WICHITA — Recent property tax appeals in the Old Town Cinema district reveal "a number of procedural errors and policy issues" that the city of Wichita must address as it provides public support to private development, a city report said today.
At issue is the case of David Burk, a prominent downtown developer who received property tax refunds and cuts after filing appeals on publicly owned property he leases from the city, said a report by City Manager Robert Layton.
Burk — who represented himself as an agent of the city on some of the tax appeals — has agreed to notify officials if he wants to appeal future taxes, the report said.
However, the report noted that taxes have been successfully appealed in several other districts where increased property values are supposed to generate new tax income to pay for millions of dollars in improvements paid for with money the city borrowed.
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And, guarantees written into the city's more recent development agreements do not fully protect Wichita taxpayers from having to cover shortfalls in the special districts once the properties reach a predicted valuation level.
"If the developer cannot raise the funds (to pay back city bond debt), the city still bears the risk," the report said.
The city is creating new policies to monitor tax appeals in tax-increment financing _ or TIF _ districts, Layton reported.
The city also is changing how it projects tax revenues to account for developers' appeals, Layton said.
"This (Burk) case has highlighted the financial impact of tax appeals on TIF district revenues and the need to be more diligent in the review of these appeals," he said.
The changes follow stories in The Eagle that showed that Burk had appealed the property taxes on the city-owned building that houses the parking garage and attached retail stores adjacent to the Old Town Warren Theatre.
The resulting refunds are the main reason the city has to cover a $190,000 shortfall in bond payments, city officials have said.
The appeal on the city-owned building at 301 N. Mead led to a refund of $25,806 for the 2008 tax year and $23,781 for 2007.
Two other buildings also had refunds, but the city's developer agreement allowed developers to appeal those taxes without city consent.
It remains unclear whether the city will try to reverse the appeal Burk initiated on the city property, but the city memo outlines options.
* Request that the Court of Tax Appeals reopen the Burk tax appeal on the city-owned buildings and either show evidence to reverse the refunds or, as owner, refuse to consent to the appeal.
* File action to recover the refund, though the city says it could be difficult since Burk and his partners paid the taxes.
* Leave the appeal alone and amend the lease and development agreements to clarify the responsibilities for taxes and allow the city to review future appeals.
For more, see Wednesday's Wichita Eagle and Kansas.com.