ELLY GRIMM
• Leader & Times
The Liberal City Commission found itself revisiting discussion of community improvement during a special meeting Tuesday afternoon.
The main topic of the meeting was the use Community Improvement District (CID) and how they should be approached. A proposal for the use of a CID for a Dairy Queen project had come before the commission at its Aug. 13 meeting from Damien Denmark.
“Dairy Queen is looking at expanding into Liberal. DQLBKLLC is a local company,” Denmark said at the Aug. 13 meeting. “They are requesting approval for Mayor Lara and City Manager Varnado to negotiate incentives. They are also requesting a $350,000 loan to cover the cost of start up. This will be a CID loan and will be repaid through the CID. I’ve worked with different firms and they have done this in other areas such as Olathe, Lenexa and Overland Park, cities which are aggressive are growing. Garden City is growing and this is an opportunity for Liberal to provide the structure to recruit new retail development. The land is west of Fellowship Baptist Church, and the cost is $1.9 million. The investors are also providing funds. The goal is to make Liberal a retail destination and I believe this will fit well with the Economic Development portion of the 1-cent sales tax. We’re proposing a 1 percent CID. This will be a full-service Dairy Queen and it will have an estimated number of visits of 15,700 visits per month. There is an opportunity for this, and I’m willing to help with the project and can be of assistance in working with legal counsel to assure that the City will not lose money.”
At Tuesday’s special meeting, Seward County Development Corporation Executive Director Eli Svaty began the discussion.
“As you all know, we were approached by developers about doing a prepaid CID,” Svaty said. “Since then, we’ve been doing some legwork to see what that would look like and whether or not it’s actually feasible. Something to consider is the City of Liberal has the CID already and a policy and program in place for all of that. According to the current policy, we don’t offer a prepaid option, the only option is to pay as you go, which is a traditional CID where the developer(s) fronts the cost and then is reimbursed through that pay-as-you-go fund. The State of Kansas does allow for communities to do the prepaid option, but our policy does not include that. Those can be fronted with 1-cent sales tax money or can be bonded out from the City depending on how big the project is. I also reached out to other communities in our region to see if any of them have done a prepaid CID – Garden City, through its retail development, has not done any sort of prepaid CID option for its development, but Great Bend is considering an option to do that for an upcoming $20 million project with a cap of $500,000 prepaid. Other communities have some unique caveats within their CID policies – for example, Bonner Springs does not offer any CID for a franchise restaurant on construction, and this development is asking for that exact plan. Our policy has no caveats like that, the prepaid CID option is just not included.”
Another question Svaty said has come up regards potentially setting a precedent with future projects.
“We can either set a new precedent where Liberal has the prepaid option, but if we continue with the current precedent, we also sustain that and show this is how Liberal will move forward,” Svaty said. “What I wanted to find was an example of a city that has more structure to these policies so as projects come and developers come, it’s not so much a question of ‘What will we do on THIS project’ as much as ‘Let’s have a structured flow that shows how everything works.’ Stillwater, Okla. is a great example of what that looks like in terms of a policy/tool that shows what the developer(s) bring to the table, what it would cost the city/county, and a scoring guide so you, as commissioners, then have a better grasp of where the city would stand per that development and whether or not you’d be sacrificing on Rural Housing Incentive Districts (RHID) or the revitalization plan or other CID.”
Liberal Mayor Jose Lara then questioned how some of the financing would work, with City of Liberal Chief Financial Officer Scarlette Diseker answering.
“We have a cash balance that is sufficient,” Diseker said. “The cash balance for the Economic Development portion of the 1-cent sales tax is $1,640,231.58. That is a shared cash account with Public Transportation, but we know those are 70 to 80 percent reimbursable through the Kansas Department of Transportation (KDOT). That’s the cash balance, and as far as this year’s budget, if we were to pay it out this year, we would have to make an amendment due to the commission not considering that in the original budget discussions, and it would also need to be made a line item in order to track those expenses. On average, for the past couple years, it looks like we’ve brought in about $700,000 into Economic Development and a few other things. This year, through July, it’s been about $437,000, so it would take about half a year to recoup that kind of money.”
The commissioners then had the chance to share their thoughts on the matter.
“I think it’s a good way to replete our funds, especially with projects that are more likely to happen compared to a regular CID without us fronting any of that cash,” Liberal Vice Mayor Jeff Parsons said. “It’s a great incentive for retail, it pays for a wide list of work these companies can be reimbursed for.. To me, these projects are going to happen with more regularity than, say, industrial or manufacturing projects, and I think we run a good chance once we start. If you’re going to do something, you have to set a pretty high bar on who you do that for, and there have to be some pretty strict guidelines, or otherwise there’ll be half a dozen of these projects and that dries up the Economic Development reserves. And then, you lose the ability to participate in a larger, more game-changing project because you don’t have those funds. I feel like it’s a bad precedent to set by doing that, and it’s a discussion Eli and I have had multiple times.”
“I would say you’re way more optimistic in regard to the amount of projects that would come this way,” Lara said. “If we had half a dozen projects we’d use those funds on, that’d definitely be something.”
Discussion continued for several more minutes, and many more questions were asked before that part of the discussion was concluded.
“For the time being, I’ll continue modifying some details and we can look at this as something we could use in the future, for sure,” Svaty said. “I’ve also been in conversations with some of the members of the Seward County Commission to do a modified version for Seward County that could be used for their projects.”
“I think it’s a great start, for sure,” Parsons said.
But according to a letter from Damien Denmark, the economic representative for DQLBKLLC, the planned project was “uncertain” since the City of Liberal did not approve the prepaid CID proposal for $350,000.
“As you are aware, the proposal was not approved in a 3-2 vote, with Commissioners Jeff Parsons, Matt Landry, and Ron Warren voting against, and Mayor Jose Lara and Councilwoman Janeth Vasquez voting in favor,” Denmark stated in a letter to the commission. “While we are certainly disappointed with the outcome of this vote, we fully respect the decision of the City Commission. At this time, the future of DQLBK LLC’s development in Liberal remains uncertain. However, please rest assured that we remain committed to exploring opportunities for this project and are diligently working toward potential next steps.”
Denmark planned to meet with the franchisee ownership and to reapproach the Liberal City Commission and management in an effort to keep the project alive.
“We remain hopeful that, through continued dialogue and collaboration, we can find a mutually beneficial path forward for the City of Liberal and DQLBK LLC,” Denmark said.
