Manhattan City Commissioners unanimously approved expanding the Downtown sales tax and revenue (STAR) bond district on first reading at their Tuesday meeting, and now look to March 15 to finalize approval.
If approved on second reading, commissioners will see the topic before them again in April to review the proposed project plan.
“It isn’t often that we have an opportunity like this,” says Mayor Linda Morse. “Most people with their projects come to the city and say […] we want you to give us money to do this. This is an opportunity where a local investor is coming forward for the benefit of the city.”
The expansion is related to a $43.6 million Art and Light Museum proposed for private development Downtown, planned by the DeBruyn’s — owners of The Master Teacher in Manhattan. Relocated from a prior possible location closer to the Flint Hills Discovery Center (FHDC), commissioners voted in January to set the public hearing to expand the district for March 1.
Including the potential location of the museum in the district opens the project up to potentially $23 million in sales tax revenue generated in the district.
STAR bonds are a mechanism through which cities can divert largely State shares of sales tax collections from a specified district for a period of time into redevelopment and tourism-generating projects. In addition to that, the DeBruyn’s will commit an estimated $21 million in private funds to the 50,000 square foot facility they hope to build in a lot north of Pierre and west of 3rd Street.
The STAR bonds were activated for a 20 year period as part of the city’s downtown redevelopment, aiding in the construction of the FHDC as well. Having performed beyond expectations, Manhattan fully repaid those bonds about five years before the deadline. Rather than allow the district to expire, city administrative staff sought and received support from Kansas Lt. Gov. and Commerce Sec. David Toland to continue the district with a new bond issuance and commit the funds to the museum project.
“The State revenue would either go to Topeka or it stays in Manhattan,” says Deputy City Manager Jason Hilgers.
The new bonds would expire at the originally planned ending date of 2026, with ‘roughly’ 95 percent of the revenue being State sales tax dollars. Five percent will come from the local share of funding committed to the STAR bonds, drawn from the south end retail sales tax.
“The actual fiscal impact on the city on the bottom line is zero because if we didn’t extend the STAR bond district, the money we would collect would go towards the TIF [tax increment finance district],” says Commissioner Wynn Butler. “Not coming into our coffers, so it’s a wash.”
City administration has no plans to be involved in operations or maintenance of the museum if it comes into existence.
The concept has generated interest from the Manhattan Area Chamber of Commerce, for which President and CEO Jason Smith came out to voice support to expand the district during the meeting Tuesday.
The proposed plans for the site involve incorporating the existing Sears Building and Manhattan Motors property, though an out-building also owned by ICON and adjacent to Pierre would be demolished.
As the DeBruyn’s have indicated they intend to structure the business as a non-profit, city staff are preparing for the possibility the development would be assessed as property tax exempt by Riley County. If that were to occur, the development would remove $1,090,00 in property valuation from local tax rolls.
Hilgers presented calculations of about a $43,000 reduction in property tax collections as the estimated fiscal impact, of which the city receives just under $5,000 for its operations. Including the reductions to city allocations to Riley County Police and the Manhattan Public Library, though, the figure is closer to $13,000.
Some of that would be offset by sales tax revenue generated by the museum, and Hilgers noted Manhattan Convention and Visitors Bureau projections that the attraction could generate a nearly $47 million economic impact.
“There’s a lot of assumptions that go into that number, but I do think that Karen [Hibbard, CVB director] and her staff work with consultants not only in the State but in the region to try to gauge just how much of an impact people have when they travel,” Hilgers says.
The standard estimate is $313 per day per visitor, in this case calculated by what Chamber officials have said could be 150,000 visitors per year to the museum and to other businesses and attractions in the city.
“400,000 visitors, I believe, is what Karen says we have on an annual basis,” says Hilgers. “Are some of those visitors part of this 150k? Probably so, they’re probably doing multiple things when they’re in Manhattan and we want them to.”
Commissioner Usha Reddi says even half that amount would be a positive development for the city.
“What we have in front of us is a good proposal,” says Reddi. “We want to give them at least some space to have those discussions and see what they would like to do.”
Part of the land the DeBruyn’s hope to aquire for the development is a parking lot adjacent to Town Pavilion that is currently public parking. The land is owned by the City of Manhattan and is under lease to the Manhattan Town Center for another — part of the original 99 year mall lease.
In order for the city to transfer the property to the developers, the DeBruyn’s have to complete a negotiated-in-principle deal of $1.8 million with MTC to buy out the remainder of their lease on the lot. As the leaser, the city will also agree to extend the MTC lease 37 years to a 99 year term while MTC will see its rent rise $15,000 per year three times over that span (2058, 2083, 2103).
“This will give them that term that most shopping centers across the country have,” Hilgers says. “The longer the term, the more leveraged you can become from an investment standpoint.”
The discussion brought out area business owners Tuesday, who raised concerns about parking impacts related to the plans for the MTC leased parking lot specifically.
Town Pavilion Property Owner Calvin Emig spoke during the public hearing saying that he and his tenants are on board with the development, but noted that tentative plans to transfer a public lot utilized by his tenants and their customers to private museum ownership will disadvantage them if no alternative is provided.
“There is no other nearby handicap-accessible parking spot without crossing a street to reach Town Pavilion,” he says. “Some of our businesses have employees and customers that arrive early in the morning and leave at dark — they need close and safe parking.”
DeBruyn’s counsel Mark Abbott says the discussion this evening was solely on expanding the STAR district, though acknowledging it’s impossible to separate the development from the topic and that more information on the development plan is to come.
“No site in a fully-developed urban area is perfect,” Abbott says. “I think the location here compared to the location that we previously presented last year where the back of the facility would have been facing those entering Downtown Manhattan, where there was no parking on-site available; I think the visual presentation of this museum to all that enter into the city will be a far superior location.”
Commissioner Mark Hatesohl calls it ‘rare’ to have a free public parking lot like that located in front of their building, and says that as developable land becomes more and more scarce that they will become more lucrative for redevelopment.
“I just can’t imagine they’re going to take a hard-line approach and completely eliminate all parking there,” says Hatesohl. “But even if they do you’re now in the same boat as most of the other businesses in Manhattan that have to worry about finding parking for their customers or provide it.”
Butler says the city may need to reach out to the DeBruyn’s specifically on ensuring the availability of handicap parking. Reddi says parking considerations will be a part of any Downtown project going forward by necessity.
“Good project, good ROI, little cost to the city, and plenty of steps to address that parking issue,” says Commissioner John Matta.
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