Print edition: 
Developers who received $2.5 million in city subsidies to renovate a northeast Wichita shopping center have diverted the money to develop a Walmart neighborhood grocery store at the site.
And on Tuesday, the City Council members retroactively changed the development plan to reflect a reality they can't change.
The vote was a 4-3 split with council members Pete Meitzner, Michael O'Donnell and James Clendenin voting no saying they wanted more time to study the proposal.
The Walmart project is already under way at the site of the former KenMar shopping center at the northeast corner of 13th and Oliver. One of the main commercial buildings at the site has been mostly torn down.
The council also approved using taxpayer money to back the development plan instead of borrowing the money through bonding, because the changed plan will not generate enough new property tax to pay back the city's investment.
Under the new plan, the developers have agreed to pay the city about $10,000 a year to cover the shortfall.
If the development generates as much property tax as the city hopes and the developers pay $10,000 a year, it should be enough to pay back the city's $2.5 million investment, plus 3 percent interest, over 17 years.
If the city had gone forward with bonding the project at a higher interest rate, the estimated shortfall would have been about $42,000 a year.
The project is being managed by the Rev. Dr. Kevass Harding, pastor of DellRose United Methodist Church and a former member of the Wichita school board. He said he embarked on the project because the shopping center, situated behind his church, has been a haven for drug dealing and prostitution.
His company, H.H. Holding LLC, paid about $2.2 million — $827,000 of which was city funds — for the property.
H.H. sold roughly half of the land to Wal-Mart Inc. for about $1.9 million.
H.H. retains the rest of the site and plans to redevelop it in a style consistent with Wal-Mart's project, documents show.
Council member Michael O'Donnell questioned why the city hadn't gotten a share of the profit from the sale of land for the Walmart store since it had fronted the developers a significant share of the purchase price.
"I get this all the time, particularly being a pastor," Harding replied. "They think I'm making a whole lot of money off this deal.... I'm discovering that developers are the last people to get paid. Everyone's getting paid but me. All of the work that you see here, that's where that money has gone, so it's not like I'm sitting here with millions of dollars in my pocket or bank account."
Harding said he had received no money from the Walmart part of the project, although he has made some from the remainder of the site.
While Harding has been the public face of the project, documents obtained by The Eagle on Monday show that as of late last year, Harding's partners in the project include prominent downtown developer David Burk, along with Key Construction owners David and Kenneth Wells.
Burk and Key Construction are longtime partners on projects such as Old Town, the WaterWalk and the Old Town Warren Cinema Plaza. Last month, the council approved a multimillion-dollar incentive package for their Douglas Place project, a planned upscale hotel at Broadway and Douglas.
Americans for Prosperity, a national group that advocates for free-market economics, is circulating petitions seeking to overturn the incentive package for Douglas Place.
Representatives of the group protested the city's handling of the KenMar project at Tuesday's meeting.
Susan Estes, the local representative for AFP, said the city's original development agreement for KenMar was "really meaningless."
"Now I find out that city staff and some, some, council members conspired with the developer in secret meetings that other council members apparently did not know about, to figure out with a 'wink, wink, nudge, nudge' how do we not go to the public with this in order to protect the deal with Wal-Mart. I think this is a prime example of good intentions and maybe even the right outcome being completely... obliterated by the process," she told the council.
"I think every single taxpayer needs an apology that some council members were left out of something and things were not brought back for a public hearing to make the change."
Mayor Carl Brewer took umbrage at the insinuation that council members and staff acted improperly, saying that meetings between businesses and individual council members are common practice.
He assailed AFP's ideology of minimal government involvement with the private sector. He said he was born in Wichita and has watched for more than 50 years as the inner city decayed from business moving to the suburbs.
AFP's complaints, he said, are "a graceful way of saying, 'You know, we don't think you (the council) should be doing anything and we don't think you should be making anything right when going in and trying to improve the quality of life for some citizens.'"
Allen Bell, the city's director of urban development, acknowledged that some city officials — including himself, Brewer, Vice Mayor Lavonta Williams, City Manager Robert Layton and City Attorney Gary Rebenstorf — met with the developers and knew about the switch from renovating KenMar to building a Walmart store almost from the start.
He said the project changes weren't brought back for council approval until after the land was already sold because Wal-Mart Inc. insisted on confidentiality until it closed on the purchase.
Layton said the city officials who were aware of the dealings emphasized to the developers that the changes would require approval by the full council and that they would be proceeding at their own risk until then.
He said he was unhappy with the process, but that going along with the Walmart store proposal seemed to be the best and possibly the only way to salvage the city's $2.5 million investment.
In addition to the $827,000 in city money Harding used to acquire the KenMar site, the city also provided about $1.67 million for improvements including parking lot paving and landscaping.
The original development agreement, approved before Layton was hired, did not provide any collateral that the city could claim if Harding and his partners did not perform. Thus, they simply could have bankrupted the limited liability corporation they created to develop KenMar and the city would have had no recourse, Layton said.
Layton said similar agreements negotiated now and in the future will contain more assurance, possibly through collateral or performance bonds, that the city can get its money back if the project fails or is significantly changed.
