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Sunday, August 9, 2020

Tax-backed Sports Complex In Western Kansas Is On Hold Over Developers’ Lawsuit

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Derek Nester
Derek Nester was born and raised in Blue Rapids, and graduated from Valley Heights High School in May of 2000. He attended Cowley College in Arkansas City and Johnson County Community College in Overland Park studying Journalism & Media Communications.After stops at KFRM and KCLY radio in Clay Center, he joined KNDY in 2002 as a board operator and play by play announcer. Derek is now responsible for the digital content of Dierking Communications, Inc. six radio stations.In 2005 Derek joined the staff of KCFX radio in Kansas City as a production coordinator for the Kansas City Chiefs Radio Network, which airs on over 94 radio stations across 12 Midwest states and growing. In 2018 he became the Studio Coordinator at the Cumulus Kansas City broadcast center for Kansas City Chiefs Football.

By Corinne Boyer – Kansas News Service

GARDEN CITY, Kansas — A legal dispute between two business partners has stalled the construction of a sports complex partially funded by $25.4 million in sales tax money.

That fight over finances, and the pending lawsuit it spawned, could jeopardize the completion of Sports of the World. The project is financed by Kansas Sales Tax Revenue Bonds, or STAR bonds, and championed as a regional tourist draw for western Kansas.

“It’s currently on hold pending the kind of resolution of some litigation between the two … partners that are involved in the Sports of the World project,” said Bob North, the chief counsel for the Kansas Department of Commerce.

Payments to the development company building Sports of the World, GC Investments Inc., have also stopped, said Garden City Manager Matt Allen.

“We’ve temporarily suspended reimbursement of the project until we get some word otherwise from the two parties of GC Investments Inc. and through their attorneys,” Allen said.

GC Investments estimated that the sports complex would be built by late 2021. But the lawsuit between the developers leaves the project hanging in the balance. Despite the delays, state and local officials say they’re optimistic that one of two partners will complete the complex — although it’s not certain that either partner will do so.

The sports complex has been touted as a way to draw visitors from Texas, Oklahoma and Colorado with indoor soccer fields, a trampoline park and volleyball, basketball and pickleball courts. The developers and the state commerce department estimate that the complex will see more than one million visitors a year.

In October 2019, the commerce department approved another STAR bond proposal for a sports complex in Overland Park. Up to $66 million in bonds could be issued for the project, which is projected to bring in 1.7 to 2.5 million new visitors to the city annually, according to the 2019 STAR Bond Annual Report.

On April 13, CAIRO of Western Kansas — a business registered with Garden City resident Cecil O’Brate — filed a lawsuit against Amro Samy and his construction company American Warrior Construction. Both O’Brate and Samy own GC Investments and share ownership of several additional companies named in the lawsuit.

In the lawsuit, CAIRO accuses Samy of making “unauthorized payments” to American Warrior Construction from their jointly owned businesses. It also claims the construction company charged “an additional percentage on top of the invoices” sent to businesses Samy jointly owns with CAIRO. The business is asking for a judgment against Samy of more than $75,000.

CAIRO’s attorney’s office said it cannot comment on pending litigation. Calls to Samy and his attorneys were not returned. An American Warrior Construction employee said Samy was not commenting on anything related to Sports of the World.

American Warrior Construction held a groundbreaking ceremony for Sports of the World in November 2019. It drew Gov. Laura Kelly, Commerce Secretary David Toland, the Finney County Economic Development Corporation and county and local officials.

Between March 2019 and February 2020, GC Investments submitted $6.6 million in disbursement requests to the City of Garden City. The bulk of the costs were tied to construction done by American Warrior Construction. The construction company last shared a Sports of the World construction update on its Facebook page in February.

According to a Certificate of Project Costs maintained by Garden City, $18.7 million in STAR bond funding remains. If GC Investments defaults on the development agreement, it could be on the hook for the STAR bond money that it already spent if the city pursued legal action.

“However, at this point, GC Investments Inc. is still an active entity and both partners that make up the corporation have indicated to us a desire to complete the project,” Allen said in an email. He also estimates that site preparation work stopped in March.

North anticipates that one of the development partners will continue building the complex. In an email North said, “Right now it appears a default is unlikely.”

“Both the principals and their companies have a solid reputation, and that’s why the project was approved in the first place,” he said. “We look forward to working with whichever entity it’s decided is going to complete the project.”

If that doesn’t happen, the commerce department will look for another developer.

“But the important thing from the state’s perspective is that there will be a developer and the project will be able to go forward,” the state commerce official said.

Garden City Mayor Troy Unruh said he wasn’t aware the project had been suspended.

“The city does hold the funds for the STAR (Bond) district, and then they can only release them based upon reviewed and approved expenditures,” Unruh said. “So I do think we have good oversight in place.”

Architectural and engineering work has been done and dirt has been hauled to the site.

In the past, lawmakers have raised concerns about STAR Bond oversight. A new law went into effect last year that requires the commerce department to list state programs that issue more than $50,000 in economic development funds — though it doesn’t yet include STAR Bonds.

Between 2021 and 2023, the Kansas Legislative Division of Post Audit will evaluate some economic development incentive programs. STAR bonds is one of nine programs on the list.

North said projects have been delayed before, but not due to a legal dispute.

“I can’t think of a circumstance that is identical to this one, but definitely there have been other projects that have had delays,” he said. In past cases, he said, “either there’s difficulty getting financing or one of the component developers might have backed out of the project.”

Corinne Boyer covers western Kansas for High Plains Public Radio and the Kansas News Service. You can follow her on Twitter @corinne_boyer or email cboyer (at) hppr (dot) org.

The Kansas News Service is a collaboration of KCUR, Kansas Public Radio, KMUW and High Plains Public Radio focused on health, the social determinants of health and their connection to public policy.

Kansas News Service stories and photos may be republished by news media at no cost with proper attribution and a link to ksnewsservice.org

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