A frequent and valued commenter on this blog wrote a comment a few days ago that contains a factual error. I think it’s important to understand this error, because it goes to the heart of the difference between developers working in TIF districts and those who aren’t. Here’s the comment:
The thing is that real estate developers do not invest in public streets, sidewalks and lamp posts, because there would be no incentive to do so. Why spend millions of dollars redoing or constructing public streets when you can not get a return on investment for that.
I think this perception, wrong as it is, is common: that when we see developers building something, the City of Wichita magically builds the supporting infrastructure, and at no cost to the developers. But it isn’t quite so. A while ago I had done some research to make sure I correctly understood the relationship between the city and real estate developers. I chose a development on the east side of Wichita, mostly because I live nearby and was familiar with the project. Here’s what I found when I searched for City of Wichita resolutions concerning this project:
03-637 Water Distribution System Number 448-89901: $54,000
04-571 Lateral 47, Main 24, War Industries Sewer: $52,500
04-570 Water Distribution System Number 448-90011: $83,000
04-572 Left and right turn lanes on 13th Street: $310,000
05-264 Traffic signalization at the intersection of Waterfront Parkway and Webb Road: $120,000
05-259 Storm Water Drain No. 189: $400,000
05-265 Street lighting system: $125,000
05-262 Left and right turn lanes on Webb Road: $393,000
05-260 Waterfront Parkway from the North line of 13th Street to the East line of Webb Road: $1,672,000
03-347 Street lighting system: $125,000
The total cost of these projects is $3,334,500, and I’m pretty sure I didn’t find all the resolutions and costs pertaining to this project.
Who pays these amounts? The developers whose project benefited from these improvements. They pay it all: water systems, sewer systems, turn lanes on existing streets, new street construction, traffic lights, etc.
In a TIF district, these things are called “infrastructure” and will be paid for by the development’s property taxes. Outside of TIF districts, developers pay for these things themselves.