The Community Improvement District (CID) program was passed by state legislation in 2009. The CID program is designed as a tool to help finance public and private development. This includes public infrastructure, such as public streets, curb and gutter, public utilities, etc., as well as private buildings: renovations, new construction, additions, etc. Communities all over Kansas (Salina, Hutchinson, Emporia, Garden City, Topeka, Lawrence, K.C. Metro, Wichita, etc.) are using this program to develop new retail space or to renovate old, outdated space. The program was designed and intended for this express purpose.
The financing takes the form of an additional sales tax, or special assessment on property tax. The sales tax only applies within the proposed district, and can be a maximum of 2% for a maximum of 22 years. In the case of the Hays Mall, the owner is using bank financing to fund the renovations. The owner is responsible for the debt if the CID does not generate enough revenue. The owner will be responsible for cost that are not eligible for CID reimbursement, and there will be costs that are not eligible. These will be paid thru the loan and repaid by the owner. The revenue can only be used to reimburse for renovation related expenses. It can’t be used to pay off a mortgage, fund other projects, or kept.
In practical terms, this means that a $100 purchase today costs you $108.04 after taxes (except in the locations that already have an additional tax). If the CID passes, the $100 item you purchase will cost $109.04 after tax, an increase of one dollar. The tax is only applied to the Mall property, nowhere else. Shoppers who do not want to pay the additional tax can choose not to shop at the Mall.
That one dollar increase will help pay for some, but not all, of the planned renovations to the Mall property. Remaining expenses will be paid out of pocket. The renovations will improve the appeal of the Mall to new national retailers that are looking for space in Hays. And yes, Hays can attract new retail chains. Hobby Lobby is a prime example. Many people were commenting over a year ago about rumors that Hobby Lobby was not coming to Hays because we were too small, rents too high, land too high, etc. Yet Hobby Lobby opened its doors this summer and has been doing very well.
The fact is, Hays has one of the highest retail pull factors in the state at 1.85. This is the ability to attract shoppers into a community from outside the city limits, nearly double our population. Hays also has an extended trade area of over 76,000 residents. These are customers from smaller communities that come to Hays as their option for shopping. We are educating national retailers to this in every conversation. What is needed to recruit new retailers is an attractive, available space ready for a new client with a quick turn-around.
The Mall management is talking to a number of potential retailers right now, several of them referrals from the Ellis County Coalition. The Coalition has shared the results of the Community Retail Survey with Mall staff, and they have reached out to several of the top 10 responses. A number of comments have been made in various media sources that the Mall should release these names to the community. The answer has and will be no, and the reason is simple…Confidentiality. Retailers do not want their competitors to know where they are looking to locate. They run the risk that a competitor may try to beat them to the market. This is why there is a Lowes in Salina, even though Home Depot looked at that market first. Should a property owner break that confidentiality, the retailer will likely drop the community from consideration, possibly permanently. If non-disclosure agreements have been signed, the penalties for breaching confidentiality could run in the thousands of dollars.
It is important to note that this is NOT a City of Hays project or tax. The City of Hays does not direct how the tax revenue is spent, and the City is not responsible for the repayment of the debt. The CID is AT THE OWNER’S REQUEST to be placed on his own property only. The City does have the authority to ensure that the applicant has an eligible project, approve the resolution, and also make sure that reimbursements go to eligible brick and mortar expenses.
The City has additional requirements that must be met to be eligible to apply for the program: the development must have at least 50,000 square feet of space, generate $10 million/year in retail sales, and employ at least 25 people. The Mall meets all of these requirements, with over 200,000 square feet, between $18 million and $25 million in annual retail sales, and well over 25 people employed in the Mall.
It is also important to note that the Mall has been an outdated facility for decades. Previous owners deferred maintenance/upgrades/improvements for many years. The current owner purchased the Mall in 2007 and inherited many of the issues that are being addressed with this renovation.
If you have any questions regarding how a CID works, retail opportunities, or general questions, feel free to contact the Ellis County Coalition at (785) 628-3102 or send an email to [email protected].