Five years ago, the City of Wichita granted Big Dog Motorcycles industrial revenue bonds (IRB). The benefit of these bonds is that the company escapes paying property tax (and often sales tax) on the property purchased with the proceeds from the bonds.
At the December 2, 2008 meeting of the Wichita City Council, the council reviewed the tax abatement to see if the company had lived up to the projections and promises it made as part of its application for the IRBs. Unfortunately for this company, their fortunes have reversed, and while at one time their employment was above what they committed to, their present employment is less than half what it was five years ago.
There are two illuminating things to take from this video clip. First, council member Jim Skelton wonders why the benefit-to-cost ratio for Sedgwick County is negative, but city staff still recommends approving the tax abatement. Allen Bell, Wichita’s director of urban development, didn’t know why. No council members except for Skelton seemed to be bothered by this.
But what’s really troubling is this quote from Bell: “I don’t think it would be productive at this time to further penalize them — as the market has already penalized them — by putting them back on the tax rolls at this time.”
So is taxation by the City of Wichita equivalent to a penalty? That’s what Mr. Bell seems to be saying.
Further, the fact that the council voted to extend the tax abatements because this company is going through lean times is tacit recognition that property taxes are bad for business. I wonder how many companies have gone out of business because Wichita’s taxes were too high? And how many companies are never formed, or have put off expansion plans because of Wichita’s taxes? Here’s an example of one: Wichita Taxes Cancel Development.
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