A missed linkage between developers involved in a Wichita tax increment financing (TIF) project means progress should be stopped until all facts are known.
In July, 2007, the City of Wichita considered a development plan (the Center City South Redevelopment District) for a tax increment financing (TIF) district in downtown Wichita. The beneficiary of the TIF financing is Real Development, whose principals are commonly known as the “Minnesota Guys.”
The report from the City Manager’s office to the council from July 17, 2007 states: “The City will acquire the property within the Project Area from DGL, LLC, an unrelated third party, for a cost not-to-exceed $1,975,000, and convey property to Lofts at Exchange Place, LLC.” (Page 164. The information for this item starts on page 131.)
The “DGL, LLC” referred to as an “unrelated third party” is actually “DGL Investments, LLC.” We can be sure of this for two reasons: First, there is no “DGL, LLC” registered in either Kansas or Minnesota, but there is “DGL Investments, LLC” registered in both states, although the registration is forfeited in Kansas. Second, the current owner of Exchange Place, according to Sedgwick County records, is DGL Investments, LLC.
(You may be wondering why I looked for record of this company in Minnesota. Well, these are the “Minnesota Guys” after all.)
So who are the people behind DGL Investments, LLC? Here’s two clues:
On a registration form for the Kaufman Building on file at the Kansas State Historical Society, the owner of the building is identified as “DGL Investments, LLC (contact Michael Elzufon – Real Development).” This form is dated November 20, 2006.
There’s also a lease agreement dated September 1, 2006 between the Kansas Department of Corrections and DGL Investments, LLC, where the contact person is given as “Michael Elzufon – Real Development.”
(Michael Elzufon is CEO of Real Development, the company that is developing the buildings that are the subject of this TIF district redevelopment plan.)
It’s true that DGL Investments, LLC is not the same legal entity as the group the city is granting TIF financing to. So what the City Manager’s report says is true — on a technical level.
But in less than an hour, I was able to find documents that establish a positive linkage between two companies that the city says are unrelated. It’s possible that these documents weren’t available online in July 2007. But there are other ways to discover the linkage between these two companies.
I don’t know why the city wasn’t aware of this relationship. Wichita’s public information office forwarded my inquiry to someone who could answer my questions, but I’ve not received a response.
But it appears that one of several things happened. Perhaps city staff wasn’t aware of the connection between DGL Investments, LLC and Real Development. This could have happened though staff’s negligence, or by relying on information provided by Real Development. Or maybe city staff knew of the relationship, but wanted to hide it from the city council and the people of Wichita.
There could be other possibilities, too. None of them are good.
So what should the city council do? This matter dates from July 2007, but this TIF district’s development plan was modified in December 2008. To my knowledge, the property has not been transferred, and the city hasn’t sent money to these developers. There is time, and in my opinion, the necessity, to stop progress on this TIF district until this oversight by city staff can be corrected.