Board of County Commissioners - Regular Meeting

Well, good morning, everybody. We'll go ahead and get the staff meeting started for Tuesday, August 18th.

Tom, what do we got? Chairman, good morning. This is actually a continuation of what we would hope to discuss at last week's BOCC meeting, but ran out of time. It's a budget discussion, but it circles around interest bank arena. And Lindsay here today to give a presentation. And she's actually going to start with Chapter 1 and take us through the whole book. You know, the sales tax and the evolution, historical, how it happened. Because if we're watching social media, there's a lot of misinformation out right now. We're trying to reconcile and put some facts out there. So I'll turn it over to Lindsay. And then as the commission has questions as she goes through, just feel free to stop and ask and we'll do the best we can to answer. So.

Yes, so I will apologize in advance. There's going to be a lot of content that we cover today. So, yes, please do pause if we need to interject with questions. I have as much information as I could possibly find and bring, so I should be able to pull up any kind of historical information you might need. So I just want to spend a few minutes before we dig into the details, reminding everybody of kind of where we came from in the context around the arena, the reserve fund. And then, of course, why we're talking about capital needs. So there's three parts to the story. There's how the arena and the reserve were originally structured. How the management agreement that we have with, I'm going to call them SMG. We know that they do business now as Legends Global, but their contractual name has not changed. They continue to be SMG. So for simplicity, that's who they're going to be through the course of this conversation, even though everyone else in the community knows them now as Legends Global. We're also going to talk about what we need to do now to protect the building for the long term. And so the most important thing I want to distinguish today is the fact that we are talking about capital responsibility, not operating performance. You're going to hear me say that probably 10 more times because I think that is the take home that a lot of the public is not understanding. So we're not asking to subsidize the arena or the operations. It's taking care of a facility. So just to recapture a little bit, we did enter our agreement with SMG to operate the facility back in August of 2007. We have had five amendments in that time. The first amendment was basically to say, okay, you helped us operate the Coliseum and the pavilions. While we were bridging the gap to the 2010 opening of the arena, so they took care of what was then called the existing facility, which was the Coliseum slash pavilions as well as what is referred to in our management agreement as the new facility new facility being the downtown arena, which now, of course, with naming rights is known as the interest bank arena. So that 1st amendment in 2008 kind of clarified that structure. We had another amendment in October of 2009. Again, more just about how the food and beverage was going to operate at the facility. The most substantive change that we have really talked about in time was Amendment No. 3 in November of 2014. Up until that point, our management agreement said that There was, this is very different than other management agreements. So I want to be very clear about that. That agreement said SMG had to earn its management fee. We weren't going to just pay a management fee. They had to earn it. And so that first kind of management fee portion was $450,000. then they could earn another $450,000 and that would come to the county. Anything greater than that would be split between the two. That was what happened in 2014. In 2019, and we'll cover this, but I want to just go through the structure now because I think it matters. In 2019, we had Amendment Number 4, and that's the one that we're all familiar with today. And what that agreement says is, again, SMG has to earn their management fee. That's the first $400,000. And then anything above that, any net operating income above that is split 50-50 between the county and SMG. And those dollars are earmarked to go back to the reserve fund. The reason that that is important and the reason I say that this is unique is because most if well, I won't say all, but most facilities have a contract that provides a management fee to the facility. And then they basically keep the operating income with the earners. In our case, we incentivize the agreement, right? We say you have to earn your management fee and then you get to keep half of whatever you generate. That doesn't happen most places. In most places, those management firms are are confined to that management fee and that's what they get as revenue unless there's other things that are structured. So we have a built in incentivization into that agreement. for them to spend less and make more. It helps their bottom line. It's also really important for us to remember this is a contract. It's an agreement. It's not federal grants. It's not any kind of situation. This is a for profit business that we're doing work with because the county, after the experience with the Coliseum, did not feel like we were the ones who were best positioned to manage this structure. So those are kind of the highlights I want to hit. Now we're get into the details. so this is the question that was on the ballot in 2004. at that time there were faqs that were put out in august of 2004 that first mentioned a reserve and in that faq document related to the question it specifically said the goal of the funding if there is funding for the reserve is to offset not eliminate, offset reliance on future property tax. So that was in August of 2004. We've confirmed that we have those FAQs. But I think it's really important to note the reserve fund was an idea from the very, very get-go when folks voted. So the arena plan was developed in 2004 as the centerpiece of a redevelopment plan that was actually approved in November of 2007. We had that 30-month 1% sales tax that generated $206.5 million. At the end of all of the project costs, including land acquisition, demolition of buildings, acquisition of parking grounds, all of those things, then the construction of the building, the furniture, fixtures, and equipment, the total cost was $191 million, and those remaining funds went into that reserve fund. The facility obviously opened in 2010 with our first concert, Extra Points, if anybody can tell me what the first concert was. Anybody remember? Brad Paisley, good job. Okay. You're paying attention.

I have not lost you yet.

If only it was Frank Sinatra. You may have been dead. Okay. So in terms of the management and revenue model, we've talked about this a little bit, but I want to spend just a moment on the second bullet on the green box. And that is that we have a term that was negotiated back in those amendments that runs through 2032 with an auto renewal of five years that extends through 2037. If 1.7Million dollars is earned by the county from 2022 through 2031, and there's no particular magic math or science that was doubling the amount of profit that was required to have the auto renewal and the 1st agreement that was 5 years. So that was the math was 10 years. We'll do that in addition. uh well let me follow through on that we actually have already met that 1.7 million 2023 was a fantastic year we generated the second highest amount of revenue off of those i think because covid had had some pent-up demand and so there were some concerts and things that we were able to book that year so um we we have already met the threshold to extend the agreement so i think that's important to note We also in that 2019 amendment recognized again that the reserve was limited. We knew it wasn't going to last forever. And so at that time we worked with SMG to add $1.50 per ticket. as facility fee revenue and that is specifically earmarked to be used toward capital improvement projects as part of that the county also agreed to match every dollar of that with general fund cash and that same cash would then be transferred from the general fund to the sales or well the reserve fund used to be the sales tax reserve fund and those dollars also can only be used on capital improvement projects at the arena We typically people I've seen a lot of folks say, well, just add a dollar or 2 to the ticket. We've done that a dollar 50 typically generates between 250,000 to 300,000 dollars in a good year. So we need to understand that the power of a dollar 50 is really. not as much as one may think when you think there are tons of concerts that happen but it's you know a 15 000 seat arena there are some events that we simply can't charge the facility fee on for example monster jam or i'm sorry not monster jam winter jam is a free concert there's no tickets that are sold so even though there are thousands of people go into the building that day they're not paying that facility fee because there's no ticket to purchase that's the question

The match, the expectation is $200,000 to $250,000 annually. County matches what this facility fee generates. So is our match typically $100,000 to $125,000? It's typically $200,000 to $250,000.

So the total fund is generating $500,000 to $500,000? Correct, per year.

Got it.

And that started, obviously, it was going to start in 2020. And then, of course, we had the pandemic and a shutdown for 2020 and 2021 with attendance caps and other things that limited that amount of revenue in those years.

But that capital infusion is roughly around $400,000 to $500,000 annually earmarked for capital needs, correct? Correct. Okay, thank you.

And if we are able to have events, yes. So again, I told you I'm going to say this about 10 times. So here's time number two. We are looking to protect this asset for the long term. That's what it's all about. It is not about subsidizing operations of the facility, trying to get more acts here, anything like that. It's literally just taking care of our asset. So we are not talking about a subsidy. We are talking about a capital reserve. And I want to take a moment to call out some of the conversations about this and the expectations. I've already talked about the August 2004 FAQs. We also know that in July 2007 the Tax Oversight Committee, so we'll take a step back real quick, there were a number of community members, a commissioner, our county audit firm at the time, who sat on the tax oversight committee. And every month there were meetings where county staff, the assistant county manager, Ron Holt, who was kind of the project manager from the inception, Chris Cronus, the CFO at the time, the project management staff that were in place at the time, including kind of funny Stephanie Knabel. So those folks met on a monthly basis, looked at all of the data. There's detailed minutes from every one of those meetings. There were letters that went to the commission. And so minutes from that tax committee in July 2007, in a subsequent letter, all mentioned that the O&M Reserve Fund, the Operations and Maintenance Fund, was basically going to go toward FF&E for building the arena and those things, but there would still be a need for a capital fund. And so I have copies of those letters if you guys would like to see it. In February 2010, right after the arena opened, was the final tax oversight committee, and they again mentioned this reserve fund and also mentioned expectations that it would last optimistically eight to nine years. And so actually, at the time it opened, we had an optimistic scenario that was prepared by our CFO at the time. And they basically said at that time, we thought the fund would be depleted by the end of 2024. So, at no point at the beginning of this, or as we have gone along, has there been any kind of expectation that this fund was going to live forever? There has always been an expectation that the county will have to step in and maintain its asset.

Can I ask you a question here on your statement that you have underlined? I'm just trying to figure out any kind of business, if you're not making the ROI you need for the facility, you... you wanna emphasize the operating efficiencies and operating income.

Absolutely. And they are, so in that management agreement, again, they earn their first $400,000 to pay their management fees, and then they split the rest of the money with the county. And half of that money goes back into the sales tax reserve fund. Sorry, I've got to get out of the habit of calling it sales tax reserve fund. It's just the reserve fund now. And those dollars are then used to help pay off the facility as an asset. But the thing is, we never hired SMGs. to make enough money to maintain the asset. We never structured it that way from the get-go. They are here to operate the facility on our behalf. They do it in a way that earns money. We'll get to a slide here in a minute that shows that more than $7 million has come back to the county since the inception of the arena to be reinvested back in the facility. But it's just not structured such that we could ever expect to pay for escalators and elevators and roofs and all of those things. with proceeds from the income of the operation. It's in the money-making business. They make money, but that also means that we have big concerts, big shows, thunder hockey, but we're not going to have all the smaller events that you might see at the Coliseum or the Wave because the rent just isn't really sustainable for those kinds of acts and shows. So I hope I'm answering. Okay. Or responding appropriately.

I'm not. I'm going to let you keep going, but I'm probably not going to let go of this.

That's fine. And I may just be misunderstanding. So be patient with me. Sorry. Okay. So this kind of reiterates what we had talked about already in terms of where the reserve fund started with. The expectations when it started, and then again, why it lasted longer, which is that 7Million dollar, either the combination of the operating income that we received back from naming rights revenues from the facilities that are from the 3 entities that contract with us to have the naming rights for either the concourse. Um, the, let's see me. Obviously, we have the building the concourse and. I want to say the Cessna Plaza. It is. It's the outdoor plaza. I'm sorry. I just had a brain lapse there for a moment. So those funds all come back into the fund. Now, As a part of each of the naming right agreement, all of those entities in return for paying the dollars for naming rights also get access to ticket banks for every concert. And so they are able to say, we want up to maybe 10 tickets for this show. When those tickets are given, We later at the county get an invoice and that's paid for from the naming rights revenues that we receive from these three entities. The three naming right entities have contracts with Sedgwick County government, not with SMG. And so we receive that revenue between the three, it's $590,000 per year. That is then used as the source of funding for the tickets that are used by the naming right partners, any of the parking, the signage when they occasionally update signage throughout the building. Those are costs that we are obviously right now with the transition to Boeing. That is not a, that's a, that's an extra cost. We're not actually having to pay for that. Boeing is going to pay for those, even though technically our agreement says that will pay for signage, but they recognize that's a significant cost to rebrand across the entire facility. So there's lots of different. Funding streams that come into this reserve fund, but again. Any of the facility fee dollars or the match may only be used on capital improvement. It can't be used for any of those ancillary costs associated with the naming rights.

What's the split on those between the three?

We get $350,000 a year from interest. That goes through 2034. Cessna is $120,000 a year. It was a 20-year agreement with an option to renew. So right now it is set to expire in 2029. They have until the end of 2027 to tell us if they want to extend that five years. And if so, then it would continue at that $120,000 per year. Spirit is another $120,000 per year. Same terms with a 20-year period with five years to renew. Again, that period ends in 2029. If they decide they want to extend for the five years, they have to tell us by the end of 2027.

And Boeing has taken over those spirit obligations? Yes. Okay. Do these ever go up? Is there an escalator? No.

So these agreements, when they were done, we hired a company called Superlative to negotiate on our behalf. And that company, because this was an untested arena downtown, very unlike the Coliseum, there was no real, I would say, understanding of what the market could, would, should do. And so, yes, now we are in a 25-year agreement with interest, same amount of dollars every year. And then 20 years with each of Spirit and Cessna, again, same $120,000 per year.

I'd say interest is getting pretty good marketing paying for the buck. Without a doubt.

And so that is something that the commission also needs to consider. And we'll get to that later in the agreement in terms of as we go forward, options that we need to think about. Certainly naming rights are going to be one of those issues that we're going to want to come back and circle back with how we do that. Whether that's RFP or private negotiation, those will be points of discussion for the commission to take up, particularly if we find out that Spirit slash Boeing and Cessna don't want to proceed.

Is there a maximum number of naming rights? Can we only have three?

So we also have sponsorship agreements. So we've got a sponsorship agreement with LDF, which is a beer distributor, basically. We also have what is known as a naming rights sponsorship, but it's much smaller scale with House of Schwan. And then we have one other one.

Absolutely.

We did have Pepsi originally that has expired. Okay, here's my House of Schwan agreement. The House of Schwan agreement that we're currently in started in June of 2004 and goes through May of next year. Standard Beverage is the one I forgot. That one is from May 25 through April of 2028. And then we have LDF, which expires in February of 2029, but does have an auto renewal provision. so no there is no limit to necessarily naming rights as long as there's a piece of the property to be named there's also folks who just pay for advertising on the marquees and all of the the running boards that go all around the facility that you can see from wherever you approach that's where they advertise concerts but it's also where they can throw up some advertisements for businesses and so we do see some of that as well so do you want to ask a follow-up question

On the naming rights and the revenue that gets from that sponsorship agreements, who is the recipient of those funds? Does that go into just the operating revenue?

It goes into our reserve fund.

It goes into reserve fund.

And then we, like I said, there are certain distinctions here. So, for example, Entrust gets 12 tickets to all events. They get 12 parking spaces. And so when they use those things, those... Invoices come back to the county by for us to reimburse them for those ticket costs from the revenues generated by these revenue of sponsorship and naming rights all go to reserve fund, which is earmarked for capital. These are not. It's that facility fee. Now, typically, it's either emergency repairs or capital improvements that we get invoiced for, though there are these suite tickets. But again, it has a revenue source and the naming rights revenues that are generated.

So you said 12 tickets, but they get their suite too as part of this.

So they have a suite, 12 tickets to all events, 12 parking spaces, a right to buy 1% of tickets in each price point. So they can just buy a bunch of tickets for their company or family, I mean, whomever they want to. And then they also have a right to use the building rent-free three times a year. So that's interest. And Cessna also gets 12, has a suite, 12 tickets to all events, six parking passes, and they get a right to buy half of half percent of the tickets in all tiers. And they get to use the building rent for you once a year. Same thing for Spirit slash Boeing.

I know these are fixed agreements, but do we ever do an analysis on that to see what other markets charge for this?

We did. In fact, back in 2019, when we were trying to determine the path forward, there were questions about, is SMG the right company? Do we need to look at what other potential vendors could be out there to do this? What kind of naming rights situations? There was a pretty full-scale analysis done at that time. And at that time, obviously, we opted to proceed with SMG. And just as a point of fact, you're seeing it everywhere. Companies are gobbling up other companies. These entities are just getting larger. It's how we went from being SMG to ASM to Legends Global. So the market is getting somewhat smaller in terms of operators. But in terms of naming rights, we had a significant multi hundred page report that came back from superlative analyzing what they thought the best options would be. We do know since 2019 that other communities have much shorter terms and generally greater costs, maybe slightly less rich. Benefits because they are shorter term. And so, yes, we know that there's going to be opportunity to look at that. But, like you say, we are locked in to these agreements interest through 2034 and these others, at least through 29, and they have the rights to extend. We don't have the right to say no contract with me. I'm not as.

For this discussion, I'm not as concerned about details in those kind of agreements. That's where we're at. I think we operate a good program over there. I'm grateful for all our partners that want to participate in all these things. For me in particular, it's about what revenues are coming in, what is earmarked towards capital, and what is the subsidy that we're going to have to provide Offer the capital need, not operational. I understand operational is going smooth. I get it. The capital piece of it. And then the next conversation for me is what is the revenue source that we're going to use for the cap? So for me in particular, it's not concerned about those small agreements right now. I think it's bigger. The conversation is where the revenue is coming from and what is being earmarked towards capital needs.

And we are going to get there. So I will move quickly through these next few slides if that's okay. So John, I'm sorry to dislike you on the previous slides. That's okay.

Absolutely. It says $7 million was added, but you've named a number of things that don't seem to be described in that sentence there. Is that the total amount of revenue added to the 15.5?

No, this is profit sharing only.

Okay, so do we have a report of how much money was added to the 15.5 since the beginning?

And let me pause for one second and walk to my table.

While you're doing that, the reason I'm asking is because it illustrates our spend rate, if you will.

know how much money was in their total over the years over the 15 years or so it tells us then what our our burn rate is of that of that cash go ahead so i can obviously very easily get you the annual um information but i do want to take a moment to call out our amazing reporting and that our team does and so in your quarterlies and in your monthly financial reports you will see a page that looks like this. And what this tells you is unlike any other page in our document, This says fiscal year 05 through fiscal year 25, actual revenues, actual expenses and how they were spent. And then it shows current year actuals as well, broken down by the revenue source and expense. And so this is the only page in the document that basically goes all the way back to our history. So this is our reserve fund. Then of course, in the ACFER, And even in the back of this, and our fund statements, you'll also see the depreciated value of the facility because it is our facility. So it is our asset. So you get 2 pieces of information there also at the back of the budget book. In addition to being able to see the fund balance here. We also have an informational budget page in our appendices that shows the balance of the fund. And so that's reported out with actual revenues and expenditures every year. So, um. It's a big budget book and a complicated quarterly financial report, and there's a lot of stuff. And that's why when I send you that monthly report, I'll always try and give you bullets at the bottom about the pages to go and look at that are hot topics, because some of these are. More high profile than others. So I think that that gets after at least the cumulative effect of all of those dollars. But we can certainly get you an annual breakdown if that would be helpful.

Just round numbers. What are the numbers for the total expenditures and revenues for those?

Total revenues from fiscal year 05 through fiscal year 25. So this is going to include the 200. Ish million in retail sales and use tax is 243.4M dollars. Thus far this year, we have received an additional $1.4 million, and that is between operating income, the facility fee revenues that we received from them, and our match to that. Then looking at expenditures, through 2025, we were at $242.5 million. Thus far this year, between capital improvements, emergency repairs, and naming rights tickets, we have paid $1.1 million. So at the end of the 2nd quarter, we showed a balance of 1.2Million in the fund.

So, if I subtract out the 191Million for the construction, as well as the. The initial 206.5Million. On the revenue side, I can see then how much money was added and how much money was spent. Yes.

And in this report, it actually shows, for example, local retail sales and use tax. It's got the specific dollar amount, which is 206-537-905. Then it shows arena A&E services, site costs, parking, infrastructure, pavilions, Kansas pavilions, arena operations, arena capital improvements. All of those are broken out on this page. Okay.

And our current balance in that fund today is at the end of the 2nd quarter is 1.2Million.

It is slightly less because we've had a couple of emergency repairs for chillers and things like that come through. But. That's that's where we said, and that is what again, why we started talking about this at your retreat last February in earnest. And then again, this year at the retreat, because we knew that this fund is on a path. We are recruiting NCAA events here. We're getting U.S. figure skating national championships. There's a lot of high-profile events, and we want to keep the facility in good shape. We don't want a national news story that our escalator broke down and we can't get folks around. I mean, if you guys remember the scoreboard incident from 2018, it was unpleasant. No. Good. Good. Well, the scoreboard went down for a minute, and we were the only ones on national TV at that particular moment. It was the evening game, and it turned out it wasn't our fault. It was the ESPN guy's fault, but still, it was not a good look.

Thank you.

Okay. I think I'm funny. Chairman does not. That's okay. I'm going to win him over someday. Okay. So we've already talked about this. I do think it's important, though, to call out these next two slides. If you really want copies of the management agreement, I have them for you. But this basically clearly delineates from day one of the management agreement that both capital improvements, as listed here, and capital equipment are are the responsibility of Sedgwick County. And most importantly, let's say SMG says we are done with you people. Peace out. All of those assets have to stay with us. I also think it's important to understand that in this case, capital improvements and capital equipment include their laptops. We buy the laptops. We buy the point of sale machines. We buy the popcorn machines. All of that is a county asset. So when we think about capital improvements for Sedgwick County government, we think about what we have all been trained on in terms of how we handle the day-to-day normal operations, not the arena where it's $25,000 more. That is not what this is considered. The agreement, in fact, defines $7,500 as kind of the threshold for capital improvement. So, in addition, you can see there's another section in here that talks about emergency repairs makes it clear again that respect again, the new facility is the downtown arena. Existing facility in the management agreement was the Coliseum and pavilions says, with respect to the new facility of such emergency expenses, SMG shall have no obligation under any circumstance to spend or commit funds. So it makes it very clear. that it will always be the county's responsibility and so it's important for us to understand that we signed that agreement in 2007 and we have amended it and kept it in place since then do you mind is it okay if i ask a follow-up i think this is pertinent to the conversation um justin or lindsay since your administrator you might go to help with this are we assured

that these agreements that we've entered into with smg honor the spirit of the ballot initiative some of the feedback that we get from constituencies we never knew we were going to have to do all these things when we took that vote in 2004 um that's what i that's the feedback i'm receiving a lot on social media i just want to make sure that these agreements which i'm From a business angle, I'm fine with these agreements. I just want to make assurances to the public that these agreements honor the spirit in which the ballot initiative that was presented to them, that there's no surprises. We're not adding things that we didn't ask them to vote for.

Commissioner Beatty, I'll do my best to address this first and see if Lindsay wants to supplement it. I mean, first, the ballot question, and you're right to say the spirit, because the ballot question is just going to address what you're going out to the tax for and what the money is used for. It's not going to address the whole operation of the arena traditionally, because that's not part of what needed to be in the ballot question under state law. But in saying all of that, there's going to be somebody operating the arena. I mean, that was a given whether it was the county or contracted party. Lindsay may be able to speak to what the intention was in 2004 behind that. But I guess I would say that I don't know that any of this was. Contrary to the spirit, I mean, I think that the, the arena was going to have to be maintained any county facility has to be maintained and there was going to be somebody operating the arena and that was not. Who would be operating the arena was not spelled out in the ballot question or really would it have been undertaken?

And correct me if I'm wrong, Lindsay, I was enjoying my time on the University of Kansas when this vote was taken in Lawrence. you were too lindsay certainly there were conversations around this in the community there were minutes there were discussions about what these things would entail and look like aside from what the ballot initiative i just want to make the case to the public that the way the arena is operating now and the agreements that the county is incurred with smg are certainly under the anticipated spirit of what was being sold on the ballot and what voters voted on in 2004.

So everything I have found to date would lead me to believe that we knew at the time we were asking to construct arena, that we were going to go to a private party. To do that, we went through a very long RFP process to evaluate which company would take that on. Um, that was decided before we even got to the agreement stage in 2007. So, how that was communicated to the public. I mean, I can't speak to that with certainty, but I can read to you. So I've got the in front of me. And I'm fairly confident I emailed these around to commissioners a month or two ago, but I'm more than happy to send it back around if it's helpful. And so I'm just going to read out loud for a minute because I think it's useful. So here's a question. How much money will be collected? About $198 million. The exact amount collected will depend on the rate and duration of tax approved by voters and on economic conditions. How will the money be used? The basic project proposal includes land acquisition, site clearing and environmental remediation, design permitting and related costs, arena construction, surface parking, street improvements to ease access to the arena and improvements of the pavilion buildings of the Kansas Coliseum. The basic project also includes a project contingency to cover construction price increases between now and when construction actually will occur. These amounts are estimates, and they may be adjusted as the project is refined, but the total cost of the basic project will not exceed $141.5 million. Possible enhancements to the project include a parking garage to ease patron access to events and an operating endowment to cover 20 years of maintenance and operating expenses that otherwise would be funded with property taxes, which would require about $30 million. These amounts also are estimates subject to change as the project is refined. What will happen if the tax produces more money than expected or more than is needed to complete the project? Any tax revenue or interest on invested arena tax receipts that's remaining when the arena opens will become the operating endowment and will be used only for future maintenance needs of the arena or to cover anticipated operating deficits. Again, at the time, they didn't know what agreement they were going to approve. using the sales tax this way will offset the use of future property taxes for the arena. So that is at least in the FAQs related to the tax itself. There's other information in here. That's what the FAQ said at the time.

So that was just put out by staff?

That was put out by the county in August of 2004.

Was it voted on by the commission? I doubt it. Okay. Will you repeat what it said about parking again?

It said possible enhancements to the project include a parking garage to ease patron access to events.

Okay. Okay. But these were items that were supposed to be paid for within the 30 months, right?

Yes.

Okay. Okay.

That very last sentence here, can you read that last sentence of the whole paragraph? The very last thing you said.

About the amounts are subject to change? No. Okay. Using the sales tax this way will offset the use of future property taxes for the arena.

See, that to me is misleading. Again, we're talking about an endowment. What's implied by that sentence is that we're not going to need property taxes. It's going to be done through this reserve fund that's an endowment. That's what that implies.

Well, I hear the term offset, and it doesn't mean eliminate. It means reduce. How I would use that word, that's how I would use that.

I think it's up to interpretation.

It is, and it's 22 years old, so I'm not going to sit here and tell you.

I guess I'd like to go back, and I probably will do this. I'll go back and pull up some articles and see what did the public know or think at that time. I think there's articles out there we can look at to clarify what did the public know about this when they voted, but To me, that is, an interpretation could be that property taxes would not be needed.

Well, and I would say the Tax Oversight Committee and the minutes that I have from that, including commissioners and the reports out, do talk about the need for property tax and that there will be less reliance. So while this 1FAQ document may not say that, there are plenty of other things on the record that do say that. that property taxes will be needed down the road, the reserve will expire.

I have no doubt that the discussion amongst staff and commissioners probably was exactly what you just described. My question is, is what did the public know? And were they privy to the interpretation that property taxes was what they were voting for? That's the only question really on the table for me, is whether or not they realized that when they voted for the sales tax.

Okay. If it's okay, I'm going to keep moving because we still got some content to cover. Okay, so again, to be clear on, we're talking about the agreement now, right? We just talked about capital improvements and the emergency repairs and how those are set up. And I want to clarify again, the management agreement says that there will be a contract administrator and that contract administrator has an awful lot of authority under that agreement. And that basically says, so they're not aligned with our budget process. It's clear. It. It was intended not to align with our budget process. But what SMG is required to provide every year to me as the contract administrator, and I'll talk about why I'm the contract administrator in a second, but it is a management plan, a budget, and a capital improvement plan. Back in 2019, when we were extending the agreement, this is after our original contract administrator, Ron Holt, who had been with the project from the inception, retired. And at that time, Chris Cronus, who was the CFO, became the contract administrator because it was now primarily a financial arrangement. The building was open. The contract was in place. The CFO was going every month to the arena to review the proprietary financial statements at a general ledger level. And so it made sense at that time for the CFO back in 2016, when he retired for that to transition to the CFO. Then when I became CFO in December of 2016, County Manager Mike Scholes at that time appointed me as the administrator. There was a lot of debate at that time about whether that should live with finance or whether that should live with legal, whether it should continue to live with the county manager's office. And the decision was made at that point in time that because, again, it was primarily a financial arrangement, the CFO ought to be the contract administrator. In 2019, when Tom was county manager, there was general discomfort, and I'm not going to lie and tell you that I didn't also have this discomfort with just having one person speak on behalf of the county for this. And so this group. There is an honest to God policy that exists that our auditors have access to where the county manager, the county counselor, and I vote on every CIP, vote on every emergency repair. We have the opportunity to ask questions, push back. Often, AJ is very easy to work with and understands our financial constraints. and will often work with us if we think this maybe is an emergency repair, could we hold off on it, do it as part of the next year's capital improvement plan, wiggle some funds around. But the three of us are a part of every decision of how we spend those emergency repair capital improvement dollars. And we also have a monthly arena business meeting where AJ comes over and meets with the three of us. We talk through pretty much any of the hiring decisions that are coming up, status of vacancies. We talk through major events that are coming, bids that are being submitted, things like that, so that we are never caught behind. If there's going to be an event at the arena that AJ thinks we ought to be aware of, he'll text me and let me know, hey, you know, the mayor is going to be here on Thursday for her mayor briefing. Just so we know how the facility is being used as a courtesy and then that gives me the opportunity to make sure Tom knows. So that if you all get questions, you have access to that information. So just understand that is the relationship. I do literally go the 1st, Monday, 2nd, Monday, excuse me of every month and spend an hour looking at their financials in detail. Um, because it's proprietary information, I'm not allowed to take it off site. I'm not allowed to take pictures. I don't get to have the copy. I get to look at the copy and then I have to hand it back to them. Just like we were an executive session. So, we also get and you'll see it out on the county's public facing dashboard. We get a monthly financial report from the arena, detailing attendance at events, any year to date activities, how what they're spending their sales tax dollars on. It also provides some of the demographic information that we then provide to ERP to get loaded onto that community dashboard. Obviously I already showed you the report out of the quarterly. This also is in the monthly. We have that annual audit that is required in the management agreement that SMG have done of their financials. They use our same audit firm and by contract they are required to get that audit to us by March 31st of each year. They also have to provide a detailed listing and reconciliation of all of the dollars that we gave them for capital improvements. they also detail all of the assets and cassandra sitting in the back gets to go through and update all of those and a giant massive spreadsheet that we lives in our sap system because again those are owned by the county technically purchased by smg but on the arena's behalf it is our asset And so I want to be very clear that there's a ton of communication and a lot of reporting that we try to do to talk about how the arena operates as well as how we're spending its capital dollars. I know there were some questions about staffing and so I want to make sure to highlight this. So, when the arena 1st, open, there were 46. Full time positions, they are down to 31 now, as I have advised you guys, I think earlier during the budget process, we don't know that there will be enough operating income this year for us to get above the 400,000 dollar threshold events. Just aren't happening. Tours are pulling back. Um, we had shows that we thought were maybe going to come that aren't coming. Uh, and that is across we validated that's cross country dollars are tight. And so there are 3 positions that are on their staffing table that they have consulted with Tom Justin and I on, and they're not going to fill, um, because the dollars just aren't there right now. They also have, again, this is a money-making operation. Their corporate office has standards for what they can staff. They keep, I would argue, just as close an eye on their financials as we do to make sure, because this is one of the facilities that can earn them money. And so there are standards that they have to comply with on that side as well, not just what the county says is necessary. Okay. um also during covid almost every employee who was not furloughed had to go and work security shifts and so and that extended all the way up to aj he was working his overnight security shifts keeping an eye on the facility 24 7 the finance director was doing the same thing they were also partially furloughed but they needed security now they've transitioned that out as a contract

So the number one feedback I get from the public is they're frustrated that they don't think that we're bringing shows here, and they're going to Kansas City and Oklahoma City and everywhere else. And I realize discretionary income is very tight. I think more people than ever are just struggling to get by. But of the acts we bring to town, how are we filling them? I mean, I think we're getting pretty good attendance, or is that a little softer than I'm thinking?

The last, so, and I'm happy to provide those performance reports, but for example, we'll look at Jason Aldean. He's a good example because he comes routinely or down. If you look at attendance, for example, Brian Adams, that was expected, that sold better in other communities than here. Same amount of marketing, same amount of, Same ticket prices, but we sold less and they had to actually block off. If you notice, there were parts of the arena that were actually curtained off. So we are not seeing weird. I was on father's day. They knew that might be a little challenging anyway, because it's father's day, but it was down compared to what was expected. So that's also. Part of the issue is when people are going, they may be buying tickets, but food and food and beverage per caps per capita is down. It's not where it used to be. It's down 4 or 5 dollars per person. So, overall, we are seeing fewer tickets sold to the same type of events. that used to sell really nicely here because past performance is one of the strongest things that can get people to come back. If Def Leppard, my favorite, performs really well, Journey's probably going to come, right? Because it performed well in this market. That's why we get so many country acts, because they perform well. when we had the ice fest which was ice cube and others it didn't sell as well so are we likely to get those acts back probably not because they didn't perform well so in general past performance gets us events but now that we are not having as strong turnout as we used to for the same kind of events that could affect us going forward too and that may be a part of why we're seeing shows not come here that we're maybe thinking about coming here so but there's no softening in ticket price but maybe attendance right Right, and the ticket price is not set by the arena. That's set by the promoters or the agencies.

Okay. I'm just curious about some of the modeling because I was looking, I think, Jason Aldean and who did you just say a while ago that was just here?

Brian Adams.

No, but the other one. Journey, Death Leopard. Jason Aldean. There were two of those big acts. Who?

She said Brad Paisley.

No. Anyway, there was both of them, and they were playing at Allegiant in Vegas in December, and it was like $115. They were up high, but I just thought that... I seen that, and I thought it was pretty cheap, and I wondered if there was... Some of the modeling is changing in the pricing.

I think it is. I think what we are seeing is the impact of fuel costs on tours, too. So those are driving ticket prices. We're seeing that across the industry. You can see that in some of the industry magazines. That's something that's going up, the labor shortage. It's hard to get people to come in and do this work. And then when you do, you've got to pay them well. It's hard to get those qualified stagehands to come in and build your elaborate displays. So I think all of those things are pressures that the whole industry is feeling. And that is something that that industry is grappling with. And the promoters and folks set the prices based on what they believe we will pay and i think they're seeing that we're maybe in this area not as willing to pay that so i'm hopeful that maybe we'll see some price reduction but that's probably a better question for aj if we can um invite him to talk about what he's seeing in the industry and some of those trends okay yeah and i think maybe we need to have that discussion because the public's asking us a lot so And that, I mean, that has been an age-old question of trying to get more than just country here to the arena. Right. Okay. Okay. So let's talk about the arena reserve fund use. Yes. Whoops, I got a little too excited. I was flipping my page and flipped the slide and said. So you can see the most expensive thing we did right before COVID hit was replace the scoreboard and marquee. So when I say the marquee, if you're driving down Kellogg and it's nighttime, you can't miss it, the giant screen that hangs in the arena facility and is basically great marketing. So we replaced that, all of the ribbon boards. So when you walk into the facility and you see scores that show up on that ribbon around the middle of it, all of that was replaced. So that was a total of about 2.5 million for all of that. And again, there were letters that came in, I believe, from WSU, from Visit Wichita at the time, saying in order for us to keep getting NCAA, we really need you guys to get with the latest technology. And so that includes the screens on the bottom. So coaches can look up and see what's happening. The higher resolution displays. That was a really hard decision for staff to support and a really, really hard decision for commissioners to support. Thankfully, it has paid off with several returning NCAA championships, but that was a huge use of that reserve fund.

So it's pretty fair to say we probably wouldn't be having the 27 and 28 NCAA.

returning if we wouldn't have made those investments without a doubt that is actually something that they have gotten feedback on that that is part of why they came okay so with that normally i'm going to waffle but on that one i know for sure that's a reason for why that they came emergency repairs and this whole time have totaled about 2.1 million keeping ice up and going in a style that's necessary for hockey in a community like Wichita where we're hot and cold and hot and cold and humid and everything else has proven to be quite a trick. So that I would say we actually ask them to keep a running list of repairs just for ice. So I can get that for you if you're ever interested. The entrance C expansion. So I think when the arena was constructed and you look at that development plan, folks really thought what was going to develop was that space between the arena and Kellogg. And instead it developed this way. And so at the time that they were looking at the facility and trying to figure out the next NCAA tournaments and those kinds of things, they realized that the traffic is going to come from the north. And that very small entrance that was there at the time was not going to cut it. And so entrance C, which is that north entrance, was expanded, redone. The escalator added to the stairs to make it more ADA accessible. And so that was about one point. 8Million in terms of actual expense, and I am going to call that 1 out for most of these projects that we're talking about. Actually does the projects and there are some requirements in the management agreement about how they're going to competitively procure those costs. However, entrance C was changing the actual footprint of the facility. And so Sedgwick county got to have a lot of fun with that actual project. That was 1 of the few that the county has actually done. We also, of course, moved to LED lighting. That was about 1.4 million. Ribbon boards earlier on were added at about 1.4 million. Of course, we had to put in Wi-Fi. That was done over three years. That's just what a modern arena needs. When it was constructed in 2010, there was no expectation that there would need to be Wi-Fi. So that was done for 1.2 million. Sports lighting on the interval was about 0.9 million. And then there was an upgrade in 2024 that was about 8%. $0.8 million for our Wi-Fi. So you can see this is the bulk of the expense that has happened from the fund since its inception. And now I think we have seen that at least a lot of this from the scoreboard, marquee, ribbon boards, and sports lighting give us an edge when we're trying to compete for those U.S. figure skating NCAA tournaments and things like that. Yes, sir.

Yeah, I just comment, listening to this history, things like when this facility opened, Wi-Fi wasn't even around.

Right. Not even on the radar.

And ribbon boards, I remember we talked about that. We said, what is a ribbon board? It used to be just hang signage over the front row. And then when you... When you watched every World Cup game in soccer, I mean, the ribbon board was a, I mean, it just, stuff, we've done stuff to keep up with, to keep a facility up. Keep it modern. And obviously the entrance C was a great addition. And so when people ask, well, what did you spend it on? Well, we spent it on stuff that wasn't even around when this building opened up. Ribbon boards, Wi-Fi. at the entrance C. So anyway, this really is a good summary page of what does that number add up to about?

I believe you're right at 15. 12.1.

12.1. Yeah.

Well, there you go.

Nevermind.

Thanks for letting me comment on that. I would throw out there also that again, if my math baby is wrong on the total spending, it looks like in addition to $191 million worth of construction, we've spent about $53 million since then doing construction. capital repairs and improvements. It's 12.1 is here. That means there's 40 million for other stuff that's not listed here over 16 years.

So in terms of the 15.1 million reserve, that's what is identified here. So when you talk about the 40 million, we also need to keep in mind that in that we have had all of the ticket prices, the SVO remember we had $10 million that we received from shuttered venue operators grant as revenue that then was also spent. um to reimburse us for operating losses so there are a number of things and we can we can go through and itemize those for you that's very easy to do but um there's there's been no nothing that hasn't been approved by the county in that time i understand thank you So in terms of the facility to what it has done, we've had about 5.2 million people cross through those doors. That does also include the COVID vaccination, COVID testing, PPE kits that were distributed through the arena during COVID, plus when it was a pole site. If we were able to track attendance, it is in here. Every Thunder Game, every Winter Jam, every Global Leadership Summit, every Chamber Lunch, that attendance is listed here in addition to actual concerts and performances like that. There have been nearly 1,300 events. Again, every Thunder Game counts as an event. We have had 292,000 attendees in just last year alone. Um, a good part of that, of course, was for, and then, of course, we have had, uh. Spikes in our attendance over time you can see 2020 and 2021 again, where there are impacts of coven. We had 3 good months in 2020 before it all shut down. And we had to shift to using the arena in other ways, which was tremendously valuable to have as a super site for elections that year. It's tremendously valuable to have it as a mass vaccination site. But still, it really impaired our ability to be able to have a lot of the normal fun events that we were planning for. It was the 10 year anniversary year. There was a ton of stuff set up. A lot of great events, a special beer, a special wine, and then it all fell down. So that's why when we hit the 15 year mark, you didn't see quite the same fanfare because nobody wanted to jinx it. They are a superstitious industry. In terms of impact, this is something that I find fascinating. So, when we look at the just the 1st decade, we haven't paid to have any economic analysis done of the facility itself. We're happy to do that. If that's something the commission would like, but at the 10 year mark. We were able to use CEDBR from Wichita State University's Center for Economic Development and Business Research to tell us that the facility had generated about $492 million in total economic impact in its first 10 years. Of that, about $169 million came from outside visitors. Not just local folks who are choosing to go there instead of the zoo on a Saturday afternoon. We've had 100.3M dollars in that 1st, 10 years of direct visitor impact. And here's something I really want to call out 38.5M dollars in tax impact. So, about 35M of that is what has been generated through retail sales and use tax that has been shared between the county and all 20 cities. But the other 3.3Million dollars is what was generated as bed tax that went straight to the city of which. And those 1st, 10 years, so we have been a wonderful economic driver in downtown. Unfortunately, none of those bed tax dollars have come back to help us offset those costs.

If I could, Chairman, that is a big sticking point with me in particular. I don't know if we have any data to suggest what is the largest economic asset, cultural asset in the city of Wichita that drives the most bed tax dollars. Would it be Century 2? Would it be the art museum? Would it be Botanica? Is it Interest Bank Arena?

I don't have that information.

This is a big conversation, I think. And we've embarked on this conversation and got interest in this conversation that, from the public's perspective, is... A bed tax is charged in our local hotels that goes back to a fun visit. Wichita is paid through their century 2. these are things that are utilized for economic development and cultural assets, marketing things of that sort. The county does not participate in that fund by any stretch of the imagination. Are we participating in that fund now? I do visit which is absolutely participating in marketing for events. They're very heavily involved at the arena. But the maintenance and the promotion and some of the public assets that are going to it are The bed tax has nothing to do with anything regarding the three biggest cultural assets that are sitting right smack dab in the middle of Wichita, which is Interest Bank Arena, Sedgwick County Zoo, and Exploration Place. Those are county assets, and we don't participate. I think this is a broader conversation that needs to happen, is to look at, as we look at the revenue stack, how we maintain these massive economic drivers right in the middle of the city of Wichita. We need to have that conversation of what the revenue stack looks like. And people have been open to having that conversation. We've just never really formalized, hey, we need to have a serious discussion about what this looks like. That is part of the dollars that should go towards maintaining the big old building that sits right in the middle of the city of Wichita that is driving so much economic traffic. So I hope we can entertain that conversation, and I hope we can invite people to have that conversation of what it looks like. I think it would be mutually beneficial in many ways. In order to get synergy of what's happening in downtown in particular, I think we have to have that conversation.

I'd like to take that conversation a step forward. I was on the original T-Bid committee when we put that forth, and I'd like to potentially have a discussion about those dollars because it's doing exactly the same thing that you just said with the bed tax.

Can I ask, Mr. Chairman, how many, the $33.4 million in hotel spending, direct hotel spending... Is there any way you could say approximately how many bed nights, how many nights that was?

I am certain that we could get that information from VisitWichita.

We could do backward math on that easily for the TBID and say this is the approximate. And that's, again, over 10 years or so.

i guess nine years ten years just clarify this is not i i what i don't want this conversation to be is we need some of this you would let's take some of our fair share is we have to have synergy with what's happening in the middle of wichita with the city of wichita and those revenue sources that are designed for these purposes should be allocated in ways to drive more economic output um and to maintain these assets and structures so this certainly be very clear this isn't uh you know we need our fair shot but for to flip that coin over is there is a real disconnect here for what's really driving economic output and who is staying in hotels and coming here to stay in hotels. And the asset, not the county, the asset needs those dollars to maintain to continue to drive more. So there's a disconnect right now that I think it would behoove everyone if we can get some synergy in this conversation.

Well, I think it's timely because we've got, we know at least two years of, you know, dozens, hundreds of basketball players, coaches, fans, family, media coming for the NCAA open rounds. And so there is going to be quite a bit of money generated from those hotel stays. And so I think it's a great time to have that conversation.

And especially as we continue to have, you know, we're partners in this with downtown, and I think we're going to be having parking discussions soon, and I want to have the discussions partnered with us. Yep.

Just for part of the discussion here, the estimate for 2027, which I was expecting about $4.3 million in bed tax, which is a 6% tax on all the rooms that are rented within the city of Wichita. So 6% is $4.2 million. I'm sorry, $4.3 million, excuse me. And I assume that that's not something that the county would even legally be able to even put a tax on hotel beds, I don't think, as far as I know.

Did you want me to inquire on that? I'm just curious.

It seems like cities do it routinely. I'm just curious, do counties do that at all?

There is an ability, and the county does currently have, through a charter resolution, We have a transient guest tax that's in the unincorporated area, which you can imagine there aren't a lot of hotels and short-term rentals in the unincorporated area that are paying that. I mean, Lindsay could probably confirm that. But there's no prohibition on the county from being able to potentially establish that. And so that's something that the city of Wichita's charter ordinance they have in place does not necessarily prohibit it, although state law would allow a city to prohibit a county from – Imposing a charter or imposing a transient guest tax within their city limits. So that that's something I'd mentioned just specific to the city of Wichita that that would be an option. The board could pursue under current state law. I believe the city could probably nullify that if they wanted to, if they wanted to amend their chart ordinance. But again, that they wouldn't have to 1 more thing.

Those dollars they collect on this 4.3Million dollars. That is. The way that they spend that money is also limited by statute. I believe there are only certain things they can spend the money on.

And I can't remember that.

It's not the same as property tax dollars. I believe they have limits on what they can spend.

And I apologize, Commissioner, how I can't recall how the statute's ordered on that for cities at this point.

I guess we ought to take a review of that. I think previous commit comments, I believe that since this is in the heart of the city and I'll just go but for their say the county built it primarily because the city was able to get it done all to say that out loud. This is it this was essentially a favor to the city which are all the county did this. It seems like the city of cities investment in this ought to be that some of that guest tax ought to be used to help fund this all to say that so I hate new taxes, but again I would I would suggest that 6% ought to be split. I don't think they're going to do that. But that would be a good discussion to have if they were willing to share that $4.3 million with the county because, again, this is the heart of the city. That would be a reasonable partnership for us to have over this facility we built for the city. That's probably not going to happen. So, again, the other alternate would be to establish a separate gas tax as a way to keep this off of property tax. There's got to be a source of revenue somewhere. Whatever that's going to be. And again, as much as I hate discussing a guest tax, to me that's a better option than the property tax. If we're going to have these difficult discussions, let's talk about that. So I guess my request to you, Justin, would be yes, we need to understand this more deeply.

I'll research that and report it back to the Board of Commissioners.

Lindsay, we've talked about transient guest tax for the last several years. Just for the record, I've asked city managers – historically to discuss this topic and those monies are allocated. So the transit guest tax total I had in my head was 9 million or so commissioner house putting out 4 million. Do we have better? Is that accurate? I'm gonna make sure we put a number out.

That's I will look up the city's budget and give you an accurate number. Yeah.

It might be more than that.

That's 9 million sounds right when we combine the two, but I will want to... I think that's correct. I think it's when you look at transient guest tax plus TBID, which are different things, I think it's the $90 million. But don't hold me to that. Please let me look at the budget book.

I would add also, again, if you add in, again, countywide would be a guest tax. We're talking about taxing Derby and Mulvane and other places. That would be a much different base for the tax on what the city of Wichita is collecting. So I do know that other cities are also collecting significant revenues through their guest tax. Yeah. I talked to Mulvaney this morning. I believe theirs is over half a million dollars.

And we've talked with Visit Wichita. I do agree with Commissioner Beatty that there's a regional flavor to this that we really ought to explore instead of everybody doing their own thing. And that really, if we had a synergy and a regional concept on this, that we could be more effective. But I've got it written down as a thing to do in the future, whether we enbunk it or how we discuss this publicly, I think ought to be hashed out. Sorry, we interrupted you.

Go ahead. No, I'm glad for the conversation. So I did say we haven't done a comprehensive analysis since that first 10 years, but there have been various opportunities for there to be economic impact analyses done of specific events. And so what you can see is our most recent NCAA men's basketball tournament, even though KU was not here. Which broke my heart, um, it still was estimate it estimated, uh, 7Million dollars in economic impact locally the 2015 Garth Brooks. I'm calling it a residency because he was here for 6 shows back in 2015 was 6.4Million dollars from 6 shows. That's incredible. In 2018, NCAA men's basketball, so just seven years before this was when KU was here, was 5.5 million. I will point out that the 2025 men's basketball tournament alcohol was allowed to be sold in the building. So that was something that was not true for 2018. So that's an especially impressive increase when you consider a $7 million impact when there's actually competition in the facility that wasn't there in 2018. And then 2025 U.S. figure skating generated $4 million. And again, a large part of that is because the skaters, their families, their coaches, the media all had to come and stay and stay at our hotels and eat in our restaurants and shop in our stores and do those kinds of things. So we have shown that. that we can host events. I'm going to call out this cool little highlight here because I do think the arena played a big part in this. And that is Wichita was named the best sports event host city in 2025 by the Sports Travel Awards. And so that's a pretty cool deal. And a lot of that is because we were able to host both U.S. Figure Skating and NCAA events in the same year. So that now is part of our resume. It helps when we go and compete, and that's going to be a large part of what caused us to earn the 2027 and 2028 opening game bids. So pretty cool impact, even from just these few days where people come into town. It's not just about what the facility itself generates, but what it does for our community. So, um, commissioner or chairman blue by to your point in terms of booking, um, has provided a significant amount of detail about what they do. So there are large venue booking calls that they do every single week. Um, 6 months out of the year, they're going to different booking conferences across the country meeting with promoters and agencies. when they go there. Obviously, as a part of Legends Global, they're able to get some of those larger touring acts and get access to others that maybe they wouldn't be able to. They are at the front row of all of the Visit Wichita and NCAA bid events. And so I think that there's a number of other things I'm happy to provide to you. I don't want to read through every single bullet, but there's booking activity happening literally every week. And I think something that is pretty cool, actually, even though I'm skeptical of when we get bought out by things, right, or anybody gets bought out. We did have Legends Global come to the table, and they actually have a full-time five-member booking team that focuses solely on getting acts done. to their facilities. And again, there's that incentive for them to earn money. And so I think we're doing as well as we can given our economy and who shows up for concerts when they didn't. So I know, I think Tom and Justin and I have been impressed in our monthly meetings when we've heard conversations about how they're able to get to promoters and lead things from one to the other. Sometimes you'll see them in trade magazines because they're known for giving cool, unique gifts. So people we've got the guitar bar that features guitars. A lot of the artists get a kick out of that. So there's ways that they're able to distinguish themselves from other places, be remembered and try and get those acts back. I also think this is really cool. So they are one of only two venues in the country that has earned the IAVM Award for Excellence. And that is, we get excited when we get a AAA credit rating. These guys get excited when they win this award. This is their objective standard to say that they're doing booking and other things. Let me see. I want to make sure I read it. So operation, safety, security, staff development and community service are what they're rated on for that. And they also get industry recognition that references specifically their strong bookings, creative marketing and innovative concessions. And then you can see a couple of other accolades that they have earned. So here's the third time. There's no operating subsidy being asked for. We're not being asked to supplement their budget from year to year. We do need to have a capital reserve to protect our asset. We know from the conversations we've had about our very own Ronald Reagan building or historic courthouse that certain assets have Certain useful lives, and we are now in a facility that has been open for 16 years that started construction 19 years ago. And so it is expected that some of those items are going to come end of life. And so the current plan is not for us to try and get back to 15Million dollars. We are not trying to replenish the fund. What we are trying to do is to make sure that we don't have sticker shock from 1 year to another when these big needs come due. And so when we look at what those, excuse me, what those needs are. I'm actually going to skip ahead a slide. We know that there's about $27 million worth of capital needs, and we have examples of what those needs are. There are ice chillers, escalators, elevators, folding chairs for when we have events that need to be on the floor and you can't just use the bowls. We know that there's roof replacement that's coming long-term. We also know that there's emergency repairs, and those are going to become more frequent, whether we like it or not. The facility is getting older. All those assets are ours, and we're going to have to replace them, or we need to make a conscious decision. I shouldn't say we. You, the commission, will have to make a conscious decision about what level of upkeep you want that facility to be at. And so we're going to talk about some of the funding streams here momentarily and whether this will meet your need or whether we need to talk about other options. So this slide is probably where the rubber meets the road for this presentation. Again, our goal is to try and match those recurring capital costs that we know are coming with a recurring source of revenue, again, to mitigate sticker shock. Hopefully, It would be fantastic if we could find an alternative revenue stream that has been talked about multiple times by this commission. And I know that that's a conversation that's ongoing, but until that happens, we do have a few choices. So commissioner is exactly right. When he 1st came on the bench, he was talking about the fact that we have the Kansas star casino and that generates gaming revenues. It's about 1.6Million dollars in revenue collections per year. That could be an opportunity to earmark those funds. We also know that investment income has been a phenomenal revenue source for us these last few years. Right now, in our financial forecast, we assume that $8 million of investment income will come every single year. Anything that's over that, we count as one-time revenue. That is then available for 1 time spending. So that would be another opportunity to earmark. Access investment income toward those if we wanted to earmark the 1st, gaming revenues, and then the access to be filled with investment income. And then, of course, I know commissioner Howell. And commissioner wise and commissioner, my son degree to have all talked about trying to earmark those sales and use tax funds as discretionary parts of our revenue stream for discretionary parts of our budget. And so there have been resolutions that have been talked about to this point to that degree. I don't know that a resolution is necessary. What we would simply do is say in the budget book, these amounts of revenues are earmarked for this purpose and we could. potentially do it that way, much like we did with ARPA revenue replacement and some of those things where we said we didn't take formal action to say this is for the admin building or this is for Concord Crisis, but we said this will generally be used for capital improvement, probably those. So we do have a precedent of earmarking funds. And so that would be an option if the commission wanted to say, yes, we're comfortable with this $2 million. We want to invest in the facility and mitigate the sticker shock, at least until we find an alternative revenue source. These would be the three mechanisms that Laurie and your budget director was able to say, yes, that makes sense. And so we've incorporated them here in your PowerPoint. So with that, There's so much more I could cover, but I will stop and answer any questions or if there's motions you want to request that we prepare for budget adoption day. Happy to talk about that too.

Whatever you all would like just quick question this 30Million is here and just these 3 sources and those are all just they are fungible. They come into the general funding. Okay. Do you have, I really like the idea of earmarking funds that are non-discretionary so that we can demonstrate reduction of property tax dependence and we're utilizing these funds for specific purposes. You have no heartburn with us doing something like that, correct?

if it's just an earmark if we put that in the budget book it's clear that that's what it's intended for but it doesn't create any kind of jeopardy with our credit rating or anything else because we're not legally binding ourselves and your belief is that a resolution would create heartburn with a resolution as an earmark would be fine um a resolution saying the reason we were I was getting caught up on some of the quality of life resolutions was because when you start talking about certain quality of life things, then you're talking about property insurance as an incidental. You're talking about health insurance costs. You're talking about workers' compensation. It gets so unwieldy and up to interpretation that that's where I was kind of

Well, I would just say as we head into the budget, I am leaning and going to talk to you specifically about resolutions for earmarking specific funds, particularly gaming revenue. Pete had a great idea with that. and investment income so that we can demonstrate that we are not going to use property tax dollars for some of these discretionary things. And if we can earmark, via resolution, earmark it, I would, unless our CFO and her brilliant Jedis that are running around her say, terrible idea and here's why, that unless i get that i don't i'm we i think we should push forward on that and earmarking specific funds while we work towards potential other sources that are non-property taxes um in the future okay if i may thank you mr german uh thanks uh i'm in agreement there i

We got some options, right? Thank you for the whole presentation. I think it's a simpler, cleaner thing to earmark a resolution of the gaming revenue towards capital improvements at interest arena. And if there's a shortfall through investment income that helps achieve a goal, I'm very supportive of that. While, and I think Commissioner Beatty, while we work on the other options, as I see, are if we could get a part of the bed tax from the city, if we can justify what's fair. And maybe we don't even get all of what we think is fair, but we could crack that open in a very respectful conversation. If I heard Justin right, then another option is we look into an ordinance that countywide we could do a... a dollar a night that jeff do you i mean commissioner bluebot do you remember when we did the t-bit was it like two dollars a night 250 a night or something or was it a percent i can't remember exactly i think it was a hard number 2.75 i think it was something like two dollars yes two point seven five percent yeah oh it's a percent it's a percent not a not a fit so anyway that would be interesting i don't know how many bed nights there are county-wide but consider a something that's a dollar or something i don't know and then uh then i guess the the last and the most nuclear would be if we uh how we can argue publicly to do a to extend the existing uh sales tax add a little bit to that existing one as a fund to keep the the uh The citizens voted on the county zoo and this county building. And if we took that similar, that we've already proven is a valuable sales tax for ongoing for however many years, if we could add Just add a little bit to that for a countywide deal, then the cities would still get their share of part of that. And just follow the same model that's already working and just add a quarter of a cent or half a cent for, put a cap on it, five years, ten years. And I think it'd be easy for us to explain. And it'd have an end of life, which the interest arena people always are glad that we've done something and that it ended. So that would be maybe something that's, again, discussed later on. So we have some options. But the immediate one, to summarize, is a resolution getting the gaming revenue dedicated to this project. So thank you for letting me comment.

Justin, will you clarify, how did we not go for a – I'm sure we didn't go for a public vote on that T-Bid, right? We just voted for it at the bench?

So how do you – It was – I remember distinctly there was – and it's just within the city limits, and there was – I think I remember there was 60 hotels at the time, and the rules that the city was playing on was if it's – at least half, three quarters are in favor of it. And so there was a, every hotel in the city got to weigh in if they would support it or not. And I remember it was like 58 out of the 60 said, yeah, we're okay with this because it goes towards promoting visit Wichita. And so, and I think the only one or two, I think I know which two that I'm talking about. They didn't say they were against it. They just were neutral on it. So it was an overwhelming experience. Something that Susie Santo brought from California. Yeah. And there it was a little controversial, but they got it passed and it worked. And so we were surprised how supportive it was by the hotels.

Yeah. I remember Mayor Brewer put me on that committee and I'd meet with them. We had several hoteliers on there. And they kind of led the other hoteliers to sell the sugar.

That's a reminder too. So it was overwhelming support. And so it was kind of a no-brainer. It wasn't a public vote. And it's worked.

I was just curious how... those kinds of votes don't have to go to the public.

Yeah. Chairman, that's the only thing I can look into further. I mean, just looking at it, I know it's a business improvement district. And I, again, I don't think it's the same thing as a, you know, for example, like a sales tax or something like that. I think that the city council appears to have charter ordinances that govern this and other ordinances. So I can look through the, both the statutes and ordinances and report back. Cause I'm not sure what all steps they have to go through, but I think you're correct that it doesn't have to go to voters. I'm just want to be able to give you a good answer on that. Okay.

Thank you. I have concerns about settling in on the gaming revenue because that ends in 2032 unless the state takes action.

That's correct.

So to me, that's not a long-term solution that we can latch on to. If we knew for sure what the state would do before 2032, that might be a solution. But right now, I don't know that we ought to consider that the answer. I am concerned that I guess investment income, in my opinion, is, I mean, that may be an option, but that's also very volatile. And it's also money that's used in the budget. It's coming from, the dollars are invested. That's essentially what I would consider the black car ending balance. That's meaning it's invested. It's not just sitting in the bank somewhere. So again, I hope that our balances are, basically as low as possible. I don't think that's the wrong way. I know you don't like how to say that, but to the extent that we have excessive balances, I don't want to have those balances too high. I want to make sure that we moderate them at the right level. We're not overtaxing the people. So again, if we use investment income, it almost incentivizes us to keep those balances higher than we probably should. But sales and use taxes, to be clear, one of the previous speakers Half percent sales tax would be around $75 million a year. I don't think we need that much money. If there was a new sales tax option for the people to lower property taxes, you have to keep those two together. Because if you don't keep those together in the same sentence, somebody will take you out of context. The idea of a sales tax to lower property taxes and then offset some of these cultural recreational taxes. has been something I've been interested in a while. To me, the zoo is a way for people to come in and spend money and essentially it creates, if you will, a self-funding revenue. People spend money and that money goes back and supports the zoo. And same thing with interest bank arena. So to me, a sales tax for discretionary activities that creates revenue, if you'll redirect that revenue back to those same venues, to me is a nice way to do this. If you use existing sales tax, I've talked about this before. How many times have I talked about this? Many, many times. And it never goes anywhere. Maybe we have a different commission today that will do this differently. But also, it's just rearranging the deck chairs. It just makes us feel good. To me, this interest bank arena is a new expenditure that we have to deal with in our budget. No matter how you slice and dice this deal, it's a new expenditure. They're asking for $2 million that we didn't have to pay for last year. That's the problem. So for me, I'll just say this. I would like to see us essentially take this off of our 2027 budget and let's work on a solution. And towards the end of the year, As we are trying to find a solution, we can always go back and use contingency funds later on to solve the problem for 2027 if we need to. But I think by not putting this in the budget, it motivates us and incentivizes us, the commission, to look for whether it be a ticket price adjustment. It may not solve everything, but maybe that's part of the answer. Maybe we don't have the information from our legal today on what gas taxes might look like. I'd like to know more about that. So to me, suspending the $2 million essentially property tax funds today, again, if it makes you feel better and say it's sales tax funds, make you feel better, we can say that. But again, it's just rearranging the deck chairs. It's not really, my point is that the $2 million hit to our budget, which by the way, when we do it this first time, I'm afraid we'll do it every year. I think by doing it this year, next year, it's like, well, we did it last year. Let's just do it again. I think it becomes routine. I don't want to become routine I want to stop today to have this robust discussion to find a long-term solution that we actually like and not essentially go to property taxes this first year because I think right now I've known about this my entire time I've been a commissioner I've always said I will never support property taxes to solve this problem I've said that numerous times and to me that's just not the best answer we've got to find a better way to do this so I know we have these options. I would like to find a different way to solve this structurally, either through The combination of ticket prices or having Wichita help support this because they're receiving around. By the way, the new money, I just did some more research. It looks like the TBID is generating about $4.1 million in 2027 and the transit gas tax is about $10.5 million. If those are the right numbers, I think they are. That's about $14.6 million that they're receiving. And again, this is the heart of the city. I think we ought to make an argument to the city that they ought to provide a million dollars to this if they could. something but there's got to be a way for us to to make those arguments and let's work with our city and make them tell us no if they really want to be a no let's ask them and let them let them answer the question then it puts us back to the drawing board to figure out another solution but we ought to we ought to suspend the two million dollars this year and let's work on a solution whether it be a sales and new sales tax offset property taxes which includes this whether it's going to be a ticket price issue, whether it's working with Wichita or a guest tax solution. We have all kinds of things on the table we can work on. What I don't want to do is go to $2 million in property tax this year. To me, it just deflates the discussion for us to find creative solutions to this problem that's not property tax.

if I can follow up with that. Lindsay, how did we arrive at the $2 million number in 2027? How did we help understand that?

So when we first saw the presentation in February of 25, there was basically, so we know it's 27 million over the course of a certain number of years, but we're approaching that 20-year mark. And so it's, again, trying to have that stability of $2 million per year, not necessarily to consume $2 million per year, but to make sure that over time each of those assets is funded. And so that's what when AJ had presented, he shared this information that there's $10 million worth of needs in the first five years. And so $2 million per year. There's not particular magic to it.

And then, oh, go ahead sheet right there. That's not in this packet. Correct? Would you might circulate it? Do you mind? Yes, I didn't bring that with me. Sorry. Um, but there's 1.2Million in the fund today. Correct?

That was at the end of the second quarter. We know that it's going to go down this year. And then of course we don't expect to get any operating income at the beginning of next year, but we know that there's going to be some capital needs in 2027. So that's why we're trying to say we need it in 2020.

I think that's helpful to understand the calculus of how we arrived at $2 million. And that was the number in, I agree with a lot of what Commissioner Howe is saying. I just want to make sure that we all, I hope that we can agree on the premise that it was always expected that this revenue fund was going to run out. It was always expected this revenue fund was for capital needs. We have to agree with that premise. The next conversation is, how do we fund this thing and what's the most likely and potential way that we can do this? I think the question is, do we just go for one plan now? Or do we look at a short-term potential while we develop a long-term plan? And I think that's the conversation is do we do short-term now or do we just try to go, do we hit pause and try to figure out the final plan that we're going to move forward? I think that's kind of where my head's at now. Short-term versus do we just try to get a plan moving forward and start now on that work? And that's a reasonable conversation I think we all need to have.

Lindsey, I want to thank you for everything you put. It was a very thoughtful presentation, and I realize you're very passionate about interest arena, and you're a user, and you like the acts, and you're a cheerleader for it, and I just appreciate everything you put into this, and I know that you're looking out for the county, and you're looking out for the success of the arena, too, and I appreciate that. It's a good presentation. anything else oh we hadn't for today all right well thank you guys a discussion