Taxpayer-funded development in Wichita opposed

Following is the tesimony of John Todd before the Wichita City Council on April 13, 2010.

Good morning Mayor and members of the Wichita City Council. My name is John Todd. I oppose the expansion of the Exchange Place TIF and incentive package you are considering today that benefits Real Development, a group of downtown developers commonly known by many people as the “Minnesota Guys.”

Shortly after the Minnesota Guys arrived in Wichita a few short years ago, they were invited to address the Wichita Independent Business Association to share their development plans for downtown Wichita. A Real Development partner indicated to me that the first building they purchased in downtown Wichita was in the $0.81 per square foot range and that after renovation the housing units they were creating were selling in the $200 per square foot range. Their plan for downtown Wichita was exciting and I complemented them for their insight in recognizing the opportunity they had discovered and seized upon in our downtown area.

After the formal presentation I personally complemented the Minnesota Guys and thanked them for what they were doing downtown. They assured me that their redevelopment work in our downtown would be completed without government incentives, and I assured them that they would have my support as long as they stayed out of the public treasury.

Well, so much for that dialogue. Now they are asking for a bigger bite from the public apple.

The 2007 TIF financing plan provided for a $6 million dollar tax funded parking garage, and now they need a $9.3 million dollar facility? The 2007 agreement provided for a $3 million dollar “City Improvement Expenditure” as city reimbursement to the developers for land acquisition, demolition, site preparation and such other “redevelopment project costs” as permitted by Kansas law. That number has grown to $3.325 million dollars under today’s proposal. Where does this money come from under this proposal? Please ask Allen Bell to explain.

Please refer to page 37 of today’s proposal, “Projected Debt Service Schedule” for the Tax Increment Financing Bonds needed to finance this project. Using data that was available to the public last Friday, the principal amount for this project is shown as $10.6 million dollars plus $5.2 million dollars in interest for a total principal and interest projected total cost of $15.8 million dollars.

Based on the 2009 Mill levy of 120.360, Wichita Public Schools would forgo an estimated $7.5 million dollars in tax revenues for this project over the course of the project bonds, with Sedgwick County taxpayers participating at an estimated $3.9 million and the City of Wichita taxpayers at $4.2 million. Since this TIF expansion involves taxes from other government entitles, this TIF expansion should require the approvals of the Wichita Public Schools and the Sedgwick County Board of County Commissioners.

Cato Institute Senior Fellow Randal O’Toole has written about tax increment financing. “TIF does not increase the total amount of development that takes place in a city or region, it merely transfers development from one part of the region (or the city) to another. … The new developments in the TIF districts consume fire, police, and other (city) services, but since they don’t pay for those services, people in the rest of the city either have to pay higher taxes or accept a lower level of services. This means people outside the district lose twice: first when developments that might have enhanced their property values are enticed into the TIF district and second when they pay more taxes or receive less services because of the TIF district.”

A TIF study by economists Richard Dye and David Merriman concludes that while TIF’s are good for the favored development, they may actually reduce the rate of economic growth in the rest of the city.

Today, this council along with our mayor has the opportunity to say no to the expansion of this tax-funded project.

2 Comments

  • Mr. Todd,
    There is no question that the Minn Guys are not going to be around for long and their project could well be another Wild West World, but the problem is two-fold: First, if the City Council does not give them the money, the condominium owners will not be able to recover some of their investment, and Second, Mayor Brewer’s political life expectancy is tied to these favored developers and their downtown projects. If the Mayor gives them the taxpayer’s money now the Minn Guys may be able to survive until the Spring of 2011 and Brewer’s re-election, but if Mr. Brewer cuts the umbilical cord and votes not to give the developers the taxpayer’s money, the “House of Cards” will come tumbling down and Mayor Brewer will be soundly defeated. Either way, these developers are done and out.

  • Patricia, formerly "Pat" -

    Too many “Pats” on the board. :)
    I totally disagree with Pat’s characterization of the Mayor. Mayor Brewer is showing leadership which is more than many others in the community can say.

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