Tax breaks in Wichita questioned

Should companies that promise to hire workers but lay them off instead get a tax break?

The Wichita City Council, which has repeatedly granted those breaks in the past, will confront the question again at Tuesday's meeting.

Big Dog Motorcycles, KGB and CAP Carpet are seeking to extend industrial revenue bond tax exemptions. IRBs allow companies to build projects free of property and sales tax, and the bond buyers don't pay income tax.

Some council members admit to being torn by the issue.

"It's a good question," said council member Janet Miller.

Big Dog Motorcycles, 1520 E. Douglas, had 257 workers in 2003 when it went to the council for IRBs to build a warehouse. It promised to spend $1.1 million and add 40 jobs in return for the tax exemption. The city's return on investment was strong.

But since then Big Dog's business has cratered and today it has just 37 workers.

City staff recommended approval. The company couldn't be reached for comment.

KGB, formerly called InfoNXX, a national call center company at 8400 E. 32nd St. North, promised in 2005 to create 944 jobs and invest $6 million to renovate and equip the call center using IRBs.

The company spent $7.3 million earning a good return on the city's investment, city staff said, but employment peaked at 870 and has since fallen to 185.

City staff recommended a one-year extension.

The company said employment as the center fell because of long-term decline in the use of directory assistance.

CAP Carpet, a carpet warehouse and manufacturing company at 535 S. Emerson, agreed in 2005 to create 37 jobs and invest $4 million.

It spent $5.2 million but created just 19 jobs. City staff said the project didn't give the city the required return on investment and recommended against approving the extension.

Company CEO Aaron Pirner said he made the promised investment, added some jobs and never laid anybody off despite a deep recession in home and aircraft construction.

"Through no fault of my own, I just haven't been able to expand as fast as I expected," he said.

In the face of large layoffs and outsourcing that has cut into local work forces, the council has routinely extended tax breaks for companies that haven't met their hiring requirements.

In 2009, the council approved a more flexible policy that takes recessions and capital spending into account.

Council member Paul Gray said the council may have been at its toughest in December when the Coleman Co. sought to renew its exemption, even though it had long failed to meet its hiring target. Instead of a 100 percent abatement, the council set it at 92.5 percent.

"It's challenging," Gray said. "Each deal is different, but if we're going to play a role in incentivizing companies, that role should be limited. And if the obligations aren't met, should we still be incentivizing them?"