Community Improvement Districts: Public safety for private developers

September 12, 2010


Recently I attended and spoke at a public hearing for a CID (community improvement district). One should get to know this term as I am sure you're going to hear lots more about these creatures in the future.

The request by an out-of-town developer is to place an additional 1 percent sales tax on a redevelopment district at Ousdahl and 23rd Street, incorporating three restaurant properties on the north side of 23rd street: Yokohama Sushi, Jimmy John's, and a yet to be announced restaurant and Hobby Lobby on the south side.

The request is for more than $1.5 million to be collected from the public through a 1 percent sales tax for up to 22 years.

The developer is going to use the sales tax revenue for the following:

The reconstruction and improvements on the properties within the district, including the installation of new curbing and gutters, landscaping, irrigation and lighting, construction of new sidewalks and installation of handicap parking for ADA accessibility, replacement of asphalt parking lots, replacement of roofs, paint and exterior building repairs, replacement or repair of mechanical systems for buildings, fencing, signage, utilities, construction of trash enclosures, and tenant improvements within the district, as well as ongoing maintenance. These costs are what developers usually pay for out of their own pockets — without taxpayers subsidizing them.

As I stated at the public hearing, this economic tool may very well come in handy for very special types of retail which the city deems to serve the public good and that such a project would not otherwise see the light of day without creating a CID, i.e., a grocery store in east or North Lawrence.

This particular project, however, is in a robust commercial zone where redevelopment continues with developers using private funds. To name a few: the new furniture store which redeveloped the Food for Less grocery store building and parking lot; Freddy's Frozen Custard remodeled Sheridan's; McDonald's on 23rd Street is building a new structure replacing its old one; the West Coast Saloon just installed a new concrete parking lot; and the old post office morphed into a bookstore. It seems to me that the restaurant business in Lawrence, especially on 23rd Street and South Iowa, is hardly under-served and is probably not in need of a subsidy. So why is there a need for a taxpayer assistance?

This is a very unfair, sneaky tax because the tax hits the consumer/taxpayer after the fact — in other words, after the sale. One commissioner explained that the customer can vote with his feet and does not have to purchase the district's goods. This is true but, if passed, this will become the third zone in Lawrence where the taxpayer is being asked to subsidize the development. If this is passed, you can bet that each new redevelopment project will include a CID request. (By the way, the law permits increasing the sales tax by up to 2 percent). Once we have 20 or 30 of these CIDs, creating a hodgepodge of taxing districts, it will become impossible to identify which businesses charge which sales tax rate, thereby snaring even the most careful shopper.

Other observations about this project are that three of the four businesses are currently operating and, therefore, the tenant improvements have already been made. Additionally, a new parking lot already exists at the Yokohama restaurant, thereby begging the question as to why there is a need for this tax subsidy. Furthermore, the applicant stated that they are going to replace the old convenience store building with a new one. Under city building codes, the developer must improve the site to the current city standards, which would require most all the upgrades that he lists in his CID proposal. Finally, the entire south half of the project representing more than 50 percent of the district was referred to vaguely as hoping to have the same high goals for it as he did for the north part.

With all the above information on the table, the City Commission is actually considering issuing this developer, Got-Mor, LLC, et al, a check for more than $1.5 million. Since there were only three public comments in addition to mine, I thought I would share with you, the taxpayer who will subsidize this project, what I observed.

— Bob Schumm is the owner of a downtown Lawrence restaurant and a former Lawrence city commissioner.


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