In Wichita, special assessment financing gone wild

At today’s meeting of the Wichita City Council, a privately-owned condominium association is seeking special assessment financing to make repairs to its building.

Special assessment financing means that the cost of the repairs, $112,620 in this case, will be added to the building’s property taxes. Actually, in this case, to each of the condominium owners’ taxes. They’ll pay it off over the course of 15 years.

So the city is not giving this money to the building’s owners. They’ll have to pay it back. The city is, however, setting new precedent in this action.

First, special assessment financing has traditionally been used to fund infrastructure such as streets and sewers, and new infrastructure at that. The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if your building is located in one of the politically-favored areas of town. Not all buildings will qualify.

By using special assessment financing in this way, the city seeks to direct investment towards parts of town that it feels doesn’t have enough investment. This form of centralized government planning is bad public policy. The city should stop doing this, and let people freely choose where to invest.

This case, however, is an even more egregious example of the city’s desire to control where and how people invest.

The agenda report for this item details two exceptions to the city’s facade improvement program that must be waived for this project to obtain special assessment financing.

The first is the private investment match. Here, the city is proposing that since the building’s owners have made a past private investment in this property, there’s no need to require a concurrent investment.

Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”

So the city proposes to waive this requirement as well.

What would happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”

Isn’t that what private property owners do: fund the cost of repairs to their property?

Today’s action, if approved, would set a public hearing on July 7.

If the city council approves this project — and I suspect it will with no dissenting votes — we must now realize that Wichita has a mayor, city council, and city staff that are willing to throw any principle aside for political expediency.

By the way, the developer of this building is Real Development. Its principles, particularly Michael Elzufon, are familiar to the mayor and some council members as campaign donors. Its public relations executive has been the campaign manager for the mayor and a city council member.

In the past I’ve referred to Real Development as “crony capitalists,” defined in Investopedia this way: “A description of capitalist society as being based on the close relationships between businessmen and the state. Instead of success being determined by a free market and the rule of law, the success of a business is dependent on the favoritism that is shown to it by the ruling government in the form of tax breaks, government grants and other incentives.”

Elzufon took exception to that characterization. After asking for this special assessment financing project and its waivers, it fits even better.

(This is a Scribd document. Click on the rectangle at the right of the document’s title bar to get a full-screen view.)

Petition to Renovate Building Facade in the Core Area 2009-06-23

4 Comments

  • Replacements for Mr. Gray and Ms. Schlapp to fill their seats which are term-limited is on the way. Mayor Brewer will not be re-elected. His written campaign promises are out and his friends are all very much in. Obama’s policies will not help the Mayor’s re-election. Timing is everything and the budget, water rates, and tax increases will be taken place next year prior to his re-election. Republicans are going to do well in 2010 and that momentum will carry over to the Spring of 2011.

  • Charlotte -

    Okay, you told me who is asking for the special assessment to a building, but I couldn’t read the fine print in the letter to see where the building is located. I assume it is one of the buildings that Real Development is already working on?
    Charlotte Foster

  • Like the instructions say, just click the rectangle at the right of the document’s title bar, and you’ll get a full-screen view. You can adjust magnification from there, too.

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