Archive for Thursday, April 26, 2001

Commissioner outlines study of Oz financial plan

April 26, 2001

Annabeth Surbaugh has notified her fellow Johnson County Commissioners what she expects from a feasibility study of Oz Entertainment Co.'s financial plan.

Her expectations have added weight because commissioners agree the financial study is being done for Surbaugh's benefit. Twice in the last six months, Surbaugh's vote against Oz's $861 million redevelopment plan for the Sunflower Army Ammunition Plant contributed to a 2-2 commission deadlock on the proposal.

After the last deadlock in March, the commission asked the Kansas Legislature to extend Sunflower redevelopment legislation until July 1, 2002. The request was made to allow the county time to carry out an independent review of the Oz's financial plan.

With that legislation signed by Gov. Bill Graves last week, the commission is set to discuss the feasibility study Thursday. Surbaugh said she hoped the memo she sent to her fellow commissioners Monday will speed that process.

The commission has already agreed its investment adviser ,Springsted, will coordinate the feasibility study. Springsted will help in the search for consulting firm to perform parts of the study within their scope of expertise.

At an April 9 work session commissioners suggested the study's areas of inquiry should include attendance projections, a cost/benefit analysis of the project for the county, a review of Oz's financial plan's viability and opportunity cost (the cost to the county should the Oz plan not go forward or be replaced by another proposal).

In her memo Surbaugh states: "I have come to the conclusion that items one through three . . . should be the primary focus of our study. Attendance projections, potential costs to county taxpayers and the adequacy of the financial underpinnings of the proposed development are in my opinion the three most critical issues for which we need confirmation and validation. ."

The commissioner wrote that the county needs not "start from ground zero" by contracting its own studies on the three items. Rather, she advocated the county seek independent validation "that the credentials of those conducting these extensive analysis are adequate if not superior, and the approach and methodologies used meet generally accepted standards."

Surbaugh's suggested the study review:

Attendance How a change in the economic cycle could affect estimated attendance.

Cost/benefit analysis A review of Oz's engineering analysis to confirm cost and schedules. Surbaugh also wrote that the study should confirm all the county's cost from the project have been identified and that agreements between the county and Oz safeguard county taxpayers from the cost of bringing infrastructure to theme park.

Financial feasibility Confirmation of the theme park's break-even point, effects of changes in the economic cycle to Oz's revenue sources and costs other than theme park attendance.

Surbaugh suggested this last study should include an evaluation of the expertise and credentials of the Oz team and its ability to "deliver the theme park/entertainment use as represented in the draft predevelopment agreement."

Finally, Surbaugh suggested a review of the opportunity costs be eliminated. "Any analysis of this issue would require a myriad of assumptions and/or speculation," she wrote.

Tuesday, Surbaugh said that part of the study could be done later if warranted.

"If the first part of the study comes back negative there would be no need for it," she said.

Commission Chair and Oz supporter Doug Wood said he didn't object to opportunity cost being eliminated from the review's scope, although he first suggested it.

With no other viable alternative to development Sunflower available for review, Wood agreed the review would be too speculative.

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