Guest tax vote Q&A
08/27/2013 9:38 AM
08/05/2014 6:11 PM
Here are answers to some of the key questions about the Feb. 28 guest tax vote on the Ambassador Hotel Wichita, a 117-room boutique hotel proposed for the old Union National Bank building, Douglas and Broadway, which was the site of the Dockum Drugs store sit-in in 1958. The rooms are projected to cost an average of $150 a night.
Q. What am I voting on?
A. This is what you will see on the ballot:
Shall Charter Ordinance 216 entitled: “A charter ordinance amending and repealing Section 1 of Charter Ordinance No. 213, of the city of Wichita, Kansas, which amended and repealed Section 1 of Charter Ordinance No. 183 of the city of Wichita which amended and repealed Section 1 of Charter Ordinance No. 174 of the city of Wichita, Kansas, pertaining to the application of revenues from the transient guest tax” take effect?
Q. What does that mean?
A. What the ballot question is asking is whether you want the city to rebate to the developers 75 percent of the bed tax paid by the hotel’s guests for 15 years. The total amount is estimated at $2.25 million. A “yes” vote means you do; a “no” vote means you don’t.
Q. Does downtown need more hotel rooms?
A. Downtown consultant Goody Clancy says Wichita needs 250 to 400 additional downtown hotel rooms to be a serious player for major events, such as NCAA men’s basketball tournament rounds, major conventions and concerts. In the first year of Project Downtown, Wichita gained 248 hotel rooms, including the 117 that are under construction at the Ambassador. Project opponents contend that the Ambassador will take up to 50 percent of its business from nearby competing upscale hotels.
Q. What are guest tax revenues?
A. The guest tax is an extra tax levied against guests at Wichita hotels. It is used to promote convention and tourism pursuits, and for maintenance and upgrades at Century II. The Ambassador is expected to generate an estimated $3 million in guest taxes over its first 15 years; it seeks to keep 75 percent, or $2.25 million, of that.
Q. What laws permit the challenge of the guest tax allocation to the Ambassador project?
A. The Wichita City Council, when it approved the guest tax allocation for the Ambassador, passed a charter ordinance to do so. Such charter ordinances are subject to a public protest petition. Americans for Prosperity and its supporters successfully gained 2,500 signatures from registered Wichita voters to force the vote.
Q. Has the city ever allocated guest tax revenues to other hotel projects?
A. Yes, three, according to Allen Bell, the city’s director of urban development: the Hyatt Regency, the Hotel at Old Town and the Fairfield Inn and Suites Hotel in WaterWalk. In each case, the city made a direct financial contribution to pay a portion of the cost of the hotel’s construction, which was then financed with city bonds, Bell said. The bed tax revenue generated by the hotel was used to help pay off the bonds. In each case, the city council adopted a charter ordinance as it did with the Ambassador, amending the prior charter ordinance governing the use of bed tax revenue. All of those ordinances were subject to the same protest petition over 60 days, but no protest was filed.
Q. Who is behind Douglas Place LLC, the group renovating the Ambassador?
A. The development team is headed by Paul Coury, a boutique hotel developer and owner of Tulsa-based Coury Properties. Coury’s credits include boutique hotels in Tulsa, Fort Worth, Oklahoma City and Kansas City. His partners include Dave Burk, the veteran Old Town developer, and Wichita construction executive David Wells.
Q. How is the project being financed?
A. The project is estimated at $29.2 million; $22.57 million is for the hotel. The rest is coming from the city of Wichita for a parking garage, retail space and an urban park. Developers say they’ve taken out a $12 million bank loan, have $5.9 million in private equity, a $2.2 million interim loan and will be using $1.5 million from the city’s facade program and $7.71 million in public investment.
Q. What are the direct public costs involved in the project?
A. According to the developers’ financial plan, the city has committed $6 million for a parking garage, $800,000 for an urban parkway, $770,000 for land acquisition and $140,000 in financing and other costs, for a total of $7.71 million. The city also would make a $1.5 million loan from its facade program to the project. And if the referendum passes, the hotel would get an estimated $2.25 million from the guest tax over 15 years.
Opponents contend the project contains $15.4 million in public subsidies, including $7.3 million in state and federal historic tax credits.
Q. How much equity do the developers have in the project?
A. Developers claim they have up to $8.8 million in equity in the project, including $1 million in cash, $6.715 million in up-front proceeds from the sale of state and federal historic tax credits and another $780,000 in tax credit sale proceeds at the end of the hotel’s construction. Coury told The Eagle last fall he plans to contribute an additional $1 million in in-kind services as the room and furnishings designer for the project.
Critics of the project dismiss the tax credits as another public incentive, boiling the developer equity down to $2 million — the $1 million in cash and the $1 million in Coury’s in-kind services. Several bankers and economists, though, told The Eagle last fall that tax credits are considered equity by many bankers because of their ease of conversion to cash.
Q. What are historic tax credits?
A. According to the Kansas Historical Society, the federal program provides an income-tax credit equal to 20 percent of qualified rehabilitation expenses on income-producing properties. The state program provides a tax credit equal to 25 percent of qualified expenses on income-producing or non income-producing properties. These credits are sold to investors to generate capital for the rehabilitation projects, which analysts say can cost two to three times more than a new building.
Q. What is the nature of the opposition from Americans for Prosperity and other groups to the project?
A. Basically, the groups oppose public subsidies for private developments, saying that such subsidies put government in the position of picking winners and losers. Some AFP supporters say they’re challenging the guest tax because the law allows them to, and that $15.4 million in eight other public subsidy programs for the Ambassador is enough.