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Wichita airport hotel ownership unclear

The Wichita City Council plans to use the consent agenda to vote on an item containing confusing language.

For the Tuesday June 25, 2019 meeting of the Wichita City Council meeting, item No. II-17 concerns the city leasing land to a company wanting to build and operate a new hotel near the airport. 1 The agenda packet holds this language:

“Upon execution of the lease, WEH will provide a $2 million good faith security deposit in escrow with the Airport to ensure timely construction of the hotel. Upon completion of the roof construction, the deposit will be available to WEH for additional construction costs. WEH will invest a minimum of $12 million of private funds to build and equip the property, which the structure will be owned by the WAA in accordance with existing policy. During the life of the lease, WEH is required to make periodic capital improvements and re-investment obligations in order to maintain its franchise agreement with a national flag hotel.” (emphasis added)

(WEH is Wichita Eisenhower Hotel, LLC, a private company formed to construct and operate the hotel. WAA is the Wichita Airport Authority, which is the same as the Wichita City Council.)

Reading this, can you tell me who will own the hotel building? I wondered, so I posed this question by email to the city’s public information officer: “The sentence fragment ‘which the structure will be owned by the WAA in accordance with existing policy’ sounds like the hotel building will be owned by the Wichita Airport Authority. Is this correct?”

I received a generic response that illuminated nothing. 2 My follow-up question was not acknowledged by the end of the day.

The council will, at least according to its schedule, consider this item tomorrow morning. Will city council members, acting as the Wichita Airport Authority, have a clear idea of the meaning of this agenda item and the supporting contract?

I think I know what it means. WEH will own the hotel and lease the land from the city. There’s language like this: “The development group requesting a lease agreement has formed a Kansas corporation to own and operate a hotel on the Airport.” (emphasis added)

Further, the lease is priced by the square foot of land (49.6 cents per square foot per year), although after four years that is replaced by a minimum agreed amount or a percent of the revenue of the hotel.

All this points to WEH owning the hotel building, not the city through the Airport Authority, although the Wichita Business Journal has a different opinion. 3 But it’s a shame that we must guess what the city means.

Will city council members also have to guess? Perhaps. This item is on the airport’s consent agenda. Unless a council member speaks up and asks for clarification, there will be no discussion on this item.


Notes

  1. Wichita city council final agenda packet for June 25, 2019. Available at https://wichita.gov/Council/Agendas/06-25-2019%20Final%20Council%20Packet.pdf.
  2. “All buildings and land are owned by the Airport Authority, with just a few exceptions. The FAA owns the control tower and the Post Office and the County owns the buildings at Jabara‚Äôs WSU Tech campus. But even in those cases, the land is owned by the Authority. Tenants pay land and building rent but do not pay property taxes.”
  3. The Wichita Airport Authority, which will also own the structure …” McCoy, Daniel. *New hotel planned for Wichita Eisenhower National Airport. Available at https://www.bizjournals.com/wichita/news/2019/06/21/new-hotel-planned-for-wichita-eisenhower-national.html.
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