in Johnson County with no interest is seeing an increase in property values," he said.

THEME PARK SALES TAX COULD HELP PAY OFF PRIVATELY PLACED DEBT
It was revealed during the work session that the 8.5 cents in sales tax collected within the theme park could be used to pay off more than just the $189 million is sales tax revenue bonds Oz is requesting from the state.

Ken Becker of Salomon Smith Barney told commissioners that annual sales taxes collected above that required to meet STAR bond obligations can also be used to retire the $267 million in privately issued bonds his firm hopes to place with investors.

That use of sales taxes is a "critical aspect" of Oz's financial package, Becker said, because it allows a theme park open 185 days a year to compete with those that operate year around.

At two August public comment sessions, critics said the Oz financial plan wouldn't work. Wood said the use of sales tax revenue to retire privately placed bonds went "a long way to explaining how it will succeed."

After the work session, Wood said it also raised the public policy question of a private interest using tax revenue to pay off privately placed debt.

Gross was more interested in how Oz developed its proposed annual payment in lieu of taxes. To compensate the county for added law enforcement and emergency services expenses, Oz is proposing annual payments that start at $500,000 a year and increase to $1.8 million annually as the park grows.

Oz CEO Robert Kory said the company met with the Johnson County Sheriff's Department and emergency service personnel to development the estimates. The park will require the sheriff's department to hire two new officers, he said.

"On the basis of those several meetings, we made an estimate we thought was on the high side," he said.

But Gross, who has been leading the county's effort to identify the true costs of its services, questioned Oz's estimate and asked County Administrator Mike Press to review them.

LINGLE SAYS INFRASTRUCTURE DETAILS UNANSWERED
As she said she would, Lingle focused on Oz's plans to bring infrastructure to the theme park.

Normally, developers are required to provide traffic-flow studies when requesting zoning or permits from the county, Lingle said. Oz has not submitted a final traffic-flow analysis, she noted, and it is not known if the state will pay for a K-10 interchange into the park.

"I find that offensive as a local government person," she said. "In all the years I've been around and I wouldn't be around much longer a traffic flow study is vital."

Oz's sewer plan is also questionable, Lingle said.

The system would be a "pre-engineered and custom designed" package system that could handle 1.6 million gallon a day. It would be constructed beside the 60-year-old existing sewer plant on Sunflower's east side, and will be removed when Johnson County brings sewers to the plant.

But, Johnson County waste-water engineer John Metzler said the state has refused the county's permit requests for package plants in recent years.

"A standard package plant may have difficulty meeting Kansas Department of Health and Environment standards," he said.

On hand to answer questions about his department's role in overseeing Sunflower's cleanup, KDHE Secretary Clyde Graeber said Oz will be held to the same standards as the county.

"We issue waste-water permits after very careful review," he said. "Theirs will meet our standards, or they will not get a permit."

WITHOUT OZ, SUNFLOWER WOULD BE TRANSFERRED IN PIECES
Blaine Hastings, a realty officer with the U.S. General Services Administration the agency handling the transfer for the Army said the negotiated transfer requires Oz to deed acres of park land to the county and make similar public benefit transfers to K-State, the University of Kansas, the city of DeSoto and the DeSoto School District.

If the Oz transfer is not approved, the federal government will probably make another request for public benefit transfers, Hastings said. But he added it is doubtful, as much land would end up in public domain.

Should the Oz proposal fail, the government would auction Sunflower's clean sections to pay for the cleanup of contaminated acres, he said. A piece-meal transfer is exactly what the county hoped to avoid when it included provisions in the state's redevelopment statute that requires a developer in this case Oz to acquire all 9,065 acres of Sunflower before it could pursue a redevelopment district at the plant, Hastings noted.

Yet after the meeting, Wood again questioned how the county benefited from the Oz proposal.

"I'm hard pressed to see where the county gets any benefit direct or indirect other than the park land. Whatever economic benefit the county derives from that is more than lost from building the dam road," he said.

The commission only asked half of Jarrett's 24 questions, and commissioners indicated they might schedule another work session to get answers to those that remained. The commission hopes to make a decision on the Oz proposal before the end of the year.

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