YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

July 25, 2003

Report No. 2003-74

The following problems were discovered as a result of a review conducted by our office of the Jackson County Sports Complex Authority.

The Jackson County Sports Complex Authority (the Authority) is currently operating under 25-year lease agreements with the Kansas City Royals and Kansas City Chiefs which were entered into in January 1990.  Each lease agreement calls for annual basic rents paid by the teams of $450,000 and percentage rentals based upon gross receipts, net of taxes, in excess of $7,500,000.

In connection with the lease agreements, the Authority agreed to a comprehensive master plan of improvements and repairs to keep the Harry S. Truman Sports Complex in top condition.  The Authority also entered into management contracts with the teams which provide for the Authority to pay management fees to the Royals and Chiefs.  Management fees of approximately $2.8 million and $3.0 million were paid to the Royals and the Chiefs, respectively, during the year ended December 31, 2002.  These fees are to compensate the teams for the costs to manage the daily operations of the stadiums, including utilities.

As noted in previous audits, past analyses and studies have indicated anticipated revenues of the Authority would not be sufficient to cover its expenses over the life of the leases.  Past projections made by various parties, including the State Auditor's office, have estimated a revenue shortfall over the term of the lease agreements ranging from $19 million to $53 million.  Past audits have disclosed efforts by the Authority and other parties to fund the revenue shortfall, including consideration of a metropolitan funding solution.

Based on the current review, it is apparent the Authority will still be unable to meet its obligations under the leases without additional funding.  The auditors projected the revenue shortfall would range between $35 million and $47 million.

In addition, the auditors reported the 1990 leases did not adequately describe the scope of work required related to the master plan projects.  As a result, the public obligations toward the sports complex have not been adequately defined or limited.  Also, the actual costs incurred related to master plan projects have been significantly higher than initial estimates.

A 1994 study estimated the total cost for master plan improvements would total approximately $56 million over the term of the leases.  However, as of December 31, 2002, the Authority has spent almost $61 million on master plan projects, with 12 years remaining in the leases and approximately 44 percent of the master plan projects not yet completed.

In late 2002, Jackson County officials entered into Memorandums of Understanding with the two teams which, among other things, would extend the leases for a 25-year period and include provisions for future improvements at the sports complex.  The implementation of these new agreements is tied to proposed plans for a bi-state sales tax.  The quarter-cent sales tax, if approved by the voters, would provide an additional $354 million for improvements to the sports complex over a 25-year period.  The Memorandum of Understandings entered into with the teams are still subject to the approval of the county legislature and it is not anticipated the bi-state tax proposal will be placed on the ballot before 2004.

The auditors questioned expenditures totaling $7,820 for meals served to Authority officials and guests attending the Kansas City Chiefs home football games from 2000 to 2002.  A review of the food/beverage invoices indicated the Authority generally paid for 30 to 40 meals at each game.  By comparison the St. Louis Regional Convention and Sports Complex Authority, the entity that owns and oversees the Edward Jones Dome in St. Louis, assesses a food and beverage charge each game to those Authority members and guests attending St. Louis Rams games to offset the costs incurred.

The auditors recommended the Authority reevaluate the practice of providing meals to Authority members and guests on game days and whether this is an appropriate use of public funds.  In addition, the Authority was advised to ensure the costs of any food/beverages provided to state officials are included on lobbying reports filed with the Missouri Ethics Commission.

Other questionable expenditures noted included mileage allowance payments made to the Executive Director and additional compensation or bonuses to employees totaling $8,750.  In addition, the Authority did not approve its 2003 and 2002 budgets on a timely basis.

Formal written minutes are not prepared for closed meetings.  Although minutes for closed meetings are not specifically required by law, such minutes provide evidence only matters specifically authorized by law are discussed in closed session.  In addition, formal minutes for closed meetings result in a better record of Authority transactions, discussions, and decisions.

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