Wichita is “clawing back” about a fifth of the tax breaks it gave a company that failed to create the jobs it promised.
Fiber Dynamics, a company founded by Darrin Teeter to commercialize technology developed at Wichita State’s National Institute for Aviation Research in the early ‘90s, hasn’t had to pay city property taxes since 2008, an estimated value of more than $500,000.
Now, it has to pay $100,000 in back taxes because it didn’t create enough jobs, based on a new agreement with the city.
The city has twice given Fiber Dynamics a five-year tax abatement, dating back to 2008, with the understanding it would complete a $3.1 million expansion and add 79 jobs.
When the company, located near K-42 and Tyler, first asked the city for a tax abatement, it had 22 employees. Within five years, it said it would have 101.
Ten years later, Fiber Dynamics has expanded its facility — and plans to complete a $2.5 million, 25,0000-square-feet expansion this year. But it has created fewer than half the jobs it said it would, adding 38 jobs and ending 2018 with 60 employees.
Fiber Dynamics first missed its mark in 2013, when the city reviewed its economic incentives agreement with the company. It found that although Fiber Dynamics had expanded its facility, it had fallen well short of its jobs promise, adding 48 jobs at the time. The city extended the tax break for another five years, blaming the economic downturn for the shortfall.
But five years later, the company had 10 fewer jobs than it did in 2013, and 51 fewer than it had promised.
The city negotiated to collect about 40 percent of the second five-year tax break, $100,000 of $253,000. The company must complete another expansion without incentives by the end of 2019 or the city may seek the other 60 percent, the agreement says.
Tim Goodpasture, an economic development analyst with the city’s economic development department, said if the city would have taken the full $253,000 as outlined in the original agreement, it would “probably be prohibitive” for the company’s $2.5 million expansion.
“The company is still in business in Wichita, which is important,” Goodpasture said.
Fiber Dynamics will pay the back taxes in four $25,000 installments over a four-year period. It will also have to pay property taxes on its facility starting this year. It will pay taxes on its expansion, Goodpasture said.
Once that’s complete, the company could pay as much as $120,000 a year in property taxes, Goodpasture said.
Teeter, the company’s founder and CEO, attended the City Council meeting where the new agreement was approved but was not asked any questions during the meeting and was not immediately available for comment on Tuesday afternoon.
The company is paying back less than a fifth of its tax breaks over the past decade, but a cost-benefits analysis by the Wichita State Center for Economic Development and Business Research projected a 2.31-to-1 benefit ratio for the city based on value added to the community.
Mayor Jeff Longwell said, ultimately, the city is a winner in the deal and the cost-benefit ratio is “pretty significant” compared to the city’s minimum requirement of 1.3-to-1.
“We are glad that this company is still growing in Wichita (and) has a significant footprint,” Longwell said.
But cases like this are exactly why Wichita has “claw-back” agreements in place, Longwell said.
“This is why we’ve done it, to make sure that everyone is accountable and that the taxpayers, at the end of the day, win,” Longwell said.