In asking for more than the $9.3 million tax-increment financing already approved for their $46.5 million Exchange Place project in downtown Wichita, the "Minnesota Guys" of Real Development are expecting the city to be their savior as much as their partner.
Developers Michael Elzufon and Dave Lundberg have suggested the project can't proceed without more TIF dollars to help them secure a $30 million federally backed loan — seemingly confirming how little capital the developers have to work with during this admittedly challenging time.
There are also concerns about the relatively small percentage of equity the developers have in the project and about whether their market projections are realistic.
As a result, even though the completed Exchange Place project would be of great benefit to downtown, the Wichita City Council should vote against investing more money.
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When used prudently, tax-increment financing can be a valuable redevelopment tool. It is not a "scheme" necessarily bad for taxpayers, as an Americans for Prosperity Kansas ad argued in the Sunday Eagle. TIF funding can be the publicly added ingredient to make things happen where they wouldn't otherwise.
But devoting more TIF money to Exchange Place — whether the $2.3 million the developers sought last week or something short of that — seems too risky.
Stanley Longhofer, director of Wichita State University's Center for Real Estate, chose his words carefully in assessing the Exchange Place condo proposal and prospects for success in a report commissioned by the City Council and released Monday. But the clear message was that Real Development's project relies too much on overly optimistic hopes and asks too much of the anemic economic recovery.
The proposed condos are pricey but only average 838 square feet each, making it hard to believe they would rent and eventually sell as quickly as projected. It also seems doubtful that the Exchange Place TIFdistrict could attract sufficient tenants for its office space, again at top-dollar rents.
Longhofer didn't even get into the proposed "fully automated" parking garage, the subject of an astonishing animated video shown to the council last week. Maximizing space and lowering the cost of parking per stall sound great. But even if its robotic technology and elevators proved reliable, the garage seems out of step with a city in which people prefer to park their own cars.
The Minnesota Guys have done wonders for downtown Wichita over the past five years, acquiring 11 defining buildings that might otherwise be dormant. And their condo project at Exchange Place would serve the shared goal of drawing more residents to the city's core. But taxpayers have helped enough already. The project now needs to succeed or fail on its merits.