In selling a plan for the revitalization of downtown Wichita, promoters started with a promise of much private investment for just a little public investment. But as the plan proceeded, the goal kept slipping, and the first project to be approved under the final plan will probably not come close to meeting even the modest goals set by the Wichita City Council.
At the time agitation for a downtown plan started in 2008, research indicated that the ratio of private to public investment in downtown was approximately one to one. A March 2009 document hinted that we could do better, noting “Cities with successful downtown turnarounds have shown that for every $1 of public investment there will be $10 to $15 of private money invested.”
Soon after that Mayor Carl Brewer and others started promoting a 15 to one ratio of private to public investment. At a city council meeting in October 2009, Council Member Janet Miller (district 6, north central Wichita) said “I’ve heard the city manager talk about moving us toward a return more in the neighborhood of 15 to one, private contribution to public.” She described this as an “important benchmark.”
Before long, some may have realized that a 15 to one ratio was unrealistic. In the briefing city officials gave the city council in December 2010 when it approved the Project Downtown plan, the information presented to the council called for “$500 million in private-sector capital investment over the next 15-20 years.” The plan also called for “An estimated $100 million in parking, streets, and parks/open space improvements,” establishing a five-to-one ratio of private investment to public investment. The document also gave officials a lot of wiggle room, as the $500 million of private investment is qualified: “As much as $500 million.”
It seems that some didn’t get the message and still pitched the original promise. In his January 2011 State of the City Address, Mayor Brewer said “In efforts to keep people working, the completion of the community-driven Downtown Master Plan will lead us to a point where ultimately the private investment exceeds public investment by a 15 to 1 ratio.”
Then in May 2011 the council approved a document titled “City of Wichita Downtown Development Incentives Policy.” This policy calls for “Minimum private to public capital investment ratio of 2 to 1.”
So we’ve gone from 15, to five, to two.
Now, for the first project to be considered under the new plans and polices: Douglas Place, a downtown Wichita hotel being proposed by a development team led by Wichitan David Burk.
According to minutes of the August 9 meeting of the Wichita city council, Allen Bell, Wichita’s Director of Urban Development, said that the ratio of private to public investment for this project, as calculated by his office, was 2.2 to one.
I’m not quite sure how they arrived at that value, as at the same council meeting Bell presented information that the total developer costs were $21,640,000, and the city investment would be $7,710,000. That’s a ratio of 2.8 to one.
This calculation, however, does not come close to capturing the total public investment in this project. For example, it leaves out the $7,300,000 in tax credits the developers will receive. It doesn’t include the benefit of allowing the hotel to keep 75 percent of the guest tax it generates, or the two percent extra sales tax the city will let it charge and keep. It doesn’t include the revenue the developers will get from renting out retail space the city provides to them at a cost of $1.00 per year. It doesn’t include $600,000 in sales tax exemptions the city will grant the hotel. It doesn’t include the value of 125 parking spaces reserved for the hotel’s exclusive use at below market rent.
(I’m sure we’ll hear explanations that the tax credits aren’t paid for by Wichita taxpayers. They’re paid for by state and federal taxpayers. This is the type of reasoning we’re accustomed to from the mayor and city council.)
So in just two years the plans for downtown Wichita have gone from a lofty promise of $15 dollars in private investment for each $1 of public investment, down to $5, then down to $2. And an honest evaluation of the first project under the plan would find that it, almost certainly, doesn’t meet the $2 threshold.
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