L&T Publisher Earl Watt
Dairy Queen is working with a local franchisee and the City of Liberal on building a new location along Pancake Boulevard, and while that is going to be a great addition to the community, there is some confusion about a specific incentive that was being considered.
A tool already being used to help attract additional growth is called a Community Improvement District, or CID.
What this allows a business to do is make improvements to their location and charge an additional sales tax to help pay for the improvements up to 2 percent.
This is already being used in several locations around Liberal, from the Southgate Mall to IHOP.
The incentive has been popular, and shoppers don’t seem to mind paying the additional sales tax in order to have the shopping options.
This same incentive is available to Dairy Queen, but a recent proposal to the City of Liberal had a bit of a twist.
In a traditional CID, the business owner gets approval from the City of Liberal and then is able to use that incentive to secure the funding for the project. In other words, they take out a loan for the funds, and then they pay back the debt with the proceeds from the additional sales tax collections until they pay back the improvement or 22 years, whichever comes first.
There is never any public money involved in the project. The business collects the additional sales tax and sends it to the State of Kansas. It is then returned to the City of Liberal where it is recorded toward the overall cost of the improvement, and then it is released to the business owner to pay the loan. The money simply passes from the customer to the state to the city and back to the owner.
The difference between a traditional CID and what was proposed by Dairy Queen was a prepaid CID.
In other words, instead of Dairy Queen taking out a loan, the City of Liberal would provide cash to the franchisee today instead of waiting to collect the money over the next several years.
The franchisee wouldn’t have to borrow that portion of the project, but they would still collect the additional tax revenue which would then go to the State of Kansas and then back to the City of Liberal. But instead of the City of Liberal giving the money to the franchisee, the City would keep it as a payment toward the money they gave the business up front.
What’s the difference?
In the prepaid CID scenario, there is actually local tax money invested in the project on Day 1. In a standard CID, there is no public money involved whatsoever.
Which one is better?
That depends on who you ask. A traditional CID does not put public money at risk, and prepaid CID does. Some would say that is not a risk they want to take while others would say that is what is needed to attract new companies to Liberal.
Neither is wrong.
There is also a question as to the amount of the incentive. The original request from the franchisee was $350,000, but that number was reduced to $250,000 during negotiations.
Where else are prepaid CIDs taking place in Kansas?
So far, the only approved prepaid CIDs have occurred in the Kansas City metro area. Smaller rural communities have not yet taken on a prepaid CID.
That doesn’t mean they won’t. It just means that this is such a new concept that no one has really had to consider such a proposal.
What is the policy for prepaid CIDs in Liberal?
That’s just it, there is no policy for a prepaid CID because this was the first request for one.
The first decision the City of Liberal had to make was whether or not it was going to offer prepaid CIDs, and if so, then develop a policy of what it would take to qualify for one.
At this point, the City of Liberal opted to not offer prepaid CIDs which would have put public money into private business ventures.
While the commission does not have the votes to support prepaid CIDs at this point, the commission should continue to develop policies regarding prepaid CIDs, where they will get the money to fund projects, and how they will fairly distribute such funds based on requests made.
There are pros and cons no matter how you slice it, but the public should not take the reluctance to a prepaid CID as a sign Liberal does not want to grow or does not want Dairy Queen.
There have been several projects recently that would prove just the opposite, from the expansion at Conestoga to begin exploring the creation of jet fuel to the approval of selling the city’s wastewater to Apex to develop a hydrogen facility.
This commission has been very business friendly, but the prepaid CID concept is relatively new, and the amount of funds being requested required a temporary pause.
Negotiations will continue on what is needed to make sure the Dairy Queen project moves forward, and there is reason to be optimistic about the project.
To those who are ready to write the epitaph on economic development, let’s just take a breath and realize what all has happened recently and what is still in the pipeline.
Liberal’s economic future has not been this bright in quite some time. Seward County Development Corporation Director Eli Svaty just announced that National Beef is expanding its fabrication department to become the largest in the world. That says something about what is happening here.
Ice cream won’t hurt, either.
