Wichita sues developers, alleging broken promises to repay incentives for shopping center

After awarding Wichita developers Dave Burk and Dave Wells millions of dollars in economic incentives in the past two decades, the city of Wichita is now suing them, alleging broken promises to repay a $2.5 million loan to redevelop the Ken-Mar shopping center.

Burk, best-known for his redevelopment of Old Town, and Wells, president of Key Construction, have been partners on dozens of projects in downtown Wichita and are two of the most prolific campaign donors in city politics.

The two developers owe the city more than $1.8 million for a loan it gave them in 2011 to redevelop the Ken-Mar shopping center on the northwest corner of 13th and Oliver, according to the lawsuit.

From 2013 to October 24, 2019, Burk and Wells repaid the city $717,000. After that, the payments by Burk and Wells stopped. They were expected to continue paying until 2029.

The City Council continued to approve additional economic development incentives for Burk and Wells, including for projects near Riverfront Stadium and Riverside neighborhood.

The development company that received the loan is now insolvent. But the city says Burk and Wells personally are on the hook for verbal promises they made to city staff about repayment.

Burk and Wells did not respond to questions seeking an explanation. The city’s spokesperson declined to comment.

In its lawsuit, the city said the two developers made payments through 2019 to stay in the city’s good graces while applying for incentive packages for at least seven other projects between 2011 and 2021. They stopped paying “because they had already secured the desired benefits for their other projects with the city,” the lawsuit says.

Mayor Brandon Whipple, who was elected in November 2019, said he was unaware of the missed payments until after the council had voted on additional incentives for the developers. The city has not extended additional incentives to the developers since they told the city they would not pay in 2022.

Additional incentives

The City Council approved a massive development agreement with Riverfront Partners LLC and its affiliate Townstreet Partners LLC, two entities which Burk and Wells had ownership interests in at the time, on Jan. 7, 2020. That was former Mayor Jeff Longwell’s last council meeting and the last one before Whipple was sworn in to office.

Under that agreement, the city bought land west of Riverfront Stadium — which the developers had started piecing together before the city announced it would build a new stadium — for $3 million. It would also provide the developers the potential for tens of millions of dollars in public subsidies, based on performance of the estimated $100 million private redevelopment of the Metropolitan Baptist Church property.

That project, announced in 2019, has not yet started, and state business filings show Burk and Wells no longer hold ownership stakes in Riverfront Partners. George Laham is the only developer with a ownership interest as of 2022.

The City Council — including Whipple — voted unanimously in 2021 to approve a development agreement with Burk and his business partner Jerry Jones for the River Trail Village housing development near Sim Golf Course. That deal included $1.7 million in incentives for infrastructure improvements and upgrades to paths, lighting, parking and a trailhead near the development.

“I absolutely was not told of this situation prior to the TIF development vote,” Whipple said. “I would have pushed for a policy requiring developers to be up to date with all payments before the city would engage in any new projects if I was told.”

Whipple said he “led the charge” to ultimately bring the lawsuit and that he plans to push for more safeguards in development agreements in the future.

“On my watch, we will hold those who get incentives from the city accountable to the promises they made the taxpayers,” Whipple said.

Redeveloping Ken-mar

In 2009, the city established a tax increment financing, or TIF, district on the northwest corner of 13th and Oliver that would allow the city to pay down $2.5 million in bonds it issued to pay H.H. Holding, LLC, a company owned by Burk and Wells, for the Ken-Mar project.

The city gave Burk and Wells — through H.H. Holding — $827,100 to buy the shopping center. Wichita provided another $1.7 million for site improvements.

The Ken-Mar redevelopment project did not see the kind of overhaul that developers and the city said would come with the TIF funding.

After the city helped Burk and Wells buy the strip mall and paid to upgrade it, the two developers began selling off the property and keeping the proceeds, according to the lawsuit.

Burk and Wells sold part of the property to Walmart in 2011 for $2,415,500. The next year, they sold the rest of the property for $1.3 million. None of those proceeds went back to the city, the lawsuit says.

In total, Burk and Wells repaid less than the city gave them to buy the property in 2009. When the 2020 payment came due, they stopped paying. The city sent an invoice in August 2020 but apparently did not hear back from Burk until February 2022. Burk told city economic development analyst Mark Elder that he was no longer involved and that all invoices should be directed to Wells.

The city heard back from Wells on March 8, 2022, after the developers had missed more than $400,000 in payments. He said the payments were no longer financially feasible.

“We hope the City can acknowledge and appreciate the extent we have supported this original effort, but feel it is time to have the City take over the responsibility for the shortfall,” Wells wrote.

Ken-mar shortfall

Burk and Wells repaid the city more than $700,000 between 2013 and 2019. Including interest, total repayments were projected to be more than $3 million.

Some of the money was supposed to be reimbursed to the city through TIF bonds, which divert new property taxes collected in a district to pay off the bonds the city issued to pay Burk and Wells.

Any shortfall between the new taxes collected and the repayment schedule for the bonds would be paid for by H.H. Holding, Burk and Wells, according to the city’s lawsuit.

The city issued bonds to pay Burk and Wells but never issued TIF bonds, as the sale to WalMart made it clear new development would not increase property values enough to cover the TIF bond payments, the lawsuit says.

Instead, the city provided Burk and Wells a $2.5 million direct loan and labeled it a “TIF Loan” with 3% interest that would require H.H. Holding to make semi-annual payments equal to the difference between actual TIF revenue received and the TIF Loan amounts specified in an agreement between the city and the developers.

“At the time the Amendment was being considered, defendants Burk and Wells made oral representations to the City that defendants would cause the Tax Increment Shortfall, or TIF Loan, payments to be made in the amounts needed to support the scheduled amortization of the TIF Loan through 2029.”

The repayment schedule shows repayments totaling more than $3 million — increasing from $160,600 in 2013 to $236,900 by 2029.

According to the repayment schedule, Burk and Wells owe $188,700 for 2020, $194,650 for 2021, $200,300 in 2022 and $200,650 for 2023.

“We were asked by Mayor Carl Brewer to join the city on a Public Private partnership to help eliminate a food desert in the 13th/Oliver area,” Wells wrote in his 2022 email to the city. “After much effort, we convinced Walmart to build a Neighborhood Market grocery store. Unfortunately, the neighborhood didn’t adequately support it and eventually the store closed due to poor financial performance.”

The Walmart at 13th and Oliver shuttered operations in 2016, and across the street, a QuikTrip that had been there 25 years also permanently closed that year. The Walmart is now an American Freight Furniture-Mattress store. The only major new development on the site is a Church’s Chicken, which opened in 2018.

This story was originally published July 21, 2023 at 5:23 AM.