In Wichita, benefitting from your sales taxes, but not paying their own

A Wichita real estate development benefits from the sales taxes you pay, but doesn’t want to pay themselves.

STAR bonds in Kansas. Click for larger version.
STAR bonds in Kansas. Click for larger version.
In Kansas, the STAR bond program allows cities to issue bonds (that is, to borrow money), give the proceeds (that is, cash) to a private business firm, and then pay off the bonds with the sales taxes paid by the business firm’s customers.

But sometimes this gift by taxpayers isn’t sufficient. In Wichita, despite benefitting from STAR bonds, a company wishes to skip paying sales taxes itself. This is what the Wichita City Council will consider tomorrow.

The Wichita Sports Forum (WSF) project on North Greenwich Road, according to city documents, is a project with a cost of $14,025,000. Of that, $7,525,000 (53.6 percent) may be paid for by the STAR bonds. These bonds will be paid off at no cost to the owners of WSF.

Additionally, according to city documents, the STAR bonds program carries with it a sales tax exemption. That is, if any of the bond proceeds are spent on items subject to sales tax (like building materials), WSF doesn’t pay the sales tax.

There’s another consideration, however. Some of the project is being paid for by the developers themselves rather than by STAR bonds. Stuff purchased with their money will be subject to sales tax. Evidently that is a problem, and the city has a way to step in and solve it.

Through the Industrial Revenue Bonds program, the WSF developers can avoid paying sales tax on $4,500,000 of building materials. City documents don’t mention this number, but with the sales tax rate in Wichita at 7.5 percent, this is a savings of $337,500. It’s as good as a grant of cash. Better, in fact. If the city granted this cash, it would be taxable as income. But forgiveness of taxes isn’t considered income.

In Kansas, low-income families must pay sales tax on their groceries, and at a rate that is among the highest in the country. Is it unseemly that having already benefited from millions in taxpayer subsidy and sales tax exemption, the developers of Wichita Sports Forum seek even more sales tax exemptions?

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