There’s been much investment in downtown Wichita, we’re told, but the assessed value of property isn’t rising.
Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base. Over the past ten years, we’re told that there has been one billion dollars in investment in downtown Wichita, including projects in progress.1
To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.
Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property, or for commercial property sometimes an income-based method is used. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.
With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little).
So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?
The answer is that after a period of increasing values, the assessed value of property in downtown has been declining. The peak was in 2008. The nearby table holds the figures.
This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.
Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars over the last ten years, we are told.
A few years ago the city said that the decline was due to the legislature exempting business equipment and machinery from the property tax rolls. Undoubtedly this was true when the law took effect, which was in 2006. It could also explain the some of the drop for a few years after that.
But for the last several years this factor is gone. At any rate, I believe its effect was small compared to the value of real property.
So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?
I don’t have enough data to answer this question. But we need to know.