More Wichita Community Improvement Districts proposed

Tomorrow’s meeting of the Wichita City Council will consider starting the process for the approval of three Community Improvement Districts in Wichita.

CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

CIDs may work in one of two ways: First, the city might sell special obligation bonds, give the money to the applicant, and pay off the bonds with the extra sales tax that is collected.

The other way is “pay-as-you-go,” in which the extra sales tax is sent to the applicant as it is collected.

Tomorrow’s city council meeting will accept petitions by property owners in the proposed CIDs and set dates for public hearings, usually around 30 days in the future.

The first of the proposed CIDs is the Bowllagio project at Kellogg and Maize Road. This is proposed to be a pay-as-you-go CID, meaning that the city will not issue bonds. The applicant proposes to collect the full two cents per dollar extra tax for up to 22 years.

The second is a development in the 2600 block of north Maize Road titled Central Park Place Development. The applicant proposes collecting an additional one cent per dollar for up to 22 years on a pay-as-you-go basis.

The third project is Planeview Grocery Store Project at George Washington Blvd. and Pawnee in southeast Wichita. This applicant proposed to collect two cents per dollar extra sales tax on a pay-as-you-go basis. This applicant also proposes creating a tax increment financing (TIF) district.

According to city documents, a goal of this project is to provide “affordable access to grocery shopping to the underserved Planeview area.” But if affordability is a goal of this project, we have to question the wisdom of adding two cents per dollar spent to the grocery bills of low income people.

Community Improvement Districts and public policy

There are several public policy issues surrounding Community Improvement Districts that deserve consideration.

First, the extra sales tax collected in these districts needs to be considered from a consumer protection perspective. How will shoppers in these districts learn that they are going to be paying extra sales tax? While some shoppers may not care, certainly low-income shoppers need to stretch their grocery dollars. Asking them to spend two cents extra per dollar doesn’t seem like the city is watching out for the best interests of its citizens.

Then there’s the “tax our visitors” strategy of council member and Vice Mayor Jeff Longwell and some other council members. Since the extra sales taxes in some CIDs like a hotel will largely be paid by visitors, it’s a wise economic development strategy, they say.

We need to consider, however, the effect of these high sales tax districts on visitors to Wichita. Will they be happy with their decision to visit Wichita once they learn of the high taxes on their hotel or restaurant bill? Will they mistakenly assume that these high taxes apply to the entire city? When corporate expense accounting sees the high taxes charged in Wichita, will they want to send business here again?

But perhaps the simplest public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

No one at Wichita city hall has an answer for this question.

7 Comments

  • Anonymous -

    The developers don’t want the merchants to charge more because the developers would not be able to get the extra money. This is a welfare program for the developers.

  • Anonymous -

    So what’s your point? The developers are taking all the risk for the endeavor.

    As to your question, “If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices?” is naive. Stick to areas about which you are knowledgeable. Heck, even your buddy Craig Gabel sees the CID as a way to help redevelop areas.

  • Anonymous -

    I think Bob needs to revisit his generous policy of allowing anonymous comments. It allows “Anonymoous” to make content-free criticisms without any accountability. Therefore, “Ananymous” is without credibility.

    Calling something naive is not substantive. If you can’t do any better, “Anonymous” you ought to stop commenting here. We’d all be better off. In the meantime, keep sucking up to the mayor, city council members, and city hall bureaucrats.

  • Anonymous -

    LOL. “Calling something naive is not substantive. If you can’t do any better, ….. you ought to stop commenting here.”

    And, the original blog is somehow better? It editorializes and is content free without any analysis, which isn’t surprising. People who don’t develop don’t understand the risks involved or the rationale. It’s not necessarily a bad thing, just that’s what it is.

    The fact of the matter is the blog is naive as it clearly is a prima facie example of not understanding the business relationship between a retail user and the developer. If he did, he wouldn’t be asking such a ridiculous question.

    The fact that you run to his defense without acknowledging even the simplest points gives rise to your own hypocrisy in “credibility”.

  • Mike (but do you REALLY KNOW) -

    Hi, I’m sure I’ll get corrected if I’m wrong, but I don’t agree with the statement below: “So what’s your point? The developers are taking all the risk for the endeavor. ”

    The impression from all of the BS is that the purpose of Community Improvement districts is to lessen the risk for the developer. I ALSO don’t agree with lessening the risk for any businessman anywhere. Government help leads to government control.

    Later

    Mike

  • Anonymous -

    @ Mike. It is true, but the developer does indeed take all the risk. The city staff reports which are available online make note that is no risk to the city.

    Does the CID help lessen the risk to the developer? Yes, by providing an added revenue stream in which to pay the costs to develop the site. However, the developer’s business model has to take into account fluctuations in the revenue stream. Sales tax revenue as we know is very elastic. The number one killer of businesses is cash-flow.

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