A Wichita city report provides a somber look at the finances of a tax increment financing district.
The City of Wichita Department of Finance has prepared an update on the financial performance of the Old Town Cinema Tax Increment Financing (TIF) District. There’s not much good news in this document. The financial performance would be worse if the city had included the costs of the no-interest and low-interest loan made to the owners of property in this TIF district. But it doesn’t appear that those costs are included. Here’s an excerpt from the report:
In 2000, the appraised value of the southeast retail building and the Warren Theatre declined 12% (from $4.5 to $3.9 million) and 33% from ($4.4 to $2.9 million), respectively. These declines occurred as a result of property tax appeals, which were made by the TIF District’s primary developer. In addition, the total appraised value of the northeast and southeast retail buildings and the Warren Theatre remains more than $3.6 million below estimates in the project plan and overall values have not yet recovered to pre-2009 levels.
The “property tax appeals” referred to in this paragraph are the doing of David Burk. The Wichita Eagle reported at the time: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”
Several city officials expressed varying degrees of outrage with Burk’s action, with the city manager telling the Eagle that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”
Since then the city has granted several forms of subsidy to Burk and his partners.
The report from the finance department also told of problems with parking revenue:
Parking Revenue – The project plan assumed sufficient parking revenue cash flow over a fifteen-year period to provide $1.1 million towards principal debt obligations, assuming an interest rate of 4.5%. The Old Town Cinema TIF Fund has received substantially less parking revenue than was expected in the project plan. In some years, the TIF Fund has received no revenue from parking, and the highest amount received in any year was $51,130 (in 2008). From 2007, when the District first began receiving parking revenue, through 2013, a total of $153,130 in parking revenue has been transferred to the TIF Fund. Based on historical experience, additional parking revenue is not assumed and total parking revenue from 2004 to 2019 is conservatively projected at $153,130.
Later on, the report holds this:
Parking revenue collections are also substantially less than projected, because fees have not been increased as originally planned. The City’s general parking fee, which predates the Old Town Cinema TIF District, started at $7.50 per parking space per month. The fee was to increase to $25 per month over an eighteen-year period, with increases starting in approximately1996, according to Property Management. Fee increases never occurred, which were needed to pay for City parking activities. The general City fee differed slightly from that originally charged in the Old Town Cinema District, because the District initially charged a $10 per month fee, but this was reduced in about 2009 to $7.50 per month consistent with the parking fee charged elsewhere in the City, again according to Property Management.
The report also contains several financial statements. These statements do not contain a form of off-the-books support given to this TIF district. That was the no-interest and low-interest loan made to the Warren Theater, estimated to cost the city $1.2 million.
Click here to open the city’s report in a new window.