Downtown apartments, Old Town project go before City Council

Editor’s note: An earlier version incorrectly referred to property taxes when discussing industrial revenue bonds.

The Wichita City Council will give a second read on Tuesday to their contribution on two big downtown redevelopment projects.

The first project is the long-simmering plan to renovate Exchange Place and the Bitting building, vacant buildings at Market and Douglas, as well as build new apartment space along East Douglas. The whole project will create 230 apartments, plus a 273-space automated parking garage, at a cost of more than $60 million.

Originated six years ago by former downtown developers Michael Elzufon and David Lundberg — who were charged with fraud by the Kansas Securities commissioner last week in relation to their downtown projects — the project was taken over in 2012 by KS1 LLC, lead by Dallas developer John McWilliams.

The city of Wichita approved the project agreement with the developer in 2013 that fixed its contribution.

Since then, however, McWilliams has struggled to firm up his complex package of public and private financing, particularly millions of dollars in federal historic tax credits. He has continued to push ahead with the deal, succeeding in getting the U.S. Department of Housing and Urban Development several times to extend a deadline on a $32 million loan guarantee.

According to the city, McWilliams’s most recent extension on the HUD loan guarantee is March 20 and he needs to have all his financing in place by then.

As part of making the financing package happen by the deadline, the city on Tuesday will vote on approving $12.5 million in tax increment financing. With a TIF, the property tax on the new apartments and parking garage goes to pay for the project, rather than into city coffers.

The council will also vote on whether to approve $45 million in industrial revenue bonds. The bonds are no cost to the city. The developer will use private loans, in part guaranteed by HUD, to buy the bonds. Their issuance simply allows him to avoid sales taxes on the project’s construction materials and furnishings.

Extending Old Town

In the second project, a development group has recently purchased several buildings along Mosley, between Second and Third streets.

The plans by Mosley Investments LLC, led by developer David Burk, call for redeveloping 62,000 square feet of warehouse and commercial space just east of the Courtyard by Marriott Hotel in Old Town. The plans call for many retail and office spaces.

But the city said that as part of the redevelopment it wants to improve Mosley and Rock Island streets from Second and Third streets to a level consistent with the rest of Old Town.

That means $1.5 million for brick streets, 33 on-street parking spots, brick sidewalks, ornamental lighting, landscaping, benches, trash cans and bicycle racks.

The money will come from a TIF, so that the money generated by higher property tax on the more valuable property will pay for the street work.

The TIF agreement restricts the developer’s ability to contest property valuation it owns.

This story was originally published March 1, 2015 at 1:59 PM with the headline "Downtown apartments, Old Town project go before City Council."