Last fall the City of Wichita awarded two forms of economic development subsidy to a proposed Save-A-Lot grocery store to be built in the Planeview neighborhood. The developer of the store was able to persuade Wichita economic development officials and city council members that the store could not be built without public assistance. But now a different developer is going ahead with the project — without any of the subsidies Wichita approved, raising questions as to whether the city’s original offer of public assistance was genuine economic development, or just another instance of corporate welfare.
The subsidies approved were in the form of a tax increment financing district (TIF) and a Community Improvement District (CID). Over a period of years, the two forms of subsidy were estimated to be worth $900,000 to the developer.
Kansas law allows affected counties and school districts to veto the formation of a TIF district. The Sedgwick County Commission did just that, and the developer said he would not proceed with the project.
But now, according to Wichita Eagle reporting, a different developer is proceeding with the project, and without subsidy, according to the article. While TIF is not available, it seems the authorizing ordinance for the CID is still in effect, and could be used by the new developer, if desired.
Economic development, or corporate welfare?
That the Planeview Save-A-Lot grocery store is able to proceed, and in a larger and more expensive form than originally proposed, tells us that the arguments of its supporters — that economic development assistance was absolutely required — were not true. Actually, these arguments might have been true in the mind of Rob Snyder, the original developer. Developers who seek public subsidy have a powerful incentive to make the case to local governments that their projects need financial assistance. In this case, Snyder was able to convince Wichita city staff that there was indeed a “gap,” according to city documents, of “approximately $950,000 on a total project cost of over $2,000,000.” In other words, the purported “gap” was nearly half the total project cost.
But in the hands of a different developer, that gap has evaporated, and the project is able to stand on its own without public assistance.
We need to realize that the “gap” analysis performed by the City of Wichita is not thorough. There’s an imbalance of power in the relationship between city officials and developers. As mentioned above, developers have powerful financial motives to present their projects in a way that makes them eligible for public assistance. Government officials want these projects to happen. Economic activity is good for everyone, after all. So the motives of local economic development officials and elected representatives to turn over a lot of rocks — examining deals too closely — is weak. As a result, we’ve seen examples where outsiders brought information to the City of Wichita that would not have been considered otherwise.
In one instance a former Wichita City Council member was unhappy that the Wichita Eagle uncovered negative information about a potential recipient of Wichita public assistance.
Wichita officials and council members need to take a look at their economic development programs and decide whether the city is willing to — and wants to — distinguish between real and valid economic development programs and corporate welfare. In the case of Wichita’s public assistance offer to Rob Snyder’s Save-A-Lot grocery store, recent developments confirm what a few people suspected at the time — it was corporate welfare, plain and simple.