Recent new stories that a prominent Wichita office building developed and owned by Real Development suffers from severe problems should cause the City of Wichita to halt any new partnerships being considered with the company, and to seek to remove itself from agreements that exist. The problems with the Wichita Executive Center -- ranging from no air conditioning to malfunctioning elevators -- have been extensively reported on by the Wichita Eagle. (See Developer pledges to fix all of downtown building’s problems.) The city's involvement with the building is in the form of facade improvement loans made to the building's owner. The city is confident that the loans will be repaid, as the principle and interest are assessed against the building as special taxes. But in what surely is a case…
Today's Wichita Eagle carries two news stories regarding the proposed expansion of a downtown Wichita tax increment financing (TIF) district. The front-page story Condo vote key to downtown Wichita growth and the additional story Owners report mixed views of developers provided background on the vote the Wichita City Council may make at Tuesday's 9:00 am meeting. The second article provides insight into Real Development's track record in Wichita. While success in any real estate venture is not guaranteed, certain types of arrangements seem to have a high likelihood of problems, and these are reported on in the article. Not mentioned is the problems at the Lofts at St. Francis, a Real Development residential condominium project. Last summer I reported on how this building's facade needed repair, and the city needed…
By Helen Cochran. At the April 13th meeting of the Wichita City Council a request from downtown developer Real Development will be made for an additional $2.2 million taxpayer subsidy for its condo project Exchange Place, located at Douglas and Market. With two weeks to go before this public hearing there is still time for council members to read The Myth of the Robber Barons by Burton Folsom. Folsom’s easy-to-read 134-page narrative lays out the case for entrepreneurship in America and can be read in one evening. It’s a history lesson worth reading by all. Folsom highlights two kinds of business developers: “political entrepreneurs” and ‘market entrepreneurs.” And while Folsom focuses on the larger-than-life entrepreneurs of the nineteenth and early twentieth century, the lessons gleaned have far reaching implications and…
Tomorrow's meeting of the Wichita city council will feature a public hearing as to whether a tax increment financing district that benefits Real Development should be modified. The TIF district is already approved in the amount of $9.3 million. The applicants are asking that the city's contribution be increased to $11.8 million, plus approval of changes to the project plan. The first issue we should address is the purpose of these public hearings. Presumably notice of their existence is given not only so citizens and interested parties can plan to attend, but also so that there can be discussion of the details of the issue. This second reason is not fulfilled to any meaningful extent. There just isn't time for anything to happen. The agenda report for this matter did…
At last week's Wichita City Council meeting, Mayor Carl Brewer spoke in favor of the city's economic development policy, specifically as it related to a downtown Wichita development partly financed with tax increment financing, or TIF. The mayor disagreed with those who have appeared at city council meetings to testify against the use of TIF. He told of how the city called mayors' associations and the National League of Cities, and they said that most large cities use incentives. He learned that cities use some incentives that that Wichita has not yet heard of, which undoubtedly will give city staff some additional tools in the toolbox in the future. He said "Incentives are available, and we're on the right track." The mayor mentioned that Harvard and Yale experts said that…
A missed linkage between developers involved in a Wichita tax increment financing (TIF) project means progress should be stopped until all facts are known. In July, 2007, the City of Wichita considered a development plan (the Center City South Redevelopment District) for a tax increment financing (TIF) district in downtown Wichita. The beneficiary of the TIF financing is Real Development, whose principals are commonly known as the "Minnesota Guys." The report from the City Manager's office to the council from July 17, 2007 states: "The City will acquire the property within the Project Area from DGL, LLC, an unrelated third party, for a cost not-to-exceed $1,975,000, and convey property to Lofts at Exchange Place, LLC." (Page 164. The information for this item starts on page 131.) The "DGL, LLC" referred…
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…
Today's Wichita Eagle reports that Wichita's "Minnesota Guys," formally known as Real Development, are seeking yet another subsidy as they work in downtown Wichita. The article in the Eagle is HUD loan sought for downtown Wichita apartment plan. In this case, the subsidy sought is a loan guarantee from the U.S. Department of Housing and Urban Development. Some readers say that a loan guarantee is not really a subsidy, as the government isn't lending or giving Real Development any money. But it's a subsidy nonetheless. A loan guarantee will let Real Development borrow at a lower interest rate than it could without the guarantee. That is a benefit that pays off year after year, as long as the loan is in effect. It also puts the United States taxpayer at…
Last week's meeting of the Wichita City Council featured a message from Council Member Janet Miller that illustrated her firm belief in centralized government planning for the purposes of economic development. It also contained a material mistake in the understanding of the facts of the project. In her remarks from the bench, Miller disagreed with those who testify at council meetings against tax increment financing (TIF). She said there is much information that says this type of economic development incentive is effective. She said "Sometimes I wonder what city folks are living in when they talk about the negative, or the lack of results from TIFs." She then named several Wichita TIF districts that she said performed well. If her remarks were aimed at me and some of the other…
Recently commercial real estate agent Patrick Ahern was interviewed by the Wichita Eagle. A few portions of the interview relate directly to public policy. How is the downtown market reacting to the slow disappearance of the Minnesota Guys? The buildings they condoed, by selling the floors off, has created quite a mess. You have multiple property owners in one building. Some owners have the resources to fix things and others don’t, and the ones who do don’t want to pay for the guy who doesn't. But that will work itself out through the foreclosure process. And two of their buildings went to auction -- Farmers and Bankers, and the Landmark building. Kaufman is being foreclosed on, and it’s no secret that at the Wichita Executive Centre, the lender has taken…