Tag: Tax abatements

Wichita presents industrial revenue bonds
Wichita city government

Wichita presents industrial revenue bonds

A presentation by the City of Wichita regarding IRBs is good as far as it goes, which is not far enough. Recently the City of Wichita prepared a short video explaining the city's industrial revenue bonds (IRB) program. The video may be viewed on YouTube by clicking here. Several times the presenters emphasized that in the IRB program, the city does not lend money. They properly identify the true purpose of the program, which is to subsidize companies by allowing them to avoid paying property taxes and possibly sales taxes. Several times the presenters emphasized that the IRB program has no cost to the city. But that isn’t true. Part of the rationale for taxes, especially the property taxes that cities, counties, and school districts collect, is to pay for services that people and busine...
Freestanding emergency room in Wichita closes
Wichita city government

Freestanding emergency room in Wichita closes

The conversion of a medical facility should receive city scrutiny due to tax breaks granted based on its original use. The Wichita Eagle reports that a freestanding emergency room in northeast Wichita has closed after two years. It will be converted to a cardiology office under the same ownership. As I reported in Free standing emergency department about to open in Wichita, the facility received property tax abatements worth an estimated $61,882 per year in the first year. The abatement was scheduled to last for five years, with a likely extension for an additional five years. These abatements were obtained through the use of the industrial revenue bonds program. The emergency room, also called a freestanding emergency department, qualified for tax abatements under a city policy that "r...
Missing from Wichita city documents: Sales tax
Wichita city government

Missing from Wichita city documents: Sales tax

It would be simple for the City of Wichita to include additional relevant information regarding economic development incentive decisions. When the Wichita City Council makes decisions regarding economic development incentives, the Center for Economic Development and Business Research at Wichita State University prepares an analysis for the city. The purpose of the analysis is to determine benefit-cost ratios for overlapping governmental jurisdictions, purporting to show that these jurisdictions will receive more in benefits than they pay in costs. An example of the analysis for a large project is here. The city does not make this analysis document available to the public. It is a public record, though. Every time I have asked, they have been provided. One thing, then, that the city coul...
Sedgwick County tax exemptions
Sedgwick county government

Sedgwick County tax exemptions

Unlike the City of Wichita, Sedgwick County has kept track of its tax exemptions. As part of an effort to increase efficiency and management of Sedgwick County government, former county manager Michael Scholes implemented numerous changes, as detailed in the document Efficiencies in Sedgwick County government. One management accomplishment was described as this: Developed a tax system and business intelligence query to identify Industrial Revenue Bonds (IRB) & Economic Development (EDX) tax exemptions and report foregone property tax revenues for Governmental Accounting Standards Board (GASB) 77 reporting. The report provides the ability to report by tax authority, company, and real or personal property for one (1) or up to four (4) years. Prior reporting was time consuming and error pro...
Wichita business press needs to step up
Wichita city government

Wichita business press needs to step up

If a newspaper is going to write a news story, it might as well take a moment to copy and paste information from a city council agenda packet. Especially when what is missing from the story is perhaps the most important information. When the Wichita City Council approved an Industrial Revenue Bond issue at its July 10, 2018 meeting, the city's business press covered the matter. In the Wichita Eagle, the story fails to mention the motivation for the item. [1. Finger, Stan. Wichita City Council approves bonds for Cargill expansion. Available at https://www.kansas.com/news/business/article214622565.html.] The meeting agenda packet for this item, very near its start, states plainly the benefits of the IRBs: "Cargill Incorporated (Cargill) is requesting a Letter of Intent (LOI) for the issuan...
How much will this cost Wichita taxpayers?
Wichita city government

How much will this cost Wichita taxpayers?

How much, if anything, do tax abatements cost? Someone asked a question regarding an item on the Wichita City Council agenda today: How much will this cost taxpayers? The item in question is agenda item IV-1: Public Hearing and Request for a Letter of Intent to Issue Industrial Revenue Bonds (WAM Investments #6, LLC). [1. Wichita City Council agenda packet for May 1, 2108.] Attached was an article from the Wichita Business Journal previewing the matter. [1. Daniel McCoy. Wichita City Council to consider $6 million in IRBs for industrial spec building. Wichita Business Journal, April 30, 2018. Available at https://www.bizjournals.com/wichita/news/2018/04/30/wichita-city-council-to-consider-6-million-in-irbs.html.] How much do these bonds cost taxpayers? It's important to remember that w...
Sedgwick County’s David Dennis on economic development
Sedgwick county government

Sedgwick County’s David Dennis on economic development

Following the Wichita Mayor, the Chair of the Sedgwick County Commission speaks on economic development. Last week Sedgwick County Commissioner David Dennis penned a column for the Wichita Eagle praising the county's efforts in economic development. [1. David Dennis. Sedgwick County part of drive to strengthen area workforce. Wichita Eagle, March 5, 2018. Available at http://www.kansas.com/opinion/opn-columns-blogs/article203559734.html.] Dennis is also chair of the commission this year. In his column, the commissioner wrote: "Economic development is a key topic for the Board of County Commissioners and for me in particular. Right now we have a lot of momentum to make our community a more attractive place for people and businesses." This emphasis on the word "momentum" seems to be a fad...
Spirit expands in Wichita
Wichita city government

Spirit expands in Wichita

It's good news that Spirit AeroSystems is expanding in Wichita. Let's look at the cost. While it is good news that Spirit AeroSystems is expanding its Wichita operations, it is not without cost to several governmental agencies. Here's a summary of what is publicly available so far. First, a new "entity" will be formed in order to facilitate the construction and ownership of a new building on the Spirit campus. [1. "The CITY, COUNTY and COMPANY would each take action to establish a new legal entity separate and apart from the CITY, COUNTY and COMPANY for development of the PROJECT (the “ENTITY”) which will take such form as the PARTIES may approve." Memorandum of Understanding for Project Eclipse, Section I.A. Contained within agenda packet for Wichita City Council meeting for December 13...
Sales tax incentives yes, but no relief on grocery sales tax
Wichita city government

Sales tax incentives yes, but no relief on grocery sales tax

Is it equitable for business firms to pay no sales tax, while low-income families pay sales tax on groceries? Last week I wondered if the city's agenda packet for economic development incentives proposed for BG Products was complete. [1. Weeks, Bob. Wichita Business Journal grants city council excess power. Available at https://wichitaliberty.org/wichita-government/wichita-business-journal-grants-city-council-excess-power/.] Since the city's narrative had no mention of a sales tax exemption, but the accompanying ordinance that was passed authorized a sales tax exemption, I wondered if the analysis performed by the Wichita State University Center for Economic Development and Business Research was correct. Now that I've received the document, it appears that CEDBR's analysis properly inclu...
Cash incentives in Wichita, again
Wichita city government

Cash incentives in Wichita, again

The City of Wichita says it does not want to use cash incentives for economic development. But a proposal contains just that. Update: The council did not approve this project, by a vote of four to three. This week the Wichita City Council will consider a package of incentives for the developer of a large downtown building, the Finney State Office Center. While the city has said that it does not want to use cash incentives, they are proposed for this project.[1. Wichita City Council agenda packet for April 11, 2017.] Elements of the proposal are these: The Wichita Public Building Commission will sell the building for $100,000. The project is also asking for the city to issue Industrial Revenue Bonds. Despite the use of the term "bond," the city is not lending money to anyone. Someone e...
Won’t anyone develop in downtown Wichita without incentives?
Wichita city government

Won’t anyone develop in downtown Wichita without incentives?

Action the Wichita City Council will consider next week makes one wonder: If downtown Wichita is so great, why does the city have to give away so much? Next week the Wichita City Council will consider a package of incentives for the developer of a large downtown building, the Finney State Office Center. The building has an appraised value of $7,902,570, per the Sedgwick County Treasurer. The city will sell it for $100,000. That's a mere 1.3 cents per dollar, if the county's valuation is reasonable. (But, the $100,000 is non-refundable, should the purchaser decide not to close on the building.) The project is also asking for the city to issue Industrial Revenue Bonds. Despite the use of the term "bond," the city is not lending money to anyone. Someone else will purchase the bonds. Inste...
In Wichita, developer welfare under a cloud
Wichita city government

In Wichita, developer welfare under a cloud

A downtown Wichita project receives a small benefit from the city, with no mention of the really big money. Today the Wichita City Council approved a subsidy for a project in downtown Wichita. The city will lend the developer of a project at 303 S. Broadway $620,000 to improve the building's facade. The property must repay this amount through an assessment on its property tax. The benefit to the property is that the city is able to borrow money at a lower interest rate, and this reduces the cost of borrowing for the project. The agenda packet for this item states: "The Office of Urban Development has reviewed the economic (“gap”) analysis of the project and determined a financial need for incentives based on the current market." This stems from the city's policy on facade improvement pr...
CID and other incentives approved in downtown Wichita
Wichita city government

CID and other incentives approved in downtown Wichita

The Wichita City Council approves economic development incentives, but citizens should not be proud of the discussion and deliberation. Today's meeting of the Wichita City Council saw the council discuss and approve economic development incentives for a project in downtown Wichita. The item contemplated economic development incentives for redevelopment of an empty building in downtown Wichita to become a Hilton Garden Inn Hotel. The incentives being considered were a Community Improvement District (CID), Industrial Revenue Bonds (IRB), a parking agreement, and a skywalk easement. The discussion by the council was useful for revealing two members who are opposed to some targeted economic development incentives, but it also showed a troubling lack of knowledge and consideration by others. ...
In Wichita, more sales tax hypocrisy
Wichita city government

In Wichita, more sales tax hypocrisy

Another Wichita company that paid to persuade you to vote for higher taxes now seeks to avoid paying those taxes. Next week the Wichita City Council will consider issuing industrial revenue bonds to benefit a local company. In Kansas, IRBs are not a loan of money from government. Instead, the bonds are a vehicle for conveying property tax abatements, and often sales tax exemptions. [1. Weeks, Bob. Industrial revenue bonds in Kansas. Available at wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.] The applicant company is Hijos, LLC/JR Custom Metal Products, Inc. City documents give the value of abated taxes at $44,900 for the first year. Following years will probably be similar. Besides property tax breaks, industrial revenue bonds can convey an exemption from payin...
Spirit Aerosystems tax relief
Wichita city government

Spirit Aerosystems tax relief

Wichita's largest employer asks to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through. This week the Wichita City Council will consider offering Spirit Aerosystems economic development incentives that will allow the company to avoid paying some $45 million in taxes. This will be accomplished through the authorization of $280 million of Industrial Revenue Bonds. [1. City of Wichita. Agenda for May 3, 2016. Available at wichita.gov/Government/Council/Agendas/05-03-2016%20City%20Council%20Agenda%20Packet.pdf.] Industrial Revenue Bonds are a vehicle for generating and conveying tax exemptions. [1. Weeks, Bob. Industrial revenue bonds in Kansas. Available at wichitaliberty.org/kansas-government/indus...
Wichita economic development items this week
Wichita city government

Wichita economic development items this week

Two economic development items on tap in Wichita this week illustrate failures or shortcomings of the regime. Update: Both items passed by seven to zero votes at the March 1, 2016 council meeting. This week the Wichita City Council will consider two economic development items. The first item concerns a company named Epic Sports. In 2012 this company received property tax abatements from the City of Wichita in exchange for a 100 percent property tax exemption. The measure passed by a vote of six to one, with former council member Michael O'Donnell voting no. Now Epic Sports has found greener pastures, it seems. Well, it didn't just find them, it sought them, according to city documents: "The company approached economic development professionals in Butler County regarding incent...
Wichita to consider tax abatements
Wichita city government

Wichita to consider tax abatements

Wichita considers three tax abatements, in one case forcing an "investment" on others that it itself would not accept. This week the Wichita City Council will consider three tax abatements to companies in the aerospace business. Two are very large companies, and one is in the small business category. In two cases the tax abatements are implemented through industrial revenue bonds. Under this program the city is not lending money. Instead, the program is a vehicle, created by under Kansas law, for companies to avoid paying property tax. In some cases companies may also avoid paying sales tax. In another case the property tax abatement is conveyed through the city's Economic Development Tax Exemption (“EDX”) program, which allows the city to forgive the payment of property taxes. ...
Kansas cities force tax breaks on others
Taxation

Kansas cities force tax breaks on others

When Kansas cities grant economic development incentives, they may also unilaterally take action that affects overlapping jurisdictions such as counties, school districts, and the state itself. The legislature should end this. When Kansas cities create tax increment financing (TIF) districts, the overlapping county and school district(s) have an opportunity to veto its creation. But for some other forms of incentives, such as tax increment financing district redevelopment plans, property tax abatements, and sales tax abatements, overlapping jurisdictions have no ability to object. There seems to be no rational basis for not giving these jurisdictions a chance to object to the erosion of their tax base. This is especially important for school districts, as they are often the la...
Wichita to consider three tax abatements
Wichita city government

Wichita to consider three tax abatements

When considering whether to grant three property tax abatements, the Wichita city council is unlikely to ask this question: Why can't these companies expand if they have to pay the same taxes everyone else pays? This week the Wichita City Council will consider property tax abatements for three different companies. One is a new request for property tax relief under the city's Economic Development Tax Exemption (EDX) program. The company is a supplier to the aerospace industry. The second is a request for a five-year extension of a five-year property tax abatement. The company met the goals established five years ago. This company is a supplier to the aerospace industry. The third is another request for a five-year extension of a five-year property tax abatement. The company met...
Sales tax exemptions in Kansas
Kansas state government

Sales tax exemptions in Kansas

Can eliminating sales tax exemptions in Kansas generate a pot of gold? Advocates of eliminating sales tax exemptions in Kansas point to the great amount of revenue that could be raised if Kansas eliminated these exemptions, estimated at some $5.9 billion per year. Analysis of the nature of the exemptions and the amounts of money involved, however, leads us to realize that the additional tax revenue that could be raised is much less than spending advocates claim, unless Kansas was to adopt a severely uncompetitive, and in some cases, unproductive and harshly regressive tax policy. A recent advocate for eliminating some sales tax exemptions is Phillip Brownlee of the Wichita Eagle editorial board. In a previous op-ed on this topic he wrote " And with each added exemption, the state is...
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