Council poised to suspend excise tax to spur development
The Shawnee City Council could vote early next year to suspend the city’s excise tax on platting in an effort to spur development.
During a Dec. 4 Council Committee meeting, elected officials directed staff to prepare a draft ordinance that would temporarily eliminate the tax and bring it to the governing body in January or February for a potential vote.
Ward 1 Councilman Jim Neighbor said that schedule would allow the development incentive to be in place “before the spring thaw.”
Shawnee charges developers an excise tax of 21.5 cents per foot platted. Several area cities have recently offered short-term special rates on building permits, excise taxes and other fees to accelerate growth in the wake of the recent recession. But during the Dec. 4 Council Committee meeting, discussion among Shawnee officials focused solely on the excise tax.
During the discussion, Development Services Director Doug Wesselschmidt gave examples of pending development projects and the amounts they would save through suspension of the excise tax.
Developers of the proposed North Shawnee Commerce Center, an 80-acre project near 43rd Street and Kansas Highway 7, would be charged an excise tax of $746,265 upon platting under current law. Under the proposed ordinance, that would be waived.
Another example, the 30-acre second phase of Shawnee Golf and Country Club Apartments near Shawnee Mission Parkway and K-7, showed how the new ordinance would apply to projects for which the developers are required to improve arterial or major collector streets.
Under the current ordinance, the apartment developer’s $279,932 excise tax would already be waived because of the developer’s $2.6 million cost of extending Clear Creek Parkway. Thus, mere suspension of the excise tax would not provide any incentive.
Therefore, the proposed ordinance is expected to include a measure that taps the city’s Economic Development Fund to reimburse developers for major road improvement costs up to the amount of their waived excise taxes.
A similar measure is expected to be included in the new ordinance to incent new development in existing projects where benefit districts have been created to finance public improvements. In those cases, the developer would be reimbursed for benefit district assessments up to the amount of the waived excise tax.
“We’re so hungry for development that we’re willing to throw everything in the world at it,” Ward 2 Councilman Neal Sawyer said. “But I don’t see (development) happening. I haven’t seen anything happen.”
Sawyer, however, said he was “all for this (proposed excise tax ordinance) if this is going to make it happen.”
Ward 3 Councilman Jeff Vaught, who works in commercial real estate, voiced the most enthusiastic support for getting rid of the excise tax.
“Everybody keep in mind that right across the road from us, the No. 1 economic development area in the Midwest has no excise tax,” Vaught said, referring to Wyandotte County. “We want to think that’s irrelevant. But I think somewhere along the line it is relevant because Wyandotte County does not have an excise tax, and there’s far more economic development in Wyandotte County than Shawnee. That might not be the only factor, but I think it’s rather interesting.”
Vaught and Sawyer both said they favored eliminating the excise tax rather than just suspending it. But Ward 3 Councilwoman Dawn Kuhn argued for the proposed one- to three-year suspension, which would keep the tax on the table to help pay for infrastructure in the event that the development picture brightens to the point where the incentive is no longer needed.
Andrea Bough of Stinson Morrison Hecker LLP said the Kansas Legislature had voted to prohibit new excise taxes six or seven years ago. But Bough told council members it appeared to be legally possible to implement a one- to three-year suspension without jeopardizing the city’s ability to charge the excise tax in the future.
Vaught said he’d prefer to see the excise ended permanently because it penalizes developers whose efforts are expanding the city’s property tax base and, in the case of retail projects, boosting sales tax revenue.
“I never liked the excise tax, and you’ll never find a developer on this planet who will support an excise tax,” Vaught said. “It’s like saying, ‘Hey, we really want you to come build in Shawnee, and we’re going to tax you for doing it.
“That’s what the excise tax really is; it’s a tax for the privilege of building in our community.”