February 22, 2012

Fact-checking claims on the Ambassador Hotel vote

Both sides of Tuesday’s Ambassador Hotel vote have produced several mailers touting their point of view on the guest tax vote. The Eagle has fact-checked several of their claims.

Both sides of Tuesday’s Ambassador Hotel vote have produced several mailers touting their point of view on the guest tax vote. The Eagle has fact-checked several of their claims.

Registered Wichita voters will decide Tuesday whether the Ambassador development group can keep 75 percent of the guest tax revenue the new 117-room boutique hotel generates over its first 15 years, an estimated $2.25 million. The arrangement was approved last year by the Wichita City Council.

A yes vote on the referendum lets the developers keep the guest tax revenue, which is levied against hotel customers and is not a general tax levy against Wichita taxpayers. A no vote would leave the revenue in the city’s convention and tourism fund.

Regardless of Tuesday’s outcome, the project will be built and currently is about 15 percent done. The outcome of the vote will affect the scope of the project, developer Paul Coury said last week.

Vote Yes claims

In four mailers, The Eagle found that the pro-Ambassador group’s claims are largely correct. However, The Eagle found three instances where semantic liberties have been taken with the facts surrounding the development.

The most glaring is the Vote Yes group’s claim that the project will create 1,102 new jobs, a claim the group attributes to a study by Wichita State University’s Center for Economic Development and Business Research. The center’s director, Jeremy Hill, says the claim is a stretch because the vast majority of the jobs – almost 1,000 – are construction positions that will either be temporary work or transferred on to other projects.

In fact, the only permanent jobs created by the project that can be quantified are the 124 new positions at the hotel itself.

The other issue is the claim that the Ambassador project creates “no new taxes.” This claim appears flawed by the group’s own financials, which include $60,000 annually from a new 2 percent sales tax that will be tacked onto Ambassador hotel bills as part of a community improvement district, or CID.

In addition, the project is the recipient of $3.8 million in Kansas historic preservation tax credits and $3.5 million in federal historic preservation tax credits. The credits are sold to investors, which then use the credits to offset their tax bills, thus lessening the tax receipts of the state and federal government when the buyers apply them.

Neither the historic tax credits nor the community improvement district tax are up for a public vote Tuesday.

The Vote Yes group also incorrectly frames the project’s return on investment for the city of Wichita as a “private to public investment ratio of nearly 3 to 1.” The WSU center’s study found a return on investment to the city’s general fund of 2.63 to 1. The study also found an overall. negative impact on the city’s debt service fund, due to the city’s planned $7 million capital expenditure for a parking garage and urban park on the site.

Vote No claims

The Eagle found that most of the claims by the Vote No group are accurate.

However, the group claims the city can’t afford to divert guest tax money away from the tourism and convention fund because it says the fund will lose $2 million this year.

That’s not true, said Rob Raine, the city’s assistant finance director. He said the group is misreading the city’s 2012 budget.

The budgeted income line for the tourism and convention fund shows a negative $2,005,919. But the state’s budget laws prevent the line from including the fund’s cash reserves, which is $2.4 million, Raine said.

The state requires that the city appropriate the fund’s reserves, even if the city does not intend to spend that money, said Mark Manning, the city’s budget director.

Raine said the fund is authorized to spend $8 million in 2012, and the projected income for tourism and convention this year is $6 million. That’s not to say the city expects to spend $8 million from the fund, he said.

“The budget is setting up what we can do, not what we expect to do,” Raine said.

The fund has spent more than revenue received in two of the last 11 years, he said. The fund’s expenses exceeded revenue by $551,100 in 2009; it exceeded by $184,859 in 2002. In other years, the fund’s income has exceeded revenue by an average of nearly $350,000 annually.

It cost $3.65 million to operate Century II and Expo Hall in 2011, Raine said. Of that amount, $1.5 million came from hotel guest taxes.

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