Departure of Wal-Mart at 13th and Oliver leaves developers on the hook

Any shortfall in tax revenue caused by the closing of the Wal-Mart Neighborhood Market at 13th and Oliver this week will not cost city taxpayers, said Wichita City Manager Bob Layton.

The store is one of three in Wichita closing Thursday as part of company-wide downsizing. The other stores are at Central and West, and at Harry and Webb. Nationwide, Wal-Mart is closing 154 stores.

But the one at 13th and Oliver is in special tax district called a tax increment financing district to encourage redevelopment. In this TIF district, the city spent $2.5 million to help cover the cost of buying the property and repaving the parking lot.

Renovating the shopping center was supposed to increase property values and generate more property taxes, which would be used to repay the city’s cost.

The city has been embarrassed a few times when TIF projects didn’t generate enough new tax revenue and taxpayers had to make up the difference. The city has since instituted contractual guarantees that a developer make up any shortfalls.

And that’s what’s happening this time, Layton said this week.

The KenMar shopping center was decaying in 2007 when Kevass Harding, minister at the Dellrose United Methodist Church and a Wichita school board member, formed HH Holdings with several business backers. In 2008, the city agreed to the TIF to make the financing of the project feasible.

But the project moved too slowly. First the property bubble collapse dried up credit and then the recession hit.

Within a few years, Harding was out, and two of his main backers – long-time Wichita businessmen David Burk and David Wells – were leading the redevelopment.

So the developers sold about half of the land to Wal-Mart in 2011. The 35,000-square-foot store opened in 2012, but it was so big that its parking lot consumed three sites for future stores. The rest of the center was renovated.

But the TIF never generated enough in new tax revenue to pay the TIF’s annual bill, and Burk and Wells sold off the rest of the development.

But Layton said the city made clear to Burk and Wells back in 2011, and they agreed, that they were responsible for making up any shortfall in tax collections needed to pay the TIF no matter who owned the property.

In 2015, according to the Sedgwick County Treasurer’s Office, the real estate in the TIF area owed $151,279 in property taxes, including $125,500 from Wal-Mart.

But any gap is likely to grow dramatically in years to come. Wal-Mart will almost surely continue to pay the property tax as long as it owns the property, but the closing will mean the value of the property will fall sharply – while the TIF payment will only keep rising until the debt is paid off in 2029.

Burk declined to comment for this story. Wells did not return messages seeking comment.

Much of the size of their future financial obligation depends on how soon Wal-Mart sells the property and to whom.

City Council member Lavonta Williams said the city is talking with Wal-Mart in an effort to get the company to limit potential buyers to ones the city believes are healthy for the neighborhood.

“We would really love some type of grocery store,” she said. “We’re just trying to get the fresh fruit and vegetables that a community needs.”

The neighborhood has a lot of diabetes cases and other health issues, she said. And many people can’t drive to stores with large selections of produce and a pharmacy. She called the area a “food desert.”

She said they will approach grocery chains about the property. Save-a-Lot already has a grocery story a mile and half to the west, at 13th and Grove.

What the city doesn’t want, she and Layton said, are liquor stores, check cashing stores, pawn shops or anything sex-related.

But both Williams and Layton made clear that the city won’t buy the property nor offer money as an incentive. The TIF is enough, Layton said.

But the city will work with any buyer to smooth the purchase and open something new in the Wal-Mart space.

Williams said she will hold a public meeting for the neighborhood on the topic at her regular district breakfast, Feb. 6, at the Atwater Neighborhood Resource Center, 2755 E. 19th. She wants to hear ideas for the Wal-Mart space.

The city has spent considerable money renovating 13th Street in the area and a number of new businesses have opened in recent years. But the announced closing of the QuikTrip at 13th and Oliver, which is not in the TIF district, is also a big blow.

“The revitalization of the area has started, and we want to keep that momentum,” Williams said. “This will set us back a bit, but have to lift ourselves up by the bootstraps and go back to the community.”

This story was originally published January 27, 2016 at 7:04 PM with the headline "Departure of Wal-Mart at 13th and Oliver leaves developers on the hook."