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Wichita City Council to vote on tax districts for community development

In several cities in Kansas and Missouri, consumers pay a little more sales tax in some parts of town than in others, though they may not know it.

That additional sales tax — up to 2 cents — stems from a perk that local governments in both states offer to help developers jump-start their businesses.

Wichita is poised to join that club Tuesday when City Council members vote on a policy for community improvement districts.

The first project to use it would likely be a $12 million Marriott Fairfield Inn and Suites Hotel at WaterWalk in downtown.

But more would follow.

Here's how community improvement districts in Wichita would work under the proposed policy.

Developers could tack on an extra 2 cents in sales tax on transactions made inside special districts where all property owners agree on the added tax.

The developers could channel that money to pay bills for construction costs, landscaping, bus stops, art and a wide array of other projects.

Once those expenses are paid off, the city would end the special tax. The maximum life of the district would be 22 years.

Or, instead of sales tax, developers could ask the city to issue bonds that would be paid off by special assessment payments from property owners inside the district.

To qualify for either, the project must cost more than $2 million and developers must prove they couldn't pull off the project without the extra taxes.

Developers would also have to pay a $5,000 non-refundable application fee and ongoing administrative fees equal to 5 percent of the district's revenue.

City Manager Robert Layton said there's very little risk for the city in CIDs.

He doesn't expect a deluge of requests for districts because it could be risky for a developer to add sales tax when competitors could offer the same thing with less tax.

"It's an extra liability for them," he said.

Missouri is among several states that have allowed community improvement districts in one form or another.

Kansas lawmakers approved the Kansas law last year. Hays and cities in the Kansas City area are among those that have already used the incentive.

Hays used it help draw a Holiday Inn Express. But other hotel owners said the assistance would give the new hotel an unfair advantage, the Hays Daily News reported.

Sales taxes can be a particularly sensitive issue for hotel owners, who often compete fiercely for room stays.

Hotels usually don't include taxes and fees in their advertised price, so one hotel could potentially lower its advertised rate and use the extra tax income to make up for it.

Fairness issues with hotels and other commercial developments have risen in CIDs in Missouri as well.

Wichita developers began lobbying the city about CIDs last year.

The first district will almost certainly be the $12 million Marriott Fairfield Inn and Suites Hotel at WaterWalk.

In February, City Council members gave preliminary approval to a controversial list of incentives for the project. (That includes an agreement council members will vote on Tuesday to give $2.5 million of the bed-tax dollars generated by the hotel back to developers.)

The taxing district was one of the least polarizing aspects of the incentives in public meetings.

If the hotel appears successful under the new policy, it's likely other projects will emerge.

Christian Ablah, of Classic Real Estate, is one local developer who sees potential.

He plans to redevelop the northeast and southeast corners of Central and Oliver, which used to house a Dillons grocery store and other businesses.

"I am indeed interested in the possible use of CID as a tool to assist with the development of some of my properties," he said in a statement. "It may be helpful at Central and Oliver, a blighted area that is in need of new development. I am certainly interested in the outcome of the guidelines that will be considered next week by the council as that will assist me in deciding whether and how to use the new tool."

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