Downtown Wichita Arena TIF District

Remarks to Wichita City Council, August 5, 2008.

When I’ve been talking to people in Wichita, I find there is great confusion about the way that TIF districts work. This confusion serves to obfuscate what really happens with TIF districts: the TIF developers get to use their own property taxes to pay for things that non-TIF developers have to pay for out-of-pocket, or through special tax assessments on top of their regular property taxes.

It is really this simple. To deny this is to deny simple arithmetic.

Then, do TIF districts perform as promised? One of the troubling things I learned from recent Wichita Eagle reporting is that in the past four years, assessed valuations in the downtown TIF areas have grown at 14.9 percent per year, just 1.4 times the rate of all commercial property. A few weeks ago I was assured by one council member that the taxes paid by property owners in TIF districts grows “exponentially.” But now we have evidence that the growth is quite modest.

I was going to say that I have no doubt that the members of this council have good and noble intentions in wanting downtown Wichita and the area around the arena to succeed. But establishing this TIF district is not good for the arena district or the city as a whole.

Entrepreneurs in Wichita, or anywhere for that matter, have a difficult enough job to do in predicting what consumers want. For government to step in and create special tax-favored districts adds another measure of uncertainty and risk. It distorts the market allocation of capital. Investment will be driven by government incentives rather than market considerations.

This is also a blow to those who have invested elsewhere. It is the city telling them they made a mistake, that they invested in the wrong part of town.

For the arena district to succeed, it needs to be because entrepreneurs, using their own capital, decide that it is a worthwhile place to invest.

2 Comments

  • You have a point. But the simularities is that both the city, with their TIF district, and your suggestions (that everybody pay the same tax rate regardless of any part of town), that no TIF districts be made, both are modeled to influence market incentives.

    Your suggestion is that let the markets decide. And I agree with that. But when the municipalities have an inherit interest in spurring development in certain parts of town and they use incentives, in a way, that ARE market forces at work.

    If a municipality says, invest here and get a tax abatement, is that not the same as a company saying ‘buy my product because it’s cheaper than the competition?’

    I’m all for less taxes or having your end of the taxes pay for the improvements in the area, why does this seem to fly in the face of free markets?

    It is not like that the city is forcing businesses to relocate downtown or really punishing anybody else. All they are saying is that this area of town, your property taxes will pay for the improvements in this area.

    I see nothing wrong with that.

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