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Many Wichita developers pay for infrastructure

A frequent and valued commenter on this blog wrote a comment a few days ago that contains a factual error. I think it’s important to understand this error, because it goes to the heart of the difference between developers working in TIF districts and those who aren’t. Here’s the comment:

The thing is that real estate developers do not invest in public streets, sidewalks and lamp posts, because there would be no incentive to do so. Why spend millions of dollars redoing or constructing public streets when you can not get a return on investment for that.

I think this perception, wrong as it is, is common: that when we see developers building something, the City of Wichita magically builds the supporting infrastructure, and at no cost to the developers. But it isn’t quite so. A while ago I had done some research to make sure I correctly understood the relationship between the city and real estate developers. I chose a development on the east side of Wichita, mostly because I live nearby and was familiar with the project. Here’s what I found when I searched for City of Wichita resolutions concerning this project:

03-637 Water Distribution System Number 448-89901: $54,000
04-571 Lateral 47, Main 24, War Industries Sewer: $52,500
04-570 Water Distribution System Number 448-90011: $83,000
04-572 Left and right turn lanes on 13th Street: $310,000
05-264 Traffic signalization at the intersection of Waterfront Parkway and Webb Road: $120,000
05-259 Storm Water Drain No. 189: $400,000
05-265 Street lighting system: $125,000
05-262 Left and right turn lanes on Webb Road: $393,000
05-260 Waterfront Parkway from the North line of 13th Street to the East line of Webb Road: $1,672,000
03-347 Street lighting system: $125,000

The total cost of these projects is $3,334,500, and I’m pretty sure I didn’t find all the resolutions and costs pertaining to this project.

Who pays these amounts? The developers whose project benefited from these improvements. They pay it all: water systems, sewer systems, turn lanes on existing streets, new street construction, traffic lights, etc.

In a TIF district, these things are called “infrastructure” and will be paid for by the development’s property taxes. Outside of TIF districts, developers pay for these things themselves.

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2 Comments

  1. Wichitator December 8, 2008

    If the developer pays for this and his competitor receiving the TIF does not, why the government have the power to grant one and not the other?

    Why don’t we make the whole community a TIF district if this type of spending is such a great idea.

  2. Pat February 2, 2009

    Again, an incomplete picture is given. It is true that in green field development meaning new development along the fringe of the city will spread the infrastructure costs against the property as special assessments; however, without understanding the economic model and differences between new development along the fringe and redevelopment or infill development, this example isn’t really an apple to apple comparison. Developers generally will not pay special assessments. Specials are generally passed along to tenants or downstream owners. This cost is a cost that is passed along to the consumer, so to say that the developer pays the specials is not entirely accurate. Also, the market demographics support higher rental rates, land prices, retail prices in the fringe areas while market demographic in lower income areas do not. The cost to put in sanitary sewer in a green field development is often less than the same cost to extend or upgrade sanitary in an infill project. Again, higher costs with less economic ability to service the cost. This same analogy exists across the state where we see little new homes being constructed in places like Anthony, Coldwater, etc. The cost to build a house there is much greater than building the same house here in Wichita yet the market will not support the same retail value there as it does here.

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