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In Wichita, corporate welfare not needed, after all

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.

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13 Comments

  1. Ayn June 1, 2011

    Why has no one ever identifieed Snyder as the spouse of newswoman Susan Peters?Also did anyoneever do due diligence on Snyder’s California business ventures?

  2. A Nony Moose June 2, 2011

    You’ve over simplified this matter because you don’ t have enough information and don’t understand “development” and business risk.

    The new developer isn’t really a developer. It’s the same store owner who was going to lease the building that Snyder was going to build. It cannot be stated that no subsidies were needed because we don’t know and will never know. It’s about who is taking the risk in the venture and how much perceived risk they are willing to take.

    Obviously, in the original proposal, the developer felt that there was substantial risk between the cost to provide the building and site and the lease amount that the tenant or store owner was willing to pay based upon market studies showing projected sales.

    Under this scenario, the arrangement is different. The developer has been removed from the equation. The financial model is different for the store owner than for the developer.

    Do we know the value of the land that was purchased? Do we know if the developer lost money in the transaction? Perhaps, that is why the “gap” no longer exists. Do we know if the price of the building and development are the same? Is the cost per square foot of the building the same? Do we know if the market studies are the same? Have they changed?

    There are dozens of other questions to which the answers are and will be unknown. What we do know for certainty is that the store owner is taking the risk, not the original developer.

  3. Anonymous June 2, 2011

    I think we can say for sure that Snyder was just looking for a handout. Things can’t change as much as the previous poster claims they might have in such a short time. This is a disgrace for Wichita city government in that they were taken for suckers.

  4. kimpot54 June 2, 2011

    Me thinks A Nony Moose thinks he’s way smarter than you are Bob. Implying that others are ignorant and stupid won’t win you any friends, Moosey–especially not here. Oh, and the Wichita Eagle came up with pretty much the same conclusion as you Bob, although not the indepth analysis that you’ve provided here.

  5. Anonymous June 2, 2011

    Surrrre Kimmie. Let me ask you something. Is it your MO to pontificate about subjects you know very little about? Do you tell somone like Jodie Galichia that he doesn’t know what he’s doing when it comes to heart surgery? Do you criticize someone like Charlie Chandler that he doesn’t know anything about banking? And when somone doesn’t agree with you or B O B or your Libertarian ideology, then well, they’re just summarily dismissed as being elitists or smart a$$es.

    Fact of the matter is that B O B doesn’t know all that much about what he writes. Oh sure he regurgitates a bunch of Libertarian rhetoric and ideology when it supports his opinion but that doesn’t make him an authority.

  6. RG June 3, 2011

    To the last Anon: and what kind of authority do you have on this subject, exactly?

  7. craig gabel June 3, 2011

    Wouldn’t it be great if Allen Bell and his counter parts at the State and county would spend as much time working with Walmart to identify products that could be manufactured here in Kansas. Now that would be true economic development taking jobs from China and creating them in Sedgwick County. Instead they spend their time trying to figure out how to use some 70 year old widows taxes for a “hand out” to some some developer. That will then use the money to put some hard working tax paying business owner out of business with unfair competition.

  8. Anonymous June 4, 2011

    Some people should learn to pay their taxes.

  9. Camarade C June 4, 2011

    To “Moose” I would like to buy a $400,000 house in Vickridge but I can’t afford the monthly note. Do you think the Council would help me? If everyone in Wichita gave me a dollar, I could buy the house outright and redecorate! I would even invite Longwell and BREWER to my house warming.

    To Anon 2: You need to take an anger management class…at the tax funded university at 21st and Hillside.

  10. A Nony Moose June 4, 2011

    So, CC, what’s your point? Doesn’t even address my comment. Typical comment. Can’t debate the issues, so just go down an irrelevant tangent.

  11. CC June 4, 2011

    To MOose..The point is there is no point..much like your arguement!

  12. ictator June 9, 2011

    CC, Kimpot, & Craig deserve credit for trying to elevate this discussion.

    I remember the Wichita news media reporting that this project could not be completed without the TIF/CID that the competing grocery stores in the area did not enjoy.

    A few months after the county rejected the TIF district, this project now proceeds without these special subsidies.

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