If developers want the city to let them charge extra sales tax and use it to help fund their business, they’ll have to alert their customers in a clear way, such as a sign on the front door or an itemized line on their receipt.
That’s the upshot of the city council’s informal discussion about community improvement districts in city hall today. The city has been grappling with rules for the districts since it penned a policy about five months ago.
The districts are a new economic development tool approved last year by state lawmakers. The districts let developers add up to 2 percent sales tax on purchases inside the district for up to 22 years. The taxes flow to the state, through the city and back to the developers to pay for private or public improvements, including some business operating costs.
Wichita created a policy that is stricter than what the state law allows. It will only allow creation of a district if every property owner agrees to it and signs a petition. And it will allow only pay-as-you go financing, which means the city doesn’t give the developer money up front — only as the sales taxes flow in.
Already, the city has approved such tax districts for several future developments, including a hotel at WaterWalk, a massive bowling and retail development at Kellogg and Maize, a retail development at Central and Oliver and a grocery store in Planeview.
As more developers request the city’s blessing for the districts, the city is talking about tighten its rules. At least four council members said they’d favor some sort of on-site notification to consumers. That could mean a sign on the front door explaining the extra tax, a note at the check-out registers or just an itemized line on sales receipts. A proposal is expected to emerge in coming weeks.
Allen Bell, director of urban development, said developers strongly oppose such signs. “It would scare away shoppers,” he said, recalling what developers told him in an earlier meeting.
“Developers are united in their position that signage will defeat the purpose of having CIDs by making it impossible to attract tenants and get financing,” developers said, according to minutes from that meeting.
Council member Paul Gray agreed, and said that he favors putting a list of all stores charging the extra sales tax on a centralized web site so that people can see all of the CIDs at once and make decisions about whether to shop there.
Council member Janet Miller said she wants visible signs. “It sounds like we have to hide it form the public or it won’t work,” she said.
City Council member Jim Skelton supported a CID in his district because residents he’s talked to support a proposed Save-A-Lot grocery store despite the extra tax because it’d be cheaper to pay the extra 2 percent tax at a store within walking distance than to catch a bus to another grocery store that suits their needs. Still, he said, he favors signs to alert shoppers of the tax.
“I think the shopping public, the consumers, have a right to know,” he said. (Lawrence has debated the issue as well, but commissioners there never voted on the issue and the debate over tax warning signs has quieted.)
In their discussions, council members also reached informal agreement to allow CIDs for residential developments, and to allow the districts in places that may already be in an area that would be developed without incentives.
Council members also said they want developers to produce a “statement of need” that explains why the sales tax is necessary. Council members didn’t reach any consensus on how to measure whether a CID in one area could harm other businesses that don’t charge the extra tax.