One of the strategies that two downtown Wichita hotels have pursued is to form a Community Improvement District (CID) to benefit their hotel.
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. In the case of the two hotels in downtown Wichita — Fairfield Inn & Suites Wichita Downtown and Drury Plaza Hotel Broadview — both elected to go for the full two cents of taxpayer welfare.
Now Douglas Place, a proposed hotel in Wichita, wants the same deal for itself.
To stay in these hotels, guests must now pay 15.3 percent in taxes. That’s 7.3 percent regular sales tax, 6 percent regular guest tax, and now 2 percent in CID tax. That places these hotels in a pretty high tax bracket. By way of comparison, guests staying in New Orleans hotels pay just 13.5 percent in tax. New York City hotels charge 15.4 percent, almost exactly the same as these Wichita hotels. In Las Vegas it’s 12 percent, and Overland Park tops the chart of the cities I looked at with tax of 17.6 percent added to hotel bills.
The rise of CIDs is an example of the city working at cross-purposes with itself, as many of the CIDs are for the benefit of hotels and other tourist attractions. Now we have the situation where we spend millions every year subsidizing airlines so that airfares to Wichita are low. Then we turn around and add extra tax to visitors’ hotel bills and perhaps the shops and restaurants they visit. Wichita City Council Member Jeff Longwell and others approve this as a wise strategy.
Defenders of the CID tax say it is a voluntary tax that the hotels or merchants place upon themselves. That’s true, although in some cases, such as retail stores, customers will probably not be aware of the tax until after they make their purchases, because the city decided against notifying customers of the extra CID tax in a meaningful way. Lawrence, however, has decided to require strong warning signage to inform customers about the special CID taxes they’ll pay.
Hotel guests are likely to be better informed than retail store customers about the taxes they’ll pay, as for both Wichita hotels, their reservation systems accurately reported the 15.3 percent tax as part of the total cost of staying at the hotel.
The problem is that the extra tax that CIDs collect risks giving Wichita a reputation as a high tax place to live or conduct business. We don’t have mountains, oceans, or even casinos to attract visitors and business. We do have a relatively low cost of living, which could translate into a low cost place to hold a convention or business meeting.
But the CID tax — a tax that is often targeted at visitors under the Longwell strategy — works against this advantage.
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