In a CID, merchants may charge additional sales tax, up to an extra two cents per dollar. Sometimes bonds might be sold by the city with the bond proceeds being given to the occupants of the district. Then the bonds are repaid by the extra sales tax collected. Or, the extra sales tax might simply be given to the occupants of the district, after deduction of a small amount for expenses.
A presentation created by city staff is available here.
Whether creation of a CID is wise is a matter of debate. The city requires that all property owners in the boundaries of the CID agree to its formation.
I asked two questions of the city council and staff. First, if a business moves into an existing CID, how might they know beforehand that they will have to charge the extra sales tax? It’s a simple matter to find out the property taxes a piece of property must pay. But if a retail store moves into a vacant storefront in a CID, how would this store know that it will have to charge the extra CID sales tax? This is an important matter, as the extra tax could place the store at a competitive disadvantage, and the prospective retailer needs to know of the district’s existence and its other terms.
Second, if a business tires of being in a CID — perhaps because it realizes it has put itself at a competitive disadvantage — how can the district be dissolved?
These questions were not answered.
During discussion from the council bench, it became clear that there was an urgent need to pass the CID policy that day. When it was suggested that passage of the policy might be deferred a week in order to provide time to answer a different issue, the mayor noted that the first applicant for a CID (he was seated in the audience) seemed to be getting nervous at the possibility of delay.
Citizens ought to be concerned that the Wichita city council is willing to bypass thoughtful deliberation of policies in order to placate one particular applicant.