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Wichita City Council approves tax breaks for speculative buildings

  • The Wichita Eagle
  • Published Tuesday, August 14, 2012, at 12:28 p.m.
  • Updated Friday, August 23, 2013, at 4:55 p.m.

The Wichita City Council approved economic development guidelines Tuesday that will exempt new speculative industrial buildings from property taxes for as long as 10 years.

Developers, business leaders and city and county officials who studied business in Wichita concluded that the city would be more attractive to new businesses if it had a ready supply of speculative buildings, which are constructed without a particular user under contract.

Having such buildings available makes it easier to attract new business because it reduces the delay and cost of starting or relocating a company, said urban development director Allen Bell. Wichita currently has a severe shortage of business-ready buildings and many of the city’s competitors have publicly owned industrial parks.

City and county staff had proposed a less generous benefit for smaller industrial buildings, with buildings of less than 100,000 square feet getting smaller tax abatements, down to 50 percent for a 50,000-square-foot building.

The council, led by council member Michael O’Donnell, opted instead by a 5-2 vote to go for the full abatement.

“As long as it’s a 50,000 square-foot building, I’d like to do a 100 percent abatement,” O’Donnell said. “If we’re going to do it, do it right.”

Council members Janet Miller and Lavonta Williams voted against the policy.

Miller said the sliding scale was designed “to encourage a variety of sizes of buildings” and giving the same abatement to smaller buildings would take away incentives for developers to build bigger.

Smaller buildings are less risky for developers, Bell said.

Unlike most economic development projects, the speculative buildings won’t have to provide a firm commitment of new jobs to be eligible for tax abatement, since it won’t be clear from the start what businesses will occupy the new facilities.

The initial tax abatement on speculative buildings will run for five years. The abatement can be renewed for a second five years if the building and its tenants meet a sliding scale for capital investment and job creation.

Several members of the public objected to the policy, saying it interferes with free markets in real estate.

Myron Ackerman, who owns development and rental properties, said the new policy uses tax dollars to give an unfair advantage to developers of speculative buildings, over the owners of existing business space who have to pay taxes.

“It’s insane you all think you know how to run a business,” Ackerman told the council.

Bell said after the meeting that the new guidelines will also help owners of existing buildings.

At present, the city allows tax abatement for redeveloping and reoccupying buildings that have been vacant for three years or more, Bell said.

The new guidelines reduce that to two years and also creates criteria for making exceptions for some buildings that haven’t been vacant that long, if the plans are particularly beneficial to the community, Bell said.

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