WaterWalk hotel subsidy passes

Not that it matters much now since the measure has passed, but here are a few things that haven’t been discussed much regarding the subsidy to a proposed hotel in Wichita’s WaterWalk development.

Good public policy requires tax fairness

When people pay taxes, they feel that their tax payments go towards funding the general operation of government, including paying for some services that benefit them specifically as well as everyone else. Police and fire protection, for example.

There’s also the idea of joint sacrifice. Citizens may not like paying taxes, but most are comforted in the knowledge that everyone else pays, too.

The tax policy surrounding this proposed hotel, however, violates sound principles of public policy. On January 12 the developer of this proposed hotel told this council that the hotel would pay property taxes. That’s true, but only on the surface. The property taxes this hotel will pay for many years will go towards retiring bonds that provided benefits exclusively for the WaterWalk development, not the general operation of government.

So when citizens pay their property tax — knowing that some goes to provide public safety protection for their home and neighborhood — that doesn’t apply to the proposed hotel. But will it consume fire and police protection, and other city services? Of course it will, but it won’t be sharing in the cost of providing those services, as do regular citizens and businesses that don’t operate in this special tax-privileged environment.

The same goes for the transient guest tax, or bed tax, that guests of this hotel will pay. That money, according to city budget documents, is designed to be used for certain specific purposes. “The Tourism and Convention Fund, financed through a six percent transient guest tax on hotel and motel rooms in Wichita, provides monies to support tourism and convention, infrastructure, and promotion of the City.” Further, from the same document: “Fund priorities are: 1) debt service for tourism and convention facilities, 2) operational deficit subsidies and 3) care and maintenance of Century II.” But in the case of this proposed hotel, the transient guest tax generated by the hotel will be used to pay off bonds that benefit only this hotel. Is this consistent with the city’s stated policy for use of the transient guest tax?

Who can we trust?

There’s a big issue of trust at stake here. Several members of this council, along with the mayor and city manager, last month heard a consultant from Goody Clancy (the firm that’s helping plan the revitalization of downtown Wichita) tell Wichita that downtown hotel occupancy rates are high, above the level that indicates a need for new hotels. In the consultant’s own words: “There’s a market for additional hotel rooms downtown.”

The finding that there’s a market for hotel rooms should mean that there’s no need to pay someone to build a hotel downtown.

We can’t have it both ways. We can’t have our planning consultant telling us there’s a market at the same time we’re ready to believe a hotel developer who tells us it’s unprofitable to build a hotel downtown.

In light of the Goody Clancy findings, we need to examine the assumptions used to produce the “gap” in financing that the hotel developer claims makes it unprofitable to develop this hotel. It’s not sufficient to check the arithmetic, as Mr. Bell tells us his department does. We need to seriously examine those assumptions, remembering that they are provided by someone who has a multi-million dollar motive to show the existence of a financing gap that the city will fill.

We need to also remember that as long as this city is willing to fill financing gaps, no one will submit a proposal to this city without showing a gap. This sets the template for the development of the remaining empty parcels in WaterWalk, and for all of downtown, for that matter.

This issue of trust extends to Jack DeBoer, the WaterWalk owner, telling us that he doesn’t want any more city money. In response to citizen inquiry, the city has produced a statement of sources and uses of funds that shows that the money to be paid to DeBoer won’t come from the city’s contribution to the project.

This contention would be laughable if it wasn’t disingenuous and self-serving. It’s not credible to tell citizens that money from one source is used only for one purpose. The fact that the city is making a contribution to the hotel developer makes the payment to DeBeor possible. It doesn’t matter whose pocket the dollars come from. As far as public policy is concerned, all dollars are the same.

Leveling the playing field?

Some on this council have said that the subsidy provided to this proposed hotel actually levels the paying field instead of distorting it. What is the source of the burden that downtown developers face? Often it is said that land assembly issues are troublesome, but that isn’t the case for the proposed hotel.

What, exactly, are the difficulties that this proposed hotel faces that require city subsidy?

Pursuit of conventions: good public policy?

One of the reasons Wichita city leaders say we need to provide subsidy to a proposed hotel in the downtown WaterWalk development is that the rooms are needed to support the city’s effort to gain convention business.

But the convention business is in a structural decline that has been declining for many years. At the same time many cities — both large and small — have built vast conventions centers and related infrastructure. The promised economic development impact of this public investment rarely materializes, but cities continue to pour in public investment, chasing something that just isn’t there.

20 Comments

  • Seriously, what on basis do you make such statements? “Convention business is in a structural decline”. For THIS market? I don’t disagree that a good business model should be followed, but to criticize the council when little factual information is provided is the pot calling the kettle black.

    “The tax policy surrounding this proposed hotel, however, violates sound principles of public policy.” Whose idea of public policy is being referring to?

    “The property taxes this hotel will pay for many years will go towards retiring bonds that provided benefits exclusively for the WaterWalk development, not the general operation of government.” True, but who do you think is going to pay off the bonds if Water Walk is not generating any property tax revenue?

    “it won’t be sharing in the cost of providing those services, as do regular citizens and businesses” That is true for the most part; however, their is also both direct and indirect spending from visitors into the city. This additional spending contributes to the tax base. Not everyone who stays there is going to eat there, buy gas there, etc., etc. Also, there is the matter of personal property taxes that will be paid.

    “The finding that there’s a market for hotel rooms should mean that there’s no need to pay someone to build a hotel downtown.” This statement shows naïveté about how development works among many other things.

    “What, exactly, are the difficulties that this proposed hotel faces that require city subsidy?” Fair question.

    Obviously, the council felt that the benefits outweigh the costs or risks to the city.

  • Bob,
    In the Spring of 2011 we need to change the players on the City Council. We need to continue recruiting fiscally conservative candidates and be ready by this summer. We need to fill the seats vacated by Schlapp and Gray. We need to challenge both Longwell and Mayor Brewer.

    The WaterWalk contract called for annual property tax payments of about $250,000 and a review of the project every five years to determine whether the development should be continue. I am sure those things are not happening, but the Wichita Eagle will continue to apologize for the incompetence of Mayor Brewer and the rest.

  • John Todd -

    I remember hearing the WaterWalk hotel developer explain to the City Council that his project would generate approximately $250,000 annually in real estate taxes. Unfortunately, these “new taxes”, instead of going into the public treasury to pay the properties’ share for city services like fire and police protection, will funnel into paying off bonds for the TIF (Tax Increment Finance) money that went to the WaterWalk developer.

  • Again, the development will generate some additional revenue that hasn’t been discussed. Nonetheless, all the “anti” people keep avoiding the discussion about the do-nothing option. So this deal doesn’t happen. Revisiting the decision to create Water Walk is irrelevant. It is what it is. Then what? Who do you suggest pays the $41 million that has already been committed? What do you suggest gets done? What’s going to be different in the next 12 months that is different than the past 4 years?

  • Some of us suggested options to competition killing subsidies.
    This is worse than do nothing. Two of Wichita’s most successful developers spoke at a recent meeting. They explained how they had killed plans for a multi million dollar condo expansion at Water front because the City got into the condo subsidy business. They now have a multi million dollar “class A” office space expansion on hold because it appears the City is now getting into the “class A” office space subsidy business. Let me put this in perspective for you. These guys took a piece of property that had taxes of $6400 per year used their own money built it up to now it pays around $2 million per year. Compared to Water Walk, the City spent it is rumored $20 million in tax money to acquire and clear the land. then put $43 million more into it, leased it to Deboer and company for $1 per year and 9 years later it does not pay even $1 into the general tax fund, and won’t pay any taxes for at least 15 more years. While every developer in town and business person put every project on hold because next Tuesday it could be your business that the City starts subsidizing.

  • Craig Gabel -

    Pat In addition it was not just no people at the Council meeting. If you watched it I explained that we sent a survey of 1000 registered voters in the City of Wichita. 95% of the surveyed voters were against this hotel and the City subsidies also. Just for the record 90% wanted a Hotel similar to a Great Wolf Lodge. If you want real vision for this City come and set down with me for 10 minutes. I assure you I don’t have to act like a school kid and run to San Antonio, or Houston, or Kc to for a plan that will bring real dollars to town and create real jobs not just steal them from other businesses
    in town

  • Craig, sorry, but you’re just espousing more rhetoric. Give some specific solutions instead of the vague generalizations.

    Let me put it once again into perspective for you. Whether we like it or not, we have $41 million in obligations that needs to be serviced. I haven’t heard anyone, not you, not Bob, not John, nor anyone else offer any solutions on what to do about it. Vague political ideology isn’t going to cut it. Until you have something specific to offer to solve the problem as it is, then the city needs to move forward with the proposal that is in front of it. Seriously, what is the solution?

    BTW, nothing is preventing Johnny Steven and Steve Clark from bringing a deal to city hall if they so chose.

  • LonnythePlumber -

    Week’s “Stop Wichita Express” needs to stop. Delaying and stopping progress for jobs is wrong. No other free market developers are stepping up to make improvements without some assistance. Let Wichita Go.

  • Pat
    Apparently you missed the review of the whole downtown issue as stated by a rep of the CATO institute? Further, you are completely disregarding any other opinions made in this opinion column.

    Are you a member of city council? you’re conduct mirrors theirs.

    The City of Wichita has a bad reputation nation wide for their individual and collective inability and unwillingness to come into compliance with standards that would attract additional industry to the area. Thats THE REAL issue.

    Who is coming here as a matter of tourism? Here rather than Colorado, Branson Missouri, The Ozarks, the Kansas City Area? Really? Since When? Hello?

    Locality is the problem … Hint … the MAJORITY of the general public in Wichita opposes the present water walk issue and concept therein … they dont matter? they dont count? You know more and better than the Cato rep as well as the rest of those opposed?

    Individually and Collectively the City of Wichita would be far better off if the present City Council were forced to resign along with Carl Brewer. Arrogant, know it all, abrasive and incapable. Thus the present state of Wichita … it doesnt take a rockect scientist to see what the real problems are here.

    Presently there are no REAL solutions regarding the Water Walk/Downtown Growth issues, therefore you are asking for discussion regarding these issues when discussion at a reasonable and sane level simply isn’t possible given the present economic climate and the City Councils lust to be involved in all things that are simply not their place to be involved.

    You my friend are sleeping with the enemie …

  • Will,

    “Further, you are completely disregarding any other opinions made in this opinion column.” Not true, I continually challenge the underlying logic of the opinions in this column and others. The opinions are overly simplistic and ignore the reality of the given situation in this case. I don’t disagree with the fundamental underpinnings of limited government, but ideological saber rattling gets us no where with respect addressing this particular situation. As of yet, no one has offered a viable alternate solution.

    “Are you a member of city council?” No

    “The City of Wichita has a bad reputation nation wide for their individual and collective inability and unwillingness to come into compliance with standards that would attract additional industry to the area. Thats THE REAL issue.” – Based upon what evidence Will? I am completely unaware of Wichita having a bad reputation nationwide. Contrarily, in my travels, Wichita seems to have a very good reputation. Please share.

    “Who is coming here as a matter of tourism?” Actually, there are a number of individuals and groups that like to come here for tourism. Tourism is broadly defined as you are probably aware. Prior to the contract fiasco, the National Bowling Congress wanted to come here.

    “Locality is the problem … Hint … the MAJORITY of the general public in Wichita opposes the present water walk issue and concept therein … they dont matter? they dont count? You know more and better than the Cato rep as well as the rest of those opposed?” – Hint, America wasn’t founded on majority rule. And, what does some Libertarian think tank have to offer the Water Walk situation. Again, you apparently ignore the fact that the community, today, has a $40 M obligation. Since no one else can answer that question, what’s your suggestion? How we got here is not the issue, but what are you going to do about paying off the bonds?

    “Thus the present state of Wichita … it doesnt take a rockect scientist to see what the real problems are here.” No, it doesn’t take a rocket scientist, but it does take more than what the critics are offering. It’s easy to play arm chair quarterback but it’s a lot different being in the game. Being an elected official is more than representing your own ideology. Elected officials represent everyone not just the people who voted for them. The council represents conservatives, liberals, capitalists, Republicans, Democrats, Libertarians, socialists, men, women, etc. etc. It requires balancing a myriad of interests.

    “when discussion at a reasonable and sane level simply isn’t possible given the present economic climate” No, I think all discussion is good at all times, but working towards a solution to a specific problem is different than trying to change the council’s policies on downtown development.

    “You my friend are sleeping with the enemie” That’s enemy. Sorry couldn’t resist. Nope, not really. Just dealing with reality of the current situation. This hotel and Water Walk? Not really much of a choice. The community needed to have it done. Downtown development policy? That’s a totally different ballgame to discuss.

    Politics is about compromise. No one seldom has it their way. “This” group would be much better off to work towards compromise in a constructive manner than to continue to alienate themselves with political ideological rhetoric.

  • Thats ok igit my speeeelin aint the bist …

    the POINT is …

    There is no rhetoric here … this is a label you use to avoid the deeper conversation and the work therein …

    Im not at all in any way concerned about “alienation or political idealogical rhetoric”

    It is what it is and you can come at it from any angle you so desire and you will NOT be successful in changing the animal in any way … IT IS WHAT IT IS.

    Here … let me show you how stupid it is …

    Prior to any meaninful changes taking place in the Wichita area it is first necessary to remove the “stuck on stupid, ultra conservative, extreme right wing, exclusive communitie, we are better than you attitiudes and dispositions”

    How’s that look to ya? Now, review what you wrote and try again.

    With regards to Wichita and the points of contention therein … This is 2010 … not 1936 as our society changes it requires that we change and adapt along with it in order to EFFECIENTLY remove systemic problems and Wichita is a glaring example of systemic dysfunction.

    Shallow, superficial and always ready to impliment the “killem all an let GOD sortem out” procedure. Fight first and then make up later and be friends … disgusting.

    Open conversation that looks at ALL sides objectively, willing to do the work, willing to be committed and involved, unwilling to sell out in favor of personal agenda, respect for fellow citizens and focus on INTEGRITY in all things as issues are discussed. Professional posturing and conduct regardless of the issues and the obsticals therein. THIS is the minimum standard that should be held …. this is not the case in Wichita.

    My opinion is that if Wichita truly desires growth they they begin with the uniform application of the law and codes … UNIFORM … NOT the citys response based on who you are and where you live.

    SUPPORT of the Wichta Police department and other law enforcement agency’s.

    Clean up areas like Hilltop and Plainview as well as other areas of the city that are in desperate need of attention.

    Work with neighbor hood organizations that want thugs, drugs, gangs and bums outta their neighbor hoods Work with these groups rather than lecture them and treat them as subordinates.

    Rid Wichita of the overwhelming number of payday loan, title loan and 27% auto loan places and put strict limitations therein for those like businesses that remain.

    Cease playing favorites with the Hispanic Chamber of Commerce and the Hispanic and Asian Communities and force the same to follow the rule of law just like the rest of us.

    Address Nola Fulston and her “pay to play” process at the Sedwick County Court House so that more crimes may be successfully prosecuted.

    Instruct the Presiding judge as well as all other judges at the Sedwick County Court house to cease interfering with attourneys and their clients so that everyday people can have the FULL advantage of their rights rather than what the local judicial community THINKS they deserve.

    Do your homework, then begin the planning phases of a much more successful and respected community.

    Wichita looks exactly like a 60k Escalade sitting in front of a 20k home.

    Prioritys, Prioritys, Prioritys. Period.

    I have right to critisize Wichita, ive spoken with nearly every council member and dab member regarding this and other matters. Ive devoted the time, made the investment and witnessed first hand, up close and in person what it is. Im NOT just taking pot shots at a distance.

    Wichita needs to grow up and take the time to get it right … for once.

  • One other thing … your comment regarding “Libertarian think tank”

    This statement is EXACTLY what im talking about when it comes to attitude, posturing and tremendous limitations that keep Wichita on its face.

    Another example of the inability of most to reach out to another form of thinking to help successfully resolve long standing issues or to simply get another opinion when there is an impass.

    Again … what we say, how we say it, how we conduct ourselves in difficult situations or not (the bowling fiasco) determine who makes the choice to invest in us and why. Few if any are going to make an investment of any size in Wichita while being treated as the City Council likes to treat people. Its that simple and that clear … AGAIN… thus the current state of Wichita.

    If the Wichita City Council wants my time and effort they have to earn it, otherwise, i could care less … there isnt anyone there that “gets” it anyway.

    At the end of the day the downtown fiasco as well as waterwalk will become liabilities just like other liabilitys the City of Wichita has aquired. Nothing good to come of it.

    it is what it is …

  • Amen Will.

    If Wichita’s Powerful want exciting monuments to their impotence, they can start paying for them on their own.

    Pat, with respect to the $41 million we already owe on the Water Walk, the same people will pay it that were ALWAYS going to pay it, the Wichita Tax payers. I refuse to see the logic in throwing more money down a bottomless pit. Business people aren’t STUPID, you can’t BRIBE them to pay for the water walk by offering subsidies.

    Later
    Mike
    Wichita KS

  • Mike,

    You are incorrect. The premise is that Water Walk with be developed and the incremental increase in property taxes will be used to pay the bonds. For example, the hotel is expected to generate several hundred thousand dollars in property tax revenue. You’re paying that? Of course not! You’re responsible for the taxes on your house, me on my house, and the hotel owner for his hotel.

    That said, no new development, means the $41 million will have to be paid for by the city at large and then, yes, you and I will get to help pay for it.

    I don’t see that logic as being too hard to follow. Again, the die was cast years ago. Let’s just deal with the reality of the development today as it stands.

  • Geez Will, you are accusing me of not wanting to debate on the facts, yet you along with everyone else refuses to engage in a factual debate. Pot meet Kettle!

    Quite frankly you have so many conflicting comments I’m not sure what your position is. For example, what’s wrong with payday loan establishments? Where’s your free market, capitalistic, Libertarian ideology at? It’s okay to set it aside now just because you don’t like the payday loan shops?

  • Pat, but since the hotel and others are attempting to be in TIF districts, they won’t be paying property taxes, at least not to the general fund. Face it, we own $41 million, and no one else is going to be STUPID enough to pay it. Why would they?

    Mike

  • Actually, a portion of the taxes will be going to the general fund and the incremental increase will be used to pay the bonds. As far as being stupid, I guess Korroch is stupid because he’s willing to build a hotel that will pay for it. Gander Mountain, the same. The Realtors, the same. The owners of any condos, the same. So, yes there are those willing to pay for it. And, I’m darn glad they are because I don’t want to pay for it.

  • Wow, I love an intellectual debate, but Pat and Lonnie the Plumber have drank the Kool-Aid. Mike, thank you for your understanding of the issues. Korroch and Jack P. are not stupid. They understand how to create their personal wealth by using “other people’s money”. How many developers working in downtown Wichita have poured thousands and thousands of dollars into the campaigns of Mayor Brewer?

  • Why is it that I drink Kool-Aid simply because 1) I don’t necessarily agree with y’all’s position, and 2) because I desire a debate on the facts not on either unsupported opinion or mindless rhetoric that sounds catchy but means nothing?

    If anyone is drinking Kool-Aid, it’s those that fall into these two categories. They’re not just drinking Kool-Aid but probably have some vodka in there as well. ;)

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