Eagle editorial: Be open about sales tax

Cabela’s customers pay an additional 1.2 percent sales tax.
Cabela’s customers pay an additional 1.2 percent sales tax.

The Wichita City Council should be highly selective about designating community improvement districts, which are proving lucrative for some worthy development projects but still lack transparency.

An economic development tool created by the Legislature in 2009, when the recession had stalled the financing of many new business projects statewide, the CID designation allows the hotels or other retailers within a district to charge up to 2 percent in sales tax to pay for construction, landscaping, parking lots, lighting and the like. In the case of the Cabela’s CID, 0.2 percent of the extra sales-tax revenue will help cover the cost of a new interchange at K-96 and Greenwich.

An article in the Sunday Eagle quantified the value of the five CIDs now in effect in Wichita, reporting that through October they had raised a total of $1 million since 2011.

The collections ranged from nearly $20,000 for the Central and Oliver CID (southeast and northeast corners) to more than $595,000 for Cabela’s. The three others benefited the Ambassador Hotel ($56,700), the Drury Plaza Broadview Hotel ($175,000), and the Fairfield Inn and Suites at WaterWalk ($185,000).

Developers say the projects would not be possible without the CID designation and the proceeds of the extra sales tax.

This editorial board has been critical of CIDs, arguing that the City Council shouldn’t give away taxing authority to private businesses. But in some cases there has been a larger public purpose to the CID designations. The hotel CIDs, for example, support the downtown revitalization plan. And the CID and other taxing tools helped land Cabela’s not just for Wichita but for all of south-central Kansas.

One other plus of the CIDs for the hotels and even a destination retailer such as Cabela’s is that much of the tax burden falls on out-of-towners rather than on locals.

But if the CIDs and the tax disparity they create are defensible, the city’s failure to disclose them isn’t.

Most people know that sales-tax rates differ from town to town in Kansas, but may not realize the rates also can differ from corner to corner within Wichita – where the sales-tax rate is 7.15 percent most places in town but customers pay either 8.15, 8.35 or 9.15 percent sales tax within the CIDs. In some places in Kansas, CIDs have pushed the sales tax into double digits.

Three years ago, rather than take the commonsense step of requiring that the higher sales-tax rate be announced with signs on businesses’ doors or at the cash register, the City Council opted to bury disclosure of CIDs on the city website ( www.wichita.gov/CID). Only a vaguely worded sign the city requires a CID business to post at its main entrance directs people to the website.

The City Council should stop doing shoppers a disservice by keeping the higher sales-tax rates a secret.

For the editorial board, Rhonda Holman