City error will delay funds from Cabela’s special sales tax

03/22/2012 5:00 AM

03/23/2012 7:20 AM

TOPEKA – Wichita City Hall neglected to notify the state on time that it created a special sales tax district to spur the development of a Cabela’s outdoor sporting goods store in northeast Wichita. That move will sap revenue intended to finance a highway interchange project and construction of the store.

The slip-up means the Cabela’s that opened to a throng of excited customers and speeches from Gov. Sam Brownback and top city officials last week will have to wait until July 1 to start collecting an additional 1.2 percent in sales tax that City Council members approved last year.

Two store employees confirmed to The Eagle on Thursday that the store was charging customers the additional tax. But Allen Bell, the city’s urban development director, said the state has asked the store to stop charging it.

“It’s a big mess,” he said.

It’s unclear if the city’s delayed notice to the state will require Cabela’s to refund money to customers. Bell said the delay won’t eat into the 22-year lifespan of the tax district – just delay its start.

If the crush of customers on the store’s opening day continues, it could mean revenue lost – or at least delayed – for the long-awaited construction of on- and off-ramps at K-96 and Greenwich, which are key to development in that fast-growing part of the city.

But while the special tax may be delayed, Bell said the $8 million project won’t be since the city would finance it with bonds and use roughly $1 million in special tax money to help pay those off.

It’s unclear who’s to blame. The contract between the city and Cabela’s calls for the company to notify the city that it’s ready for the city to notify the state that it will begin collecting the tax.

Bell said the city got that notice last Friday, two days after the store opened, and that the city notified the state Monday.

Cabela’s spokesman Wes Remmer said the company wasn’t aware of the problems until Wednesday. He said the company is talking with the city to figure out whether customers would receive refunds, and he couldn’t immediately confirm when Cabela’s sent notice to the city.

Mayor Carl Brewer planned to meet with City Manager Robert Layton Thursday to learn how the error will affect the tax incentives.

Asked how the problem happened, Brewer said: “I understand it was a staff issue.”

The Eagle filed an open records request with the city late Thursday to try to verify when the city received notice from Cabela’s and when it notified the state.

The slip-up could cost Cabela’s money, but the delay or refund of special sales tax could offer customers a chance to save 1.2 percent on purchases.

City Council members voted 6-1 last March to allow the Nebraska-based retailer to collect the extra sales tax. Of that, 1 percent goes to the developer, which in this case is Cabela’s, and .2 percent helps pay for on- and off-ramps at the K-96 and Greenwich Road interchange.

Developers and the city projected the additional tax will generate nearly $17.2 million over the district’s 22-year lifespan. Developers said the entire project would cost about $28 million.

Bell said the city will change its community improvement district ordinance so that the state will be notified of a start date for tax collection immediately after the district is approved by the City Council. That, he said, would prevent problems like this from happening again.

Another proposed development in the area will also receive tax incentives. More recently, the state has approved a $50 million special sales tax and revenue bond district to help build the interchange ramps and finance another development. The 400-acre entertainment and tourism district would be anchored by the proposed GoodSports Fieldhouse, mostly geared toward youth sports.

The STAR bonds allow developers and city to use the state’s 6.3 percent sales tax for qualifying public and private infrastructure. The GoodSports project would use that cash for the development as well as for the interchange.

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