As the City of Wichita decides whether to offer subsidy to a hotel in the downtown WaterWalk development, there are a few questions that deserve answers. Most of these questions are my own, but some are questions that people have told me I should ask.
What is the development budget for this project? I’ve been told by several sources that $100,000 per room seems to be too high for a limited-service hotel like this.
What are the terms of the ground lease? Will the developers of the proposed hotel be paying any private person or entity for the rights to lease the ground under the hotel? If so, who and how much?
What are the terms of the parking space arrangement? Will any private person or entity be receiving payment for allowing the use of the parking spaces? If so, who and how much?
Jack DeBoer, owner of WaterWalk, has recently been quoted saying he doesn’t want any more of Wichita’s money. Will any of the city subsidy or any of the cost of this proposed hotel be flowing to him?
The city says it has performed a “gap analysis” which indicates that city subsidy is needed for the proposed hotel to be financially feasible. May we see that analysis? Are the underlying assumptions used in this analysis realistic? What is the source of these assumptions? Do these assumptions come from someone who has a financial motive in showing a financing gap?
Could the project be modified so that there is no financing gap?
What is it about downtown Wichita that makes it unprofitable to make an investment without subsidy from the city and other government? Can we fix any problems so that development may proceed without taxpayer subsidy?
City council members spoke of a “critical mass” of hotels developing downtown, but the proposed hotel will have an exclusivity period of four years in WaterWalk. Will the developer of the proposed hotel consider proceeding without such a restrictive agreement?
The stated reason for the need for the proposed hotel is to boost the city’s convention business. What, precisely, is the benefit of convention business to Wichita? Is the claimed benefit general, applying to a broad sector of the city’s economy? Or do primarily certain sectors of the economy benefit?
What is the estimate of the amount of transient guest tax this hotel will generate?
According to the Wichita budget: “The Tourism and Convention Fund, financed through a six percent transient guest tax on hotel and motel rooms in Wichita, provides monies to support tourism and convention, infrastructure, and promotion of the City.” Further, from the same document: “Fund priorities are: 1) debt service for tourism and convention facilities, 2) operational deficit subsidies and 3) care and maintenance of Century II.” In the case of this proposed hotel, the transient guest tax generated by the proposed hotel will be used to pay off bonds that benefit only this hotel. Is this consistent with the city’s stated policy for use of the transient guest tax?
There’s a move in Topeka to limit or eliminate tax exemptions, including sales tax exemptions such as planned for this hotel. Is the city confident it can secure the planned sales tax exemption?
At the city council meeting, Jim Korroch, the developer of the proposed hotel, said that the hotel will pay property taxes. Will those property taxes go to fund the general operations of government? Or will they be used to retire bonds that were issued for the specific benefit of the WaterWalk development?
What is the financial performance of the city-owned Hyatt Hotel? Are all floors back in operation? On September 13, 2004 the Wichita Eagle reported “Wichita police arrested one man Sunday after discovering a meth lab at the Hyatt Regency Wichita.” Are we sure there are no meth labs operating there today?
Other articles on this issue include:
The Waterwalk is a bust. Offices, Condos and maybe a restaurant or two. Big deal! The nearby Hyatt can handle all of the area’s lodging needs. We need a hotel within a block or two of the new arena. Something in a cool art deco style. They could call it… the ALLIS, in honor of the one imploded a few years ago. That screw up of local government cost the taxpayers millions.
On the same City Council agenda (according to the Eagle) Council members will be deciding to spen possibly millions on Century II repairs. Where is all the 6% guest tax going if we need to dig up millions to repair Century II. The City claims the Hyatt is profitable I have been told that that assertion is based on the fact that the Hyatt as government property does not account depreciation that could be as high as $800,000. In addition most City owned properties do not post maintenance and repairs to their P&L’s. Those expenses go against the General Fund. These factors could paint a truly different picture if taken into consideration.
The Wichita Eagle reported that there are a number of maintenance issues relating to Century II. Since this tax is dedicated to maintaining this facility, why is it being spent on a hotel?
This looks like a clear misuse of these hotel/convention tax funds.
Finally, someone is asking the hard questions. As individuals do we not personally ask these questions when spending our own money? I’m particularly interested in the answer to: “What, precisely, is the benefit of convention business to Wichita?” I’ve yet to hear any good justifications for tourism in general for a city like Wichita. What’s wrong with Wichita being a great place to live and raise a family but not to visit?
[…] some form of subsidy in the name of economic development. Presently the city council is considering subsidy of over $2.5 million to a developer of a downtown hotel. The planning for the revitalization of downtown Wichita, also currently underway, is likely to […]