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New Y seeks $23 million in tax-free bonds

  • The Wichita Eagle
  • Published Monday, Feb. 7, 2011, at 12:05 a.m.
  • Updated Wednesday, Feb. 16, 2011, at 3:39 p.m.

The city of Wichita is considering issuing $23 million in industrial revenue bonds to help finance construction of a proposed new downtown YMCA.

A public hearing is set for Feb. 15 at City Hall.

As a nonprofit, the Y is eligible under federal tax codes to have its capital building projects financed with tax-exempt bonds, meaning they carry a lower interest rate because the purchaser of the bonds doesn't have to pay taxes on them, said Allen Bell, the city's director of urban development.

If the bonds are approved by

the City Council, the city would own the facility and lease it to the Y until the bonds were paid off. The lease payments would equal the bond payments, Bell said.

After the bonds were paid off, the city would deed the property over to the YMCA.

The owner of Genesis Health Clubs, private fitness clubs that view the Y as competition, criticized the Y was seeking such bonds.

The Y last month announced a $40 million fundraising campaign for the new downtown Y and other projects.

It plans to raise the $23 million to pay off the bonds for the Central Branch, plus another $17 million for its other projects, through a combination of private gifts, foundation grants and gifts, and operations revenue, said Shelly Conrady, communications director for the Greater Wichita YMCA.

The IRBs would pay up-front construction costs to build the new downtown branch and would be paid off over time as donations come in, she said.

The Y's other projects include the expansion and renovation of Camp Hyde in Viola, new outdoor sports fields at the South Branch and an east-side site yet to be determined, an indoor sports center at an east-side location yet to be determined, and the expansion of the existing Northwest Branch.

When the Y launched its fundraising campaign, business leaders said a new downtown Y is needed to replace the current 50-year-old facility and expand recreation and services to low-income kids and their families.

A new 110,000-square-foot facility would be built adjacent to the current location at 402 N. Market.

The city has no risk in relation to the proposed IRBs, Bell said.

"We are not backing the bonds. We're making no financial commitment of any kind on this undertaking," he said.

Bell said the city issues IRBs for organizations such as hospitals, nursing homes, and universities, not merely for industrial projects.

"We've been doing this for years and years for the YMCA," Bell said.

The Y built the South Branch and made improvements to the Central Branch using industrial revenue bonds, he said.

Issuing the bonds ultimately would have to be approved by the City Council.

"I don't see any downside," council member Jeff Longwell said.

The bonds aren't backed by the city, and they don't provide any tax breaks to the Y because as a nonprofit the Y doesn't pay taxes, he said.

"It's not a bond that puts anybody at risk in terms of taxpayers or the city," Longwell said.

Rodney Steven II, owner of Genesis Health Clubs, said it is "unfortunate that the Wichita YMCA is seeking tax-exempt bonds that further expand the amount of tax money that goes to the YMCA."

The tax dollars take the form of sales and property taxes that aren't paid, and direct government payments, he said.

Steven asked the city for industrial revenue bonds to help build a new Genesis club in 2004, and later sued, claiming the city reneged on a deal to issue the bonds. Genesis eventually lost the case.

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