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.