Video: Fact-checking ‘Yes Wichita’ on paved streets

In this excerpt from WichitaLiberty.TV: Will the proposed Wichita sales tax result in more paved streets? It depends on what you mean by “pave.” Bob Weeks explains. View below, or click here to view at YouTube.

For more on this issue, see Fact-checking Yes Wichita: Paved streets.

Bar char statistics

Beechcraft incentives a teachable moment for Wichita

The case of Beechcraft and economic development incentives holds several lessons as Wichita considers a new tax with a portion devoted to incentives.

In December 2010 Kansas Governor Mark Parkinson announced a deal whereby the state would pay millions to Hawker Beechcraft to keep the company in Kansas. The company had been considering a purported deal to move to Baton Rouge, Louisiana. (Since then the company underwent bankruptcy, emerged as Beechcraft, and has been acquired by Textron.) The money from the state was to be supplanted by grants from the City of Wichita and Sedgwick County.

At the time, the deal was lauded as a tremendous accomplishment. In his State of the City address for 2011, Wichita Mayor Carl Brewer told the city that “We responded to the realities of the new economy by protecting and stabilizing jobs in the aviation industry. … The deal with Hawker Beechcraft announced last December keeps at least 4,000 jobs and all existing product lines in Wichita until at least 2020.”

Kansas Payments to Hawker Beechcraft and Employment

The nearby table shows data obtained from the Kansas Department of Commerce for Hawker Beechcraft. “MPI” means “Major Project Investment,” a class of payments that may be used for a broad range of expenses, including employee salaries and equipment purchases. SKILL is a program whereby the state pays for employee training. The MPI payments have been reduced below the $5 million per year target as the company has not met the commitment of maintaining at least 4,000 employees.

Besides these funds, the City of Wichita and Sedgwick County approved incentives of $2.5 million each, to be paid over five years at $500,000 per year (a total of $1,000,000 per year). The company has also routinely received property tax abatements by participating in an industrial revenue bond program.

It’s unfortunate that Beechcraft employment has fallen. The human cost has been large. But from this, we can learn.

First, we can learn it’s important to keep the claims of economic development officials and politicians in perspective. Mayor Brewer confidently claimed there would be at least 4,000 jobs at Beechcraft and the retention of existing product lines in Wichita. As we’ve seen, the promised employment level has not been maintained. Also, Beechcraft shed its line of business jets. The company did not move the production of jets to a different location; it stopped making them altogether. So “all existing product lines” did not remain in Wichita — another dashed promise.

Second, Wichita officials contend that our city can’t compete with others because our budget for incentives is too small. The figure of $1.65 million per year is commonly cited. As we see, Beechcraft alone received much more than that, and in cash. Local economic development officials are likely to say that the bulk of these funds are provided by the state, not by local government. I doubt it made a difference to Beechcraft. The lesson here is that Wichita officials are not truthful when telling citizens the amounts of incentives that are available.

Third, this incident illuminates how incentives are extorted from gullible local governments. In his 2011 address, the Wichita mayor said “We said NO to the State of Louisiana that tried to lure Hawker Beechcraft.” (Capitalization in original.) But a Baton Rouge television station reported that the move to Louisiana was never a possibility, reporting: “Today, Governor Bobby Jindal said the timing was not right to make a move. He says Hawker could not guarantee the number of jobs it said it would provide.”

The Associated Press reported this regarding the possible move to Louisiana: “They [Hawker Beechcraft] weren’t confident they could meet the job commitments they would have to make to come to Baton Rouge so it just didn’t make sense at this time.”

The threat the mayor said Wichita turned back with tens of millions of dollars? It was not real. This is another lesson to learn about the practice of economic development.

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For Wichita city hall, an educational opportunity

Will Wichita city officials and sales tax boosters attend an educational event produced by a leading Kansas public policy institute? It will be an opportunity for city officials to demonstrate their commitment to soliciting input from the community.

Wichita voters will face a choice in November — whether to vote for or against a proposed sales tax of one cent per dollar. Wichita city council members and city hall bureaucrats say they have spent great effort educating Wichitans on issues relevant to the sales tax. Members of the “Yes Wichita” group are holding events to educate the public on why they should vote in favor of the tax.

Wichita City Budget Cover, 1975All of the information presented by the city and the “Yes Wichita” group has a common ideological thread: That our city has problems, and the way to fix things is to implement a new tax and rely on government to provide the solutions it has determined we need.

City hall might be surprised to learn that there are differing opinions as to the nature and extent of our city’s problems, and different ideas about how to fix them. Some of these ideas are novel. Some may work, and some may not. (It’s far from certain that government-provided solutions will work.) Most of these diverse ideas are well-researched. They often rely on private sector initiative rather than government taxation and spending. They may rely on voluntary cooperation through markets rather than coercive government action.

Since city hall says that knowing the facts is important, you might think that city council members and city bureaucrats would welcome the production of educational events on sales tax topics. That’s why it was discouraging that a July forum on water issues produced by Kansas Policy Institute was attended by just a handful of city officials. Even worse, the city officials that attended left the meeting at its midpoint, as soon as the city’s public works director finished his presentation.

I understand that city council members are part-time employees paid a part-time salary. Some have outside jobs or businesses to run. But that’s not the case with the city’s public works director or its governmental affairs director. That’s not the case with the city manager, or the assistant city manager, or the city’s economic development staff.

It’s especially not the case for Mayor Carl Brewer. He is paid a full-time salary to be the leader of our community. When he shows little willingness to consider views other than those produced by city hall sycophants that work — directly or indirectly — for him and the council, we have a deficit of leadership in Wichita.

It’s especially grating because several city council members and the “Yes Wichita” group contend their opponents — like me — are misinformed and/or lying. (When pressed for specific examples, few are produced.)

If you’ve attended a city council meeting, you may have to sit through up to an hour of the mayor issuing proclamations and service awards before actual business starts. Fleets of city bureaucrats are in the audience during this time.

But none of these would spend just one hour listening to a presentation in July by a university professor that might hold a solution to our water supply issue.

kansas-policy-institute-logoI understand that city officials might not be the biggest fans of Kansas Policy Institute. It supports free markets and limited government. But city officials tell us that they want to hear from citizens. The city says it has gone to great lengths to collect input from citizens, implementing a website and holding numerous meetings.

About 70 people attended the KPI forum in July. Citizens were interested in what the speakers had to say. They sat politely through the presentation by the two city officials, even though I’m sure many in the audience were already familiar with the recycled slides they’d seen before.

But it appears that Wichita city officials were not interested in alternatives that weren’t developed by city hall. They can’t even pretend to be interested.

Now, this Friday morning September 19, Kansas Policy Institute is producing another forum on issues relevant to the proposed sales tax. The event’s agenda features six speakers over about four hours. Three speakers were selected by the Wichita Metro Chamber of Commerce. Two are from out of town. Another is an expert on the Wichita and Kansas economy. There will be opportunities for attendees to ask questions.

Will city council members, city hall bureaucrats, and members of the “Yes Wichita” leadership team attend this event?

The Fostering Economic Growth in Wichita event is open to everyone and presented at no charge by Kansas Policy Institute. For more information and registration, click here.

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Before spending on new infrastructure, Wichita voters should ask why so much deferred maintenance

As the City of Wichita asks for more tax money for infrastructure, Wichita voters need to be aware of the projected costs of the city’s deferred maintenance.

When the Wichita City Council voted to increase water rates in November 2013, meeting minutes reported these remarks from the city manager explaining that Wichita has not adequately maintained its infrastructure:

Bob Layton City Manager stated the Council told staff last year that they wanted staff to continue to look at operation efficiencies to reduce the operating costs, which they are doing. Stated the rate recommendation does reflect the three percent efficiency increase. Stated over the last several years 80% of those rate increases have gone to infrastructure improvements and a lot of it is because of deferred maintenance that occurred over a long period of time. Stated they recognize even with these increases that it will difficult to keep up with the maintenance requirements of our system but are also aware of concerns residents have about significant rate increases.

This was not the first time, nor the last time, that Wichitans might have heard about problems with deferred maintenance of city infrastructure. In his 2013 State of the City address Mayor Carl Brewer told the city that over the next 30 years, “Wichita’s aging water, sewer, and storm drainage systems will require significant maintenance or replacement. Total replacement of these systems is estimated to cost $2.1 BILLION.” (emphasis in original)

Earlier this year a report presented to the Community Investments Plan Steering Committee held language like “Decades of under-investment in infrastructure maintenance … 38% of Wichita’s infrastructure is in ‘deficient/fair’ condition.”

The report also told the committee that the “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.

It’s important to note that these costs are not for building new infrastructure. Also, these costs are not for routine, ongoing maintenance. Instead, these numbers are what it costs to catch up with what the city should have been doing. As the report says: To bring existing deficient infrastructure up to standards.

This is important for Wichita voters to know as they consider their decision on a proposed one cent per dollar sales tax that will appear on the November ballot. Almost two-thirds of the tax proceeds would be spent on water.

Wichita Area Future Water Supply: A Model Program for Other Municipalities
Wichita Area Future Water Supply: A Model Program for Other Municipalities
But it’s important to note that the purpose of the $250 million allocated for water is not for catching up on the maintenance backlog. Instead, it’s earmarked for building additional water supply capability.

Whether the sales tax passes or not, the deferred maintenance needs of our existing infrastructure will remain. There will be pressure for water rates to rise, or for some other source of revenue to catch up on maintenance.

It won’t do us much good to have a new water source (the purpose of which is to allow for the watering of lawns and washing of cars during droughts) if the water pipes are broken. Perhaps Wichita voters should ask that the city present a plan for maintaining the assets we have before sending more tax dollars to city hall.

And let’s also ask this: Why hasn’t the city maintained the infrastructure that taxpayers and water users have already paid for?

Is Kansas a rural, agriculture state?

One of the most-often repeated themes heard during the Kansas Governor debate at the Kansas State Fair is that Kansas is a rural state, and that agriculture is vital to our state’s economy. It’s not just gubernatorial candidates that say this. It seems to be common knowledge.

Rural populations of the states. Click for larger version.
Rural populations of the states. Click for larger version.
There may be several ways to measure the “ruralness” of a state. One way is the percent of the state’s people that live in rural areas. The U.S. Census Bureau has these statistics. In the chart made from these statistics, Kansas is right in the middle of the states. 25.80 percent of Kansans live in rural areas.

As for the importance of agriculture to the Kansas economy, figures from the Bureau of Economic Analysis (part of the U.S. Department of Commerce) tell us that in 2013 agriculture contributed $6,914 million to the Kansas GDP. Total GDP in Kansas that year was $144,062 million, meaning that agriculture accounted for 4.8 percent of total Kansas economic production. That is a pretty high number; only six states have a higher percentage of GDP from agriculture.

Do these numbers mean anything? It’s common for Kansas politicians to emphasize — and perhaps exaggerate — whatever connections they may have to a family farm. It’s part of a nostalgic and romanticized view of Kansas, the Kansas of Home on the Range. We are the “Wheat State” and “Breadbasket of the World,” and “One Kansas farmer feeds 128 people (plus you).”

So while Kansas is in the middle in the ranking of percent of population living in rural areas, agriculture is a larger component of state income than all but a few states. Still, agriculture is less than five percent of Kansas income. Policymakers should keep this in mind, although politicians may not.

For downtown Wichita, some progress in controlling waste

Downtown Wichita, September 12, 2014, 11:17 am
Downtown Wichita, September 12, 2014, 11:17 am
It was a cloudy day, and while the sidewalk bench lights were on, at least the tall street lights were off. Other good news: The outdoor lights at the Wichita Transit Center were also turned off. So Wichita’s making some progress in controlling the blatant waste of electricity. Either that, or the lights at the Transit Center finally burned out from being on all day.

The lights illustrated in these photographs are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in As Wichita asks for more taxes, it continues to waste what it has, Before asking for more taxes, Wichita should stop wasting what it has, Waste in Wichita, the seen and probably unseen, Wichita’s monsters on display, again, Forget the vampires. Let’s tackle the real monsters, Wichita advances in the field of cost savings, Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.

Who does the proposed Wichita sales tax harm?

In this excerpt from WichitaLiberty.TV: Analysis of household expenditure data shows that a proposed sales tax in Wichita affects low income families in greatest proportion, confirming the regressive nature of sales taxes. View below, or click here to view on YouTube. For more on this, see Wichita sales tax hike would hit low income families hardest.

For Wichita’s Williams, $1.33 per month is too much

Wichita city council member Lavonta Williams (district 1, northeast Wichita) is a supporter of the proposed one cent per dollar Wichita sales tax. She has also spoken of her concern for Wichita’s low-income families, as she did in November 2013 when the Wichita City Council voted to increase water rates. City documents indicated that the average residential bill would rise by $1.33 per month for those who use modest amounts of water.

Wichita City Council Member Lavonta Williams
Wichita City Council Member Lavonta Williams
According to the meeting minutes, Williams said this:

Council Member Williams stated she realizes that some may think that $1.33 is not that big of an increase, but for so many of our constituents, it is quite an increase for them especially those who are on a fixed income. Stated this is concerning to her and appreciates staff looking at all options and are kicking off a program that will help those who need assistance from the City. Stated she realizes as a City that we have to continue moving forward and look at our infrastructure.

I wonder: When Williams voted in favor of the Wichita sales tax ballot placement, did she understand that anyone who spends $133.00 per month on taxable purchases will see a $1.33 rise in their monthly sales tax expense? Recall that Kansas applies sales tax to food, although there is a possibility of receiving a rebate. The rebate is implemented through a nonrefundable income tax credit.

Here’s something else: Since Williams applauded the formation of a payment assistance program for those who can’t afford their water bills, I wonder if she will propose a similar program for those who can’t afford a higher sales tax?

Yes Wichita logo

For Wichita sales tax, concern over conflicts of interest

Supporters of a proposed sales tax in Wichita promise there will be no conflicts of interest when making spending decisions. That would be a welcome departure from present city practice.

"Yes Wichita" website.
“Yes Wichita” website.
In November Wichita voters will decide on a new one cent per dollar sales tax, part to be used for economic development, specifically job creation. “Yes Wichita” is a group that supports the sales tax. Language on its website reads: “Conflict-of-interest policies will prohibit anyone from participating in decisions in which there is any self-interest.” The page is addressing the economic development portion of the proposed sales tax. It’s part of an effort to persuade Wichita voters that millions in incentives will be granted based on merit instead of cronyism or the self-interest of politicians, bureaucrats, and committee members.

The problem is that while the city currently has in place laws regarding conflicts of interest, the city does not seem willing to observe them. If the proposed sales tax passes, what assurances do we have that the city will change its ways?

Following, from October 2013, is one illustration of Wichita city hall’s attitude towards conflicts of interest and more broadly, government ethics.

Wichita contracts, their meaning (or not)

Is the City of Wichita concerned that its contracts contain language that seems to be violated even before the contract is signed?

This week the Wichita City Council approved a development agreement for the apartments to be built on the west bank of the Arkansas River. The development agreement the council contemplated included this language in Section 11.06, titled “Conflicts of Interest.”

section-1106

No member of the City’s governing body or of any branch of the City’s government that has any power of review or approval of any of the Developer’s undertakings shall participate in any decisions relating thereto which affect such person’s personal interest or the interests of any corporation or partnership in which such person is directly or indirectly interested.

At Tuesday’s meeting I read this section of the contract to the council. I believe it is relevant for these reasons:

Warren Theater Brewer's Best 2013-07-18

1. Wichita Mayor Carl Brewer is a member of a governing body that has power of approval over this project.

2. Bill Warren is one of the parties that owns this project.

3. Bill Warren also owns movie theaters.

4. Wichita Mayor Carl Brewer owns a company that manufactures barbeque sauce.

5. Brewer’s sauce is sold at Warren’s theaters.

The question is this: Does the mayor’s business relationship with Warren fall under the prohibitions described in the language of section 11.06? Evidently not. After I read section 11.06 I asked the mayor if he sold his sauce at Warren’s theaters. He answered yes. But no one — not any of the six city council members, not the city manager, not the city attorney, not any bureaucrat — thought my question was worthy of discussion.

(While the agreement doesn’t mention campaign contributions, I might remind the people of Wichita that during 2012, parties to this agreement and their surrogates provided all the campaign finance contributions that council members Lavonta Williams and James Clendenin received. See Campaign contributions show need for reform in Wichita. That’s a lot of personal interest in the careers of politicians.)

I recommend that if we are not willing to live up to this section of the contract that we strike it. Why have language in contracts that we ignore? Parties to the contract rationalize that if the city isn’t concerned about enforcing this section, why should they have to adhere to other sections?

While we’re at it, we might also consider striking Section 2.04.050 of the city code, titled “Code of ethics for council members.” This says, in part, “[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”

That language seems pretty clear to me. But we have a city attorney that says that this is simply advisory. If the city attorney’s interpretation of this law is controlling, I suggest we strike this section from the city code. Someone who reads this — perhaps a business owner considering Wichita for expansion — might conclude that our city has a code of ethics that is actually observed by the mayor and council members and enforced by its attorneys.

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Claims of future transparency of Wichita tax money spending

Claims by boosters of a proposed Wichita sales tax that the city will be transparent in how money is spent must be examined in light of the city’s attitude towards citizens’ right to know.

When a city council member apologizes to bureaucrats because they have to defend why their agencies won’t disclose how taxpayer money is spent, we have a problem. When the mayor and most other council members agree, the problem is compounded. Carl Brewer won’t be mayor past April, but the city council member that apologized to bureaucrats — Pete Meitzner (district 2, east Wichita) — may continue serving in city government beyond next year’s elections. Wichita City Manager Robert Layton will likely continue serving for the foreseeable future.

Why is this important? Supporters of the proposed Wichita sales tax promise transparency in operations and spending. But requests for spending records by the city’s quasi-governmental agencies are routinely rebuffed. The city supports their refusal to comply with the Kansas Open Records Act. Many of the people presently in charge at city hall and at agencies like Greater Wichita Economic Development Coalition will still be in charge if the proposed sales tax passes. What assurances do we have that they will change their attitude towards citizens’ right to know how taxpayer funds are spent?

Following, from December 2012, an illustration of the city’s attitude towards citizens’ right to know.

Wichita, again, fails at open government

The Wichita City Council, when presented with an opportunity to increase the ability of citizens to observe the workings of the government they pay for, decided against the cause of open government, preferring to keep the spending of taxpayer money a secret.

The occasion was consideration of renewing its contract with Go Wichita Convention and Visitors Bureau. I asked, as I have in the past for this agency and also for Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition, that they consider themselves to be what they are: public agencies as defined in the Kansas Open Records Act.

In the past I’ve argued that Go Wichita is a public agency as defined in the Kansas Open Records Act. But the city disagreed. And astonishingly, the Sedgwick County District Attorney agrees with the city’s interpretation of the law.

So I asked that we put aside the law for now, and instead talk about good public policy. Let’s recognize that even if the law does not require Go Wichita, WDDC, and GWEDC to disclose records, the law does not prohibit them from fulfilling records requests.

Once we understand this, we’re left with these questions:

Why does Go Wichita, an agency funded almost totally by tax revenue, want to keep secret how it spends that money, over $2 million per year?

Why is this city council satisfied with this lack of disclosure of how taxpayer funds are spent?

Why isn’t Go Wichita’s check register readily available online, as it is for Sedgwick County?

For that matter, why isn’t Wichita’s check register online?

It would be a simple matter for the council to declare that the city and its taxpayer-funded partner agencies believe in open government. All the city has to have is the will to do this. It takes nothing more.

Only Wichita City Council Member Michael O’Donnell (district 4, south and southwest Wichita) gets it, and yesterday was his last meeting as a member of the council. No other council members would speak up in favor of citizens’ right to open government.

But it’s much worse than a simple failure to recognize the importance of open government. Now we have additional confirmation of what we already suspected: Many members of the Wichita City Council are openly hostile towards citizens’ right to know.

In his remarks, Wichita City Council Member Pete Meitzner (district 2, east Wichita) apologized to the Go Wichita President that she had become “a pawn in the policy game.” He said it was “incredibly unfair that you get drawn into something like this.”

He added that this is a matter for the Attorney General and the District Attorney, and that not being a lawyer, she shouldn’t be expected to understand these issues. He repeated the pawn theme, saying “Unfortunately there are occasions where some people want to use great people like yourself and [Wichita Downtown Development Corporation President] Jeff Fluhr as pawns in a very tumultuous environment. Please don’t be deterred by that.”

Mayor Brewer added “I would have to say Pete pretty much said it all.”

We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”

But by framing open government as a legal issue — one that only lawyers can understand and decide — Wichita city government attempts to avoid criticism for their attitude towards citizens.

It’s especially absurd for this reason: Even if we accept the city’s legal position that the city and its quasi-governmental taxpayer-funded are not required to fulfill records request, there’s nothing preventing from doing that — if they wanted to.

In some ways, I understand the mayor, council members, and bureaucrats. Who wants to operate under increased oversight?

What I don’t understand is the Wichita news media’s lack of interest in this matter. Representatives of all major outlets were present at the meeting.

I also don’t understand what Council Member Lavonta Williams (district 1, northeast Wichita) suggested I do: “schmooze” with staff before asking for records. (That’s not my word, but a characterization of Williams’ suggestion made by another observer.)

I and others who have made records requests of these quasi-governmental taxpayer-funded organizations have alleged no wrongdoing by them. But at some point, citizens will be justified in wondering whether there is something that needs to be kept secret.

The actions of this city have been noticed by the Kansas Legislature. The city’s refusal to ask its tax-funded partners to recognize they are public agencies as defined in the Kansas Open Records Act is the impetus for corrective legislation that may be considered this year.

Don’t let this new law be known as the “Wichita law.” Let’s not make Wichita an example for government secrecy over citizens’ right to know.

Unfortunately, that bad example has already been set, led by the city’s mayor and city council.

Wichita City Hall

What Boeing received from Wichita was better than cash

Supporters of the proposed Wichita sales tax contend that the millions in incentives Boeing received were not cash. That’s true — they were more valuable than cash.

At a forum on the proposed Wichita sales tax on September 9, 2014, “Yes Wichita” co-chair Jon Rolph told the audience “The Boeing incentive thing? The city never gave Boeing incentives. They didn’t take our incentive money and run.” As explained at Fact-checking Yes Wichita: Boeing incentives, the claim that the “city never gave Boeing incentives” must be astonishing news to the Wichita city officials who dished out over $600 million in subsidies and incentives to the company.

"Yes Wichita" Facebook page.
“Yes Wichita” Facebook page.
In response, “Yes Wichita” posted this on its Facebook page: “Those who were at the event understand that the conversation was about cash incentives not about IRBs. Boeing never received cash incentives from the City.”

First, it’s interesting that the person commenting on behalf of “Yes Wichita” was able to read the minds of the audience members. That’s a neat trick. But let’s talk about something more important — the confusion that often surrounds economic development incentives.

“Yes Wichita” contends that although Boeing received an estimated $657,992,250 in property tax abatements over several decades, this doesn’t count as “cash incentives” because it wasn’t given to Boeing in the form of cash.

“Yes Wichita” is correct, in a way. As a result of the City of Wichita’s issuance of industrial revenue bonds, Boeing didn’t receive cash from the city. Instead, the benefits the city initiated on Boeing’s behalf are more valuable to the company than receiving an equivalent amount of cash.

Internal Revenue Service IRS logoAccording to IRS guidelines, “tax incentives, whether in the form of an abatement, credit, deduction, rate reduction or exemption, simply reduce the tax imposed by state or local governments.” The IRS says these incentives do not count as income. Therefore, Boeing did not pay income taxes on these benefits, as it would have if the city gave the company cash.

The claim by the “Yes Wichita” group — that tax abatements don’t count as cash incentives — is characteristic of the way economic development incentives are justified. Instead of passing out cash, it’s more common that government uses abatements, credits, tax increment financing, investment in training and infrastructure, or exemptions. Many of these programs are confusing to citizens, and perhaps also to the elected officials who approve them. This allows government to shroud the economic realities of the transaction, and “Yes Wichita” is contributing to this confusion.

Assistance needed in obtaining records from a government agency

September 12, 2014

Mr. Marc Bennett
Office of the District Attorney
Sedgwick County Courthouse

Dear Mr. Bennett,

I am writing to ask your assistance in obtaining records from a government agency. Specifically, I asked Go Wichita Convention and Tourism Bureau for a copy of a contract the organization recently formed with an external entity. My request was declined.

The Kansas Open Records Act says this in defining which agencies are subject to the open records law: “‘Public agency’ means the state or any political or taxing subdivision of the state or any office, officer, agency or instrumentality thereof, or any other entity receiving or expending and supported in whole or in part by the public funds appropriated by the state or by public funds of any political or taxing subdivision of the state.”

Go Wichita Convention and Tourism Bureau receives substantial public funds from the City of Wichita. According to the 2012 IRS form 990 for Go Wichita, the organization had total revenue of $2,609,545. Of that, $2,270,288 was tax money from the city, meaning the agency is 87 percent funded by public money. This year the Wichita City Council passed an ordinance that will add 2.75 percent to Wichita hotel bills starting on January 1, 2015. This public money will be sent to Go Wichita Convention and Tourism Bureau. The city estimates the proceeds of this tax to be $2.5 million per year, which will boost the percent of support by public money to a higher level.

I feel that this level of public funding qualifies as “supported in whole or in part by the public funds appropriated by the state or by public funds of any political or taxing subdivision of the state” as described in the Kansas Open Records Act.

It has been the position of Go Wichita Convention and Tourism Bureau that it is a non-profit private corporation and therefore not subject to the Kansas Open Records Act. The City of Wichita supports this position. But Go Wichita Convention and Tourism Bureau performs a governmental function, and is funded almost entirely by public funds.

Mr. Bennett, as your office considers this case, I ask that we remain mindful of the language from the preamble to the Kansas Open Records Act: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.”

Respectfully,

Bob Weeks

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: Unknown stories of economic development, Uber, Fact-checking Yes Wichita

In this episode of WichitaLiberty.TV: Wichita economic development, one more untold story. The arrival of Uber is a pivotal moment for Wichita. Fact-checking Yes Wichita on paved streets. View below, or click here to view at YouTube. Episode 58, broadcast September 14, 2014.

possibilities-opportunity-396265_1280

To pay for a Wichita water supply, there are alternatives

Supporters of a proposed Wichita sales tax contend there is only one alternative for paying for a new water supply, and it is presented as unwise.

The major component of the proposed Wichita one cent per dollar sales tax is to pay for a new water supply. Controversy surrounds how the water should be supplied (ASR? El Dorado? New reservoir?) and its urgency. But according to sales tax boosters, there is no controversy about how to pay for a new water supply.

"Yes Wichita" campaign material. Click for larger version.
“Yes Wichita” campaign material. Click for larger version.
The City of Wichita and the “Yes Wichita” group present two alternatives to Wichita voters: Either (a) approve a sales tax to pay for a new water supply, or (b) the city will borrow to pay for the water supply and water users will pay a lot of interest. Campaign material from “Yes Wichita” states that without a sales tax, “we end up paying 50% more over 25 years because of financing costs.”

Are there other alternatives? Here’s one: If the water supply project costs $250 million, let’s raise water bills by that amount over five years. In this way, water users pay for the new water supply, and we avoid the long-term debt that city council members and “Yes Wichita” seem determined to avoid.

It's best to have those who use something pay for it directly.
It’s best to have those who use something pay for it directly.
Water bills would have to rise by quite a bit in order to raise $50 million per year. But it’s important to have water users pay for water. Also, Wichitans need to be aware — acutely aware — of the costs of a new water supply. Many citizens are surprised to learn that the city has spent $247 million over the past decade on a water project, the ASR program. That money was mostly borrowed, much of it by the same mayor, council members, and city hall bureaucrats that now shun long-term debt.

It will be easier to let people know how much a new water supply costs and how it affects them personally when its cost appears on their water bills. The money that is collected through water bills can be placed in a dedicated fund instead of flowing to the city’s general fund. Then, after the necessary amount is raised, water bills can be immediately adjusted downwards. That’s more difficult to do with a sales tax.

If we pay for a new water supply through a general retail sales tax, the linkage between cost and benefit is less obvious. There is less transparency, and ultimately, less accountability.

Sales tax supporters like “Yes Wichita” claim that one-third of the sales tax collected in Wichita is paid by non-Wichitans. It’s smart, they say, to have visitors to Wichita pay for a portion of the costs of a new water supply. But don’t retail stores pass along their costs — including water bills — to their customers?

Consider this: What is probably the most expensive item sold on a routine basis by a Wichita water utility customer? A good guess would be a Boeing 737 fuselage manufactured by Spirit Aerosystems and sold to Boeing. This item isn’t subject to sales tax. But Spirit can pass along higher water bills to Boeing. (This assumes that shifting costs to outsiders is desirable. I’m not convinced it is.)

According to the Wichita budget, the Wichita water utility provides water to 425,000 customers. As the population of Wichita is about 385,000, there are some 40,000 Wichita water utility customers outside the city. How best to have them help pay for a new water supply: Through their water bills, or hoping that residents of Derby drive past their local Wal-Mart and Target stores to shop at identical stores in Wichita so they can pay sales tax to the city?

There are alternatives for paying for a new water supply other than a sales tax and long-term debt. As has been illustrated by sales tax opponents, water is important, but the need for a new water supply is not as urgent as sales tax supporters portray. There is time to consider other alternatives.

City of Wichita Spends 2 million Rebuffs Citizen’s Transparency Request

For proposed Wichita sales tax, claims of transparency

Claims of valuing and promoting government transparency by the City of Wichita are contradicted by its taxpayer-funded surrogates.

As boosters of a proposed Wichita sales tax promise accountability and transparency in how money will be spent, especially the portion designated for jobs and economic development, voters may want to consider the city’s past and present attitude towards government transparency and open records.

Brochure from Kansas Attorney General's office
Brochure from Kansas Attorney General’s office
The city has three surrogate quasi-governmental agencies that are almost totally taxpayer-funded, specifically Go Wichita Convention and Visitors Bureau, Wichita Downtown Development Corporation, and Greater Wichita Economic Development Coalition. Each agency contends it is not a “public agency” as defined in Kansas law, and therefore does not have to fulfill records requests.

These agencies spend considerable sums of tax money. In December the city approved funding Go Wichita with $2,322,021 for 2014, along with a supplemental appropriation of $150,000. Earlier this year the council voted to increase the city’s hotel tax by 2.75 cents per dollar, with the proceeds going to Go Wichita. That tax is thought to raise $2.5 million per year.

That’s a lot of tax money. It’s also a very high portion of the agency’s total funding. According to the 2012 IRS form 990 for Go Wichita, the organization had total revenue of $2,609,545. Of that, $2,270,288 was tax money from the city. That’s 87 percent taxpayer-funded. When the surge of higher hotel tax money starts flowing in, that percent will undoubtedly rise, perhaps to 93 percent or more.

Despite being nearly totally funded by taxes, Go Wichita refuses to supply spending records. Many believe that the Kansas Open Records Act requires that it comply with such requests. If the same money was being spent directly by the city, the records would be supplied.

City of Wichita Spends 2 million Rebuffs Citizen’s Transparency RequestI’ve appeared before the council several times to ask that Go Wichita and similar organizations comply with the Kansas Open Records Act. See Go Wichita gets budget approved amid controversy over public accountability, City of Wichita Spends $2 million, Rebuffs Citizen’s Transparency Request, and articles at Open Records in Kansas.

This week Go Wichita refused to provide to me its contract with a California firm retained to help with the re-branding of Wichita. If the city had entered into such a contract, it would be public record. But Go Wichita feels it does not have to comply with simple transparency principles.

Supporters of the proposed one cent per dollar Wichita city sales tax promise transparency in the way decisions are made and money is spent. Below, Mike Shatz explains how this promise is hollow.

City of Wichita wants to increase sales tax by 14%

The City of Wichita funnels your tax dollars into “non-profit” development groups that refuse to show us how that money is spent, and now the City wants you to vote in favor of a sales tax increase so they can give these organizations even more of your money.

These groups, Go Wichita, The Downtown Development Corporation, and the Greater Wichita Economic Development Coalition, get roughly 90% of their overall funding from Wichita tax dollars, but claim that they are exempt from the Kansas Open Records Act, because they are “private” organizations.

The City of Wichita could easily place conditions on the money it gives to these groups, requiring them to show taxpayers how their tax dollars are being spent, but the City refuses to do so. This is not transparency.

Continue reading at Kansas Exposed.

Coalition for a Better Wichita logo

Fact-checking Yes Wichita: Sales tax cost per household

The cost of the proposed Wichita sales tax to households is a matter of dispute. I present my figures, and suggest that “Yes Wichita” do the same.

At a forum on the proposed Wichita sales tax on September 9, 2014, Jennifer Baysinger told the audience that “the average family bringing in about $50,000 a year would pay about $240 a year tax.” She was speaking on behalf of Coalition for a Better Wichita, a group that opposes the one cent per dollar sales tax that Wichita voters will see on their November ballots.

In his rebuttal, “Yes Wichita” co-chair Jon Rolph disputed these figures, saying that Baysinger’s claim would mean that the average family spends $24,000 per year on “groceries and sweaters and socks.” He said a family would need to make $200,000 per year to spend that much on taxable items.

So who is correct? It’s relatively easy to gather figures about sales taxes and households. Here’s what I found.

According to a report from the Kansas Department of Revenue, in fiscal year 2013 the City of Wichita generated $372,843,844 in retail sales tax collections. With a population of 385,577 (2012 value), the tax collected per Wichita resident was $966.98.

Supporters of the proposed sales tax say that one-third of the sales tax collected in Wichita is paid by non-Wichitans. If true, that leaves $248,562,563 in sales tax paid by 385,577 Wichita residents, or $645 per person. This figure is from sales tax being collected at a rate of 7.15 percent, which implies that one cent per dollar of sales tax generates $90 per person. (This assumes that people do not change their purchases because of higher or lower sales taxes, which does not reflect actual behavior. But this is an estimate.)

According to the U.S. Census Bureau, there are 2.49 persons per household in Wichita. That means that a one cent per dollar sales tax has a cost of $224 per household. That’s close to Baysinger’s figure of $240.

We could also take sales tax collections of $248,562,563 and divide by the 151,309 households in Wichita to get a figure of $1,642.75 in sales tax paid per household. Again, since that is tax paid at the rate of 7.15 percent, it implies that one cent per dollar of sales tax generates $230 per household, subject to the same caveats as above. Again, this is close to Baysinger’s figure.

These results are close to my estimation of the cost of the proposed sales tax derived in an entirely different way. I took Census Bureau figures for the amount spent in various categories by families of different income levels. For each category of spending, I judged whether it was subject to sales tax in Kansas. The result was that the average household spent $22,287 per year on taxable items. One percent of that is $223, which is an estimate of the cost of a one cent per dollar sales tax per household. For households in the middle quintile of income, the value was $194. See Wichita sales tax hike would hit low income families hardest for details and charts.

How can the claims of Baysinger and Rolph be so far apart? I’ve presented my reasoning and calculations. The results are figures very close to what Coalition for a Better Wichita is using. Wichita voters might ask that Jon Rolph or one of the other co-chairs of “Yes Wichita” do the same.

Yes Wichita logo

Fact-checking Yes Wichita: Boeing incentives

The claim that the “city never gave Boeing incentives” will come as news to the Wichita city officials who dished out over $600 million in subsidies and incentives to the company.

At a forum on the proposed Wichita sales tax on September 9, 2014, “Yes Wichita” co-chair Jon Rolph told the audience “The main reason I’m here, I need to educate folks on this. There’s been a lot of misinformation out there.”

The proposed one cent per dollar Wichita sales tax will be voted on by Wichita voters in November. The city plans to use the proceeds for four areas: A new water supply, bus transit, street maintenance and repair, and economic development, specifically job creation. It is the last area that is the most controversial. Sales tax boosters make the case that Wichita has a limited budget for incentives, generally pegged at $1.65 million per year. They say that other cities have much larger budgets, and unless Wichita steps up with additional incentives, Wichita will not be able to compete for jobs.

Wichita has, however, many available incentive programs that are worth much more than $1.65 million per year. Just this week the city extended property tax abatements to one company that are valued at $108,541 per year. The company will receive this benefit annually for five years, with a likely extension for another five years. The city will also apply for a sales tax exemption on behalf of the company. City documents estimate its value at $126,347.

None of this money counts against the claimed $1.65 million annual budget for incentives, as these incentive programs have no cash cost to the city. There is a cost to other taxpayers, however, as the cost of government is spread over a smaller tax base. To the recipient companies, these benefits are as good as receiving cash. I’ve detailed other incentive programs and some recent awards at Contrary to officials, Wichita has many incentive programs.

The nature of, and value of, available incentive programs is important to understand. “Yes Wichita” co-chair Jon Rolph is correct. There is much misinformation. Here’s what he told the audience of young Wichitans after warning about misinformation: “The Boeing incentive thing? The city never gave Boeing incentives. They didn’t take our incentive money and run.”

Wichita Mayor Carl Brewer Facebook 2012-01-04The claim that the “city never gave Boeing incentives” will come as news to the Wichita city officials who dished out the subsidies and incentives. In a written statement at the time of Boeing’s announcement that it was leaving Wichita, Mayor Carl Brewer wrote “Our disappointment in Boeing’s decision to abandon its 80-year relationship with Wichita and the State of Kansas will not diminish any time soon. The City of Wichita, Sedgwick County and the State of Kansas have invested far too many taxpayer dollars in the past development of the Boeing Company to take this announcement lightly.”

Along with the mayor’s statement the city released a compilation of the industrial revenue bonds authorized for Boeing starting in 1979. The purpose of the IRBs is to allow Boeing to escape paying property taxes, and in many cases, sales taxes. According to the city’s compilation, Boeing was granted property tax relief totaling $657,992,250 from 1980 to 2017. No estimate for the amount of sales tax exemption is available. I’ve prepared a chart showing the value of property tax abatements in favor of Boeing each year, based on city documents. There were several years where the value of forgiven tax was over $40 million.

Boeing Wichita tax abatements, annual value, from City of Wichita.
Boeing Wichita tax abatements, annual value, from City of Wichita.
Kansas Representative Jim Ward, who at the time was Chair of the South Central Kansas Legislative Delegation, issued this statement regarding Boeing and incentives:

Boeing is the poster child for corporate tax incentives. This company has benefited from property tax incentives, sales tax exemptions, infrastructure investments and other tax breaks at every level of government. These incentives were provided in an effort to retain and create thousands of Kansas jobs. We will be less trusting in the future of corporate promises.

Not all the Boeing incentives started with Wichita city government action. But the biggest benefit to Boeing, which is the property tax abatements through industrial revenue bonds, starts with Wichita city council action. By authorizing IRBs, the city council cancels property taxes not only for the city, but also for the county, state, and school district.

We’re left wondering, as we have wondered before, whether the “Yes Wichita” campaign is uninformed, misinformed, or intentionally deceptive in making its case to Wichita voters.

Fostering economic growth in Wichita

Kansas Policy Institute is hosting a conference titled “Fostering Economic Growth in Wichita.” This is the second in a series of events looking at issues surrounding the proposed sales tax in Wichita. Voters will see the sales tax question on the ballot in November.

Wichita job development sales tax Kansas Policy InstituteThis event focuses on the economic development, or jobs, portion of the sales tax. The other areas sales tax funds would be spent on are a new water supply, street maintenance and repair, and bus transit.

This is event on Friday September 19, from 7:30 am to noon, held in room 132 of the Wichita State University MetroPlex. the event is free, and you may register here.

Here is the lineup of speakers and topics:

  • Nuts and Bolts of the “Jobs Fund” Proposal: Wichita Metro Chamber of Commerce with:
    • Paul Allen, Allen Gibbs & Houlik, Leadership Council Jobs Task Force
    • Jeff Finkle, President/CEO, International Economic Development Council
    • Dr. John Tomblin, Vice President for Research and Technology Transfer, Wichita State University
  • Examining Kansas’ Incentive History:
    • Nathan Jensen, Ph.D., Associate Professor at George Washington University
  • Trends of Wichita’s Economy:
    • Jeremy Hill, Director of Wichita State University’s Center for Economic Development and Business Research
  • Creating a Dynamic Local Economy:
    • Pamela Villarreal, Senior Fellow at the National Center for Policy Analysis

This is the second in a series of KPI-sponsored forums covering the various aspects of the 1% sales tax proposal. A forum on the water proposal was held in July, and a forum on the street and transit portion will be held in the near future. Kansas Policy Institute is hosting these events to give citizens the opportunity to hear experts address all sides of the issues, and is not taking a position on the individual aspects of the 1% sales tax proposal.

Wichita City Budget Cover, 1990

Wichita economic development, one more untold story

Readers of the Wichita Eagle might be excused for not understanding the economic realities of a proposed tax giveaway to a local development.

Tomorrow’s meeting of the Wichita City Council holds an item of economic development that might be confusing to citizens unless they read the meeting’s agenda packet. Here’s what the Wichita Eagle is reporting to readers: “The owner of the former Wichita Mall is seeking $3.6 million in industrial revenue bonds for a new parking lot — a request that the Wichita City Council will consider at its Tuesday meeting.” (Owners of former Wichita Mall seek IRBs for new parking lot, kansas.com, September 8, 2014)

The article doesn’t present much more about the economics of this transaction and its importance to public policy. That’s unfortunate, as after reading this article, citizens could be excused for thinking that the city is making a loan to a private entity.

But that isn’t the purpose of industrial revenue bonds, or IRBs, in Kansas. By issuing these bonds, the City of Wichita is not lending any money, and is not guaranteeing — not even hinting — that any loan will be repaid. Instead, city documents — but not Wichita Eagle reporting — tell us that Co-Co Properties, LLC will purchase the bonds. Who is Co-Co, you may be wondering? It’s the company that owns the Wichita Mall property, the same company that wants to borrow money to repair its parking lot. By purchasing the IRBs, the company is, in effect, lending money to itself. (It’s possible that Co-Co may seek other loans to get the funds to buy the IRBs, but if so, these would be private transactions and therefore not a matter of public policy.)

So if Co-Co is buying these IRBs itself, what is the purpose of the transaction? Why is Co-Co taking $3.6 million from one of its corporate pockets and transferring it to another pocket, and incurring costs in the process?

At this point, if all you’ve done is read the Wichita Eagle story, you may be confused. Actually, you’d be uninformed, because the Eagle story says nothing about who will purchase the IRBs. Further, the Eagle story tells us nothing about the reason for this transaction, which is to avoid paying two forms of taxes.

The city council agenda packet, available on the city’s website, explains that property tax forgiveness accompanies the IRBs. Specifically:

The one year estimated tax abatement on Co-Co’s proposed $3.6 million real property improvements when fully complete would be $108,541. … The value of a 100% real property tax exemption as applicable to taxing jurisdictions is:

City of Wichita, $29,258
Sedgwick County, $26,439
State of Kansas, $1,350
Wichita school district, $51,494

These annual numbers would be repeated for five years, plus another five years if the city council approves, based on council review. That’s potentially over one million dollars of forgiven property taxes.

That’s not all. City documents say city staff will also apply for a sales tax exemption. No value is given for how much sales tax Co-Co may avoid paying. If all purchases were taxable the value of the sales tax exemption would be $257,400, but it’s unlikely the value of the exemption would reach that level.

So there it is. The purpose of the industrial revenue bonds transaction is to avoid paying taxes. That inspires a question. In its application, Co-Co says it has spent millions renovating the building in order to attract tenants, done without public incentive or financing. But now we’re told the parking lot can’t be repaired without two forms of tax giveaways?

When the city finds it necessary to forgive taxes in order to make investment possible, it tells us that taxes in Wichita are too high. Those high taxes are blocking investment. It’s either that, or cronyism — a simple taxpayer-funded gift to a city council crony.

One more thing: Boosters of the proposed Wichita sales tax, part to be used for economic development, tell us that Wichita has only $1.65 million per year to fund incentives. The incentives being considered for Co-Co are worth over $1 million, but have no cash cost to the city. These incentives aren’t part of the $1.65 million annual budget for incentives. But the incentives do have a cost, paid by taxpayers when the city, county, state, and school district spend and expect taxpayers to make up this missing tax revenue.

Arrival of Uber a pivotal moment for Wichita

Now that Uber has started service in Wichita, the city faces a decision. Will Wichita move into the future by embracing Uber, or remain stuck in the past?

Uber is a ridesharing service, although that word doesn’t describe it adequately. Here’s how it works. People apply to be Uber drivers. Uber does background checks to its satisfaction. Drivers must have a relatively late-model car. If Uber accepts drivers, they receive a smartphone with an app, and they’re in business.

Customers who want to use Uber must have a smartphone. Then, customers create an account and make payment arrangements such as credit card, Google Wallet, or PayPal.

Being driven by Uber on the Washington Beltway.
Being driven by Uber on the Washington Beltway.
When customers want a ride, they use the Uber smartphone app to make a request. A driver accepts the request and picks up the passenger. At the end of the ride, payment is made through the Uber app. There is no tipping.

After the ride, passengers rate drivers. (Drivers rate passengers, too.) Passengers receive a receipt via email that shows the route taken on a map.

I’ve used Uber a few times in Washington and was pleased with the experience: No extortion of tips, polite and courteous drivers, clean cars, offers of bottled water, a bowl of wrapped candy on the seat beside me, and magazines in front of me.

People like Uber. Especially the young millennials I know that live in cities where Uber operates. These are people that Wichita is desperately trying to appeal to. So you may be thinking “isn’t it great that Uber has expanded to Wichita?”

Uber in Wichita is good if you value innovation and progress. But not everyone does. There will be a scuffle.

Available Uber drivers on a Sunday morning in Kansas City. There were no Uber drivers available in Wichita at the time.
Available Uber drivers on a Sunday morning in Kansas City. There were no Uber drivers available in Wichita at the time.
In 2012 Wichita passed new taxi regulations. They create substantial barriers to entering the taxicab market. Some of the most restrictive include these: A central office, staffed at least 40 hours per week; a dispatch system operating 24 hours per day, seven days per week; enough cabs to operate city-wide service, which the city has determined is ten cabs; and a supervisor on duty at all times cabs are operating.

These regulations protect Wichita’s existing traditional taxi industry. There are three taxi companies in Wichita, with two having the same ownership. Already one owner is speaking out against Uber. The public agenda for Tuesday’s meeting of the Wichita City Council lists a citizen speaking on the topic “Taxi Cab Insurance.” I imagine this speaker is inspired to speak on this topic due to Uber’s arrival.

The taxi companies that benefit from the restrictive Wichita regulations are likely to fight to keep their competitive barriers in place. The question is this: Does Uber fall under these regulations?

So far, the city’s position is this, according to the Wichita Eagle: “From the government side, interim City Attorney Sharon Dickgrafe said Uber is not a taxi service because the private cars its drivers use aren’t equipped with taxi meters.” (Ride-sharing app begins offering Wichitans a lift, August 28, 2014)

I’ll expect the city’s position to change when the city realizes that Uber cars do have meters. Not clunky old-fashioned meters, but meters running on smartphones that track journeys using GPS. After all, Uber charges for its trips just like traditional cabs: A fee to enter the cab, and then charges based on distance traveled, and in some cases, time. (In Wichita, Uber charges a base fare of $2.00 plus $0.20 per minute and $1.65 per mile, plus $1.00 safe rides fee. There is a $5.00 minimum. When you request a ride, Uber can give you a fare quote.)

The overhaul of Wichita taxi regulations in 2012 was partly inspired by the perception that drivers were not projecting a good image for the city. Now there are regulations in addition to the above that require standards of dress and hygiene, and “knowledge of the geography of the city and the area, and knowledge of local public and tourist destinations and attractions.” Cabbies must take a customer service class delivered by city bureaucrats.

Taxi driver was on sex offender registrySo Wichita has many regulations for the taxi industry. But as I explain in more detail below, the city admitted that it failed to enforce a really important regulation: Convicted sex offenders shouldn’t be taxi drivers. But through the city’s mistake, one such man was granted a taxi driver license. He’s now serving a lengthy prison sentence for raping a passenger.

The standard argument against Uber is that it is unfair because Uber doesn’t have to follow laws and regulations. But Uber is regulated by a very powerful force: The marketplace. Remember, passengers rate Uber drivers. Can you rate your traditional Wichita taxi driver? What if you felt that your traditional taxi driver was padding the fare by taking a roundabout route? Uber trips are monitored by GPS. Passenger receipts have a map that shows the route taken, which can be the basis for a fare review.

The traditional taxi industry complains that Uber doesn’t have to follow follow laws and regulations. That’s nonsense. Uber drivers must follow traffic laws. Uber drivers and passengers must observe the most fundamental of laws: “Don’t hit people, and don’t take their stuff.” Beyond that, the taxi industry laws and regulations are from a bygone era. The traditional taxi industry is comfortable with these laws and regulations. The taxi companies can cope with them, and they make it difficult for competition to form. The purpose of these laws and regulations is not to benefit passengers, in most cases. They exist for the benefit of the taxicab industry.

But there is a transformation underway. Wichita can stop it if it wants to, but that would be a mistake.

The city says it is considering whether this industry — Uber — needs regulation. The question I have is this: Has the City of Wichita earned the right to regulate taxis? The answer is no. The city has created regulations that prop up the near-monopoly of traditional taxi companies and stifle innovation, but failed to protect passengers from being raped by convicted sex offenders.

Beyond that, the city has to decide whether it can back off its heavy-handed regulation and allow market-based innovation to thrive. The city has to decide in favor of customers or the traditional taxi industry and its near-monopoly ownership. It’s a decision that will let us learn a lot about the future direction of Wichita.

Regulation failure leads to tragedy in Wichita

wichita-taxi regulationsWhen the Wichita City Council passed new taxicab regulations in 2012, the focus was on dirty cabs and slovenly drivers who were not acting as goodwill ambassadors for the city. Mayor Carl Brewer said he was “tired” of hearing complaints about drivers.

So the council passed new regulations regarding taxicabs, including the requirement that drivers attend customer service training provided by Go Wichita Convention and Visitors Bureau. Other regulations determine taxicab office staffing levels and level of supervision.

Bryon Scott Spohn, a taxi driver accused of raping a passenger.

But something very important slipped through the cracks. The Wichita Eagle has reported the city didn’t competently enforce regulations designed to protect passenger safety:

A Wichita taxicab driver now in prison for raping a passenger last year shouldn’t have been allowed to operate a taxi in the first place.

That’s because at the time Bryon Scott Spohn applied for a taxi driver’s license in late 2012, he was on a state sex offender registry for possession of child pornography. A city ordinance that went into effect in July 2012 says a taxi driver’s license shall not be issued to anyone who “is now or has ever been registered as a sexual offender with any state, county or local government.”

Spohn shouldn’t have received a taxi license but did because the new change banning registered sex offenders wasn’t communicated to staff members doing background checks on taxi driver applicants, city officials told The Eagle on Friday. The city has fixed the problem that led to the oversight in Spohn’s case, they said. Taxi driver in prison for raping passenger was on sex offender registry, March 3, 2014

The regulations regarding customer service training were implemented. But the really important regulations? Lack of oversight, says the city.

I wonder: Who is regulating the regulators?

calculator-178164_1280

Fact-checking Yes Wichita: Arithmetic

A group promoting the proposed Wichita sales tax makes an arithmetic error, which gives us a chance to ask a question: Is this error an indication of Yes Wichita and the city’s attitude towards, and concern for, factual information?

VoteYesWichita website, September 6, 2014. Click for larger version.
VoteYesWichita website, September 6, 2014. Click for larger version.
“Yes Wichita” is a group that promotes a one cent per dollar sales tax that Wichita voters will see on the November ballot. Using a $10 purchase as an example, a page on the Yes Wichita website breaks down the tax among the four areas of spending sales tax revenue, informing voters that means 6.3 cents to water, 2 cents to jobs, 1 cent to transit, and .07 cent to streets.

These numbers, however, don’t add up. On a $10 purchase, the one percent sales tax generates ten cents of sales tax revenue. The numbers used in the Yes Wichita example sum to 9.37 cents. The correct number is 0.7 cent to streets, not 07.

Should we be concerned about errors like this? For what it’s worth, this error is repeated at least once more on the voteyeswichita.com site. This site has been online with these errors for at least two weeks. Haven’t any of the members of the Yes Wichita team noticed this error? Or have they noticed the error, but don’t think it’s worth a correction?

Most importantly for Wichita voters: Is this error an indication of Yes Wichita and the city’s attitude towards, and concern for, factual information?

This does give us a chance to look at the cost of the sales tax for various levels of taxable purchases. I’ve prepared a table. As you can see, once we make purchases that add up to large amounts, so too does the amount of the extra sales tax Wichita city hall recommends citizens pay. Click on it for a larger version.

Proposed Wichita Sales Tax Amounts 01

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: Wichita’s blatant waste, Transforming Wichita, and how you can help

In this episode of WichitaLiberty.TV: Let’s ask that Wichita trim its blatant waste of tax dollars before asking for more. We’ll look back at a program called Transforming Wichita. Then: We need to hold campaigns accountable. I’ll give you examples why, and tell how you can help. View below, or click here to view at YouTube. Episode 57, broadcast September 7, 2014.

United States Currency

Fact-checking Yes Wichita: NetApp incentives

In making the case that economic development incentives are necessary and successful in creating jobs, a Wichita campaign overlooks the really big picture.

In November Wichita voters will decide whether to approve a sales tax of one cent per dollar. Part of the proceeds, about 20 percent, is dedicated to economic development, specifically the creation of jobs. On its website under the heading “Most of our growth comes from within,” the “Yes Wichita” campaign presents this argument in favor of sales tax revenue for economic development:

In the past, more than 90% of our existing economic development resources have been used to support expansion of local companies. NetApp is a great example because they had new work and needed to locate 400 new jobs in one of their existing facilities. They looked at multiple locations and it came down to expanding in an existing facility in the Research Triangle or an existing facility in Wichita. Those 400 jobs came to Wichita because of our great workforce and the partnership with WSU along with a small forgivable loan. With this new system, Wichita could have invested in training the 400 new hires at WSU.

VoteYesWichita website, September 4, 2014. Click for larger version.
VoteYesWichita website, September 4, 2014. Click for larger version.
Voters reading this might conclude that all that was needed to create 400 new jobs in Wichita was a “small forgivable loan,” along with things we already have (“great workforce and the partnership with WSU”). But voters might be interested in the entire picture of what NetApp received.

First, what the city and county offered to NetApp was not a forgivable loan. NetApp received, and will continue to receive, an annual grant as long as the company meets conditions. City documents explain: “Under the terms of the attached grant agreement, NetApp would be issued an annual grant payment of $312 per year during the 5-year term of the agreement for each employee in excess of 439 base employees, but in no event will the sum of all grant payments exceed $418,000.”

We won’t quibble over the difference between “grant” and “forgivable loan.” Instead, let’s take a look at the entire incentive package offered to NetApp.

Kansas Department of Commerce logoA letter to NetApp from the Kansas Department of Commerce laid out the potential benefits from the state. As detailed in the letter, the programs with potential dollar amounts are:

  • Promoting Employment Across Kansas (PEAK), up to $7,705,535
  • Kansas Industrial Training with PEAK, up to $160,800
  • sales tax savings of $6,880,000
  • personal property tax exemption, $11,913,682
  • High Performance Incentive Program (HPIP), $8,500,000

The total of these is $35,160,017. Some of these benefits are paid over a period of years. The PEAK benefits are payable over seven years, according to the letter, so that’s about $1.1 million per year. These are potential benefits; the company may not actually qualify for and receive this entire amount. But it’s what the state offered.

(We should qualify that the nearly $12 million in personal property tax exemption arises from a 2006 law whereby the state no longer taxes business equipment and machinery. This is not a targeted incentive for NetApp; it is something that benefits all companies in Kansas.)

It’s true that these programs are not cash incentives paid by the City of Wichita. But if a company is going to make purchases, and if the state says you can skip paying sales tax on the purchases — well, that’s as good as cash. $6,880,000 in the case of NetApp, according to the Kansas Department of Commerce. Unless the state reduces its spending by an equivalent amount, that’s missing revenue that other taxpayers have to make up, including Wichita taxpayers.

The City of Wichita is — or should be — generally aware of the entire incentive package offered to NetApp and other companies. In a presentation made to the Wichita City Council by Gary Schmitt, an executive at Intrust Bank and the Chair of Greater Wichita Economic Development Coalition, NetApp was presented as an example of a successful economic development effort. On a chart in the presentation, figures indicate that NetApp received $2,000 per job from local incentives, and $84,115 per job from state incentives.

In another section of the presentation, this is noted: “The $4.5 million PEAK program incentive from the Kansas Department of Commerce was an important factor in keeping NetApp in Wichita.”

Wichita voters will have to decide whether the Yes Wichita campaign is being forthright when it claims that a “small forgivable loan” was all the cash incentive that was necessary to create NetApp jobs in Wichita. If voters choose to believe that the small forgivable loan was all the incentive needed to seal the NetApp deal, they should then wonder why the State of Kansas offered many millions of unnecessary incentives.

street-chalk-73583_1280

Fact-checking Yes Wichita: Paved streets

Will the proposed Wichita sales tax result in more paved streets? It depends on what you mean by “pave.”

Of the proposed Wichita sales tax that voters will consider in November, a portion is scheduled to be used for streets. The specific language in the ordinance that the Wichita City Council passed on August 5 states “with an amount not to exceed $27.8 million dollars of such tax applied for street maintenance and repairs.”

VoteYesWichita website, September 4, 2014. Click for larger version.
VoteYesWichita website, September 4, 2014. Click for larger version.
But “maintenance and repairs” may mean different things to different people. The “Yes Wichita” group that supports the sales tax states this on their website:

What happens to neighborhood streets if we pass the sales tax proposal?

The city would contract to pave an additional 111 miles of neighborhood streets. This would help catch up the backlog with an infusion of additional resources targeted to some of the worst streets in the city. It would join the $8 million in regular funding to pave more than 1,900 miles of neighborhood streets.

Appearing on KNSS radio on August 26, Yes Wichita spokesman Jon Rolph said “we’ll be able to double the number of miles of paved streets over the next five years.”

That sounds as though sales tax money will be used to convert dirt streets into concrete or asphalt streets. That, I believe, is what most people would conclude when reading or hearing the language produced by the Yes Wichita group.

Pave definition

But that’s not what will happen if the sales tax passes. No sales tax money will be used to convert dirt streets to concrete or asphalt streets, which is the normal meaning of “pave.”

Paving dirt streets in Wichita, excerpt. Click for larger version.
Paving dirt streets in Wichita, excerpt. Click for larger version.
Here’s how dirt streets are paved in Wichita: The surrounding property owners petition for the formation of an improvement district. If a successful petition is filed, the city paves the street, and the property owners in the improvement district pay the cost. A city document titled Petitioning for Residential Street Paving explains in more detail.

How will sales tax proceeds be used regarding streets? The July 22 presentation to the city council held this: “The sales tax funds would repair 111 lane miles of streets over the next five years, focusing on some of the worst residential streets in Wichita. Coupled with the current CMP budget allocation of $8 million, a total of 1,964 lane miles will be repaired over the next five years.”

A little backwards arithmetic shows that without sales tax revenue, the city plans to pay for the repair of 1964 – 111 =1853 lane miles. The sales tax would increase what is already planned and budgeted through existing funding by (1964 – 1853) / 1853 = six percent.

As for Rolph’s contention that “we’ll be able to double the number of miles of paved streets over the next five years”: Even if we grant that he used pave to mean repair, the city won’t be able to double the miles. Instead, city documents indicate the sales tax will allow for an additional six percent in the number of lane miles to be repaired. That’s quite different from doubling, which means to increase something by 100 percent.

Has the Yes Wichita group been merely careless in using the word pave? Or is the group trying to present the proposed sales tax as something other than what it is?

Tallgrass National Prairie Preserve in the Kansas Flint Hills

Kansas sales tax reform: Revenue booster?

Kansas has a problem with sales tax exemptions, but the potential revenue boost from reform is not as great as commonly mentioned, unless Kansas wants to place its manufacturers at severe disadvantage.

While the Wichita Eagle editorial board is correct to argue for eliminating sales tax exemptions, the amount of potential revenue is far less than presented, if we want to keep Kansas manufacturers competitive. Here’s what the Eagle editorial held:

As a result, the number of sales-tax exemptions keeps growing — from 30 in 1985 to more than 100 today. And with each added exemption, the state is losing out on more revenue — $5.9 billion this fiscal year, according to the Kansas Department of Revenue. That’s money the state could be using to cover its budget shortfalls, increase funding to public schools or further reduce its income-tax rates.” (Reduce state sales tax exemptions, August 27, 2014)

First, it’s good that the editorial board mentioned — as one possibility — the right thing to do if sales tax exemptions are eliminated, which is to reduce other taxes. Second, the state is not “losing out on more revenue” by granting sales tax exemptions. The state is simply letting people conduct certain transactions without being taxed, thereby letting them keep more of their own money. It’s true that the exemptions are granted in a way that is not equitable and does not promote economic growth, but that’s another issue.

The big problem with the editorial is the amount of money mentioned as up for grabs, which is $5.9 billion. That is a lot of money. It’s almost as much as Kansas annual general fund spending. It’s worthwhile to look in detail at the nature of Kansas sales tax exemptions to understand their nature.

In 2010 Kansas Legislative Division of Post Audit looked at the topic of sales tax exemptions and issued a report titled Kansas Tax Revenues, Part II: Reviewing Sales Tax Exemptions. The data in this report is from 2009, so it’s a few years out of date. But the principles and relative amounts remain the same. At the time of this report, advocates of eliminating sales tax exemptions in Kansas pointed, as they do now, to the great amount of revenue that could be raised if Kansas eliminated these exemptions, estimated at some $4.2 billion per year for 2009. Analysis of the nature of the exemptions and the amounts of money involved, however, leads us to realize that the additional tax revenue that could be raised is much less than spending advocates claim, unless Kansas was to adopt a severely uncompetitive, and in some cases, unproductive tax policy.

Tax exemption policy is an important economic policy matter. In its background discussion, the Post Audit report noted “the U.S. Supreme Court’s opinion that tax exemptions and tax deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income.”

Sometimes these sales tax exemptions are issued to specific organizations. Others are issued to organizations that fall within certain categories. In this case, the exemption is like an entitlement, granted to any organization that falls within the scope of definition of the exemption. Some exemptions are for categories of business transactions that shouldn’t be taxed.

It’s this last category that is important to recognize, because of the large amount of economic activity that falls within its scope. An example is exemption 79-3606 (m), described as “Ingredient/Component parts: Of items manufactured or produced for sale at retail.” The audit report estimates that for 2009, this exemption cost the state $2,248.1 million in lost sales tax revenue.

But this exemption isn’t really an “exemption,” at least if the sales tax is a retail sales tax designed to be levied as the final tax on consumption. That’s because these goods aren’t being sold at retail. They’re sold to manufacturers who use them as inputs to products that, when finished, will be sold at retail. Most states don’t tax this type of sales. If Kansas decided to tax these transactions, it would place our state’s manufacturers at a severe disadvantage compared to almost all other states.

There are two other exemptions that fall in this category of inputs to to production processes, totaling an estimated $461 million in lost revenue.

Another big-dollar exemption is “items already taxed” such as motor fuel. This is an estimated $232.5 loss in revenue.

Two other categories of exemptions are purchases made by government, or purchases made by contractors on behalf of government. Together these account for an estimated $449.9 million in lost sales tax revenue. If these two exemptions were eliminated, government would be taxing itself and no net revenue is gained.

All told, these six exemptions account for $3,391.5 million of the total $4,234.2 million in exemptions for 2009. That’s about 80 percent.

So $4.2 billion has shrunk to $842.7 million. That’s still a lot of money, but not near as much as spending advocates would like to have Kansans believe is lying in wait just for the taking.

Wichita City Hall

‘Transforming Wichita’ a reminder of the value of government promises

When Wichita voters weigh the plausibility of the city’s plans for spending proposed new sales tax revenue, they should remember this is not the first time the city has promised results and accountability.

Do you remember Transforming Wichita? According to the city, “Transforming Wichita is the journey by which we are fundamentally changing the way we measure, report and perform the work of delivering services to the citizens of Wichita.”

In more detail, the city website proclaimed: “TW is the journey by which we will be fundamentally changing the way we deliver services to the citizens of Wichita. Our vision is for Wichita to be a premiere Midwestern city where people want to visit, live and play and for the city government to be a model of world class city governance where citizens receive the best possible value for their tax dollars and have confidence in their city government.”

At the end of this article I present the complete page from the city’s website as captured on November 10, 2007. That’s just seven years ago. There are officeholders (Wichita Mayor Carl Brewer, City Council member Jeff Longwell, City Council member Lavonta Williams) and many bureaucrats still in office from that year. It’s not ancient history.

Some of the most frequently-mentioned concepts in this document are:

  • performance
  • accountability
  • trust
  • confidence
  • measure and report

Wichita spending data.
Wichita spending data.
The document mentions “supported by modernized information systems that facilitate collaboration with our partners.” That promise was made seven years ago. Today, do you know what you get when you ask the City of Wichita for spending records? The city can supply data of only limited utility. When I asked for spending records, what was supplied to me was data in pdf form, and as images, not text. It would be difficult — beyond the capability of most citizens — to translate the data to useful format. Even if someone translated the reports to computer-readable format, I don’t think the data would be very useful. This is a serious defect in the city’s transparency efforts.

How does Wichita compare to other jurisdictions in this regard? Many governmental agencies post their checkbooks on their websites, having mastered this aspect of accountability and trust years ago. Not so the City of Wichita.

Speaking of websites: The new and “improved” wichita.gov website is actually less useful than the city’s website in 2007. For more on this see A transparency agenda for Wichita.

Regarding performance: One of the most important functions city leaders say they perform is economic development, specifically the creation of jobs. Last year when the Wichita Eagle asked for job creation figures, it reported this:

“It will take us some time to pull together all the agenda reports on the five-year reviews going back to 2003. That same research will also reveal any abatements that were ‘retooled’ as a result of the five-year reviews,” city urban development director Allen Bell said.

One might have thought that the city was keeping records on the number of jobs created on at least an annual basis for management purposes, and would have these figures ready for immediate review. If the city had these figures available, it would be evidence of trustworthiness, performance, accountability, and measuring and reporting. But the city isn’t doing this.

Regarding values for dollars spent: During the past decade Wichita spent $247 million on the Aquifer Storage and Recovery Program, or ASR. As that project was contemplated, Wichita was told there was sufficient water for the next 50 years. We should ask: What value did we receive for those dollars?

Speaking of accountability: Much of the money used to pay for the ASR project was borrowed in the form of long-term debt. Now we are told that long-term borrowing to pay for a new water supply would be bad fiscal management. So was it was prudent and advisable to borrow over $200 million for water projects during the last decade? Who do we hold accountable for that decision, if what city leaders now say is correct?

Here’s a page from the city’s website as captured on November 10, 2007:

Transforming Wichita

Transforming Wichita is the journey by which we are fundamentally changing the way we measure, report and perform the work of delivering services to the citizens of Wichita. Our Vision:

  • For Wichita to be a premiere Midwestern city where people want to visit, live and play (as envisioned in Visioneering Wichita).
  • For Wichita City government to be a model of world class city governance — where citizens are getting the best possible value for their dollars and the City has the public’s confidence and trust. For this vision to be attained, we have to adapt to change!

twWhile we are doing a lot of things right, we can’t be complacent, resting on our laurels from past successes. The paradox is that we must retain faith that the future is bright, while being willing to face challenges of our current situation. We must be willing to challenge every aspect of how we’re doing things today. We must position ourselves for the future.

We will do this by transforming City government into a high performance organization that:

  • Focuses on results
  • Understands what results matter most to their customers
  • Makes performance matter
  • Moves decision-making down and out to the front-line, closest to customers; and
  • Fosters an environment of excellence, inclusiveness, accountability, learning and innovation.

Through Transformation Wichita:

  • We deliver outstanding results that matter to our customers and are trustworthy stewards of the funds with which citizens have entrusted us;
  • We utilize team work and the best business processes, supported by modernized information systems that facilitate collaboration with our partners;
  • We measure and report on our work, using a balanced scorecard that shows progress and results in how we carry out programs and activities, so that performance matters; and
  • We engage in work that produces results that matter for our customers; we will work with colleagues in an environment where learning enriches us and innovation expands our potential.

More about TW

TW is the journey by which we will be fundamentally changing the way we deliver services to the citizens of Wichita. Our vision is for Wichita to be a premiere Midwestern city where people want to visit, live and play and for the city government to be a model of world class city governance where citizens receive the best possible value for their tax dollars and have confidence in their city government.

While the City is doing a lot of things right, we can’t be complacent. We must be willing to challenge every aspect of how we’re doing things today and position ourselves for the future.

We will accomplish this by transforming City government into a high performance organization that:

  • Delivers outstanding results that matter to our customers and is a trustworthy steward of the funds with which citizens have entrusted us;
  • We utilize team work and the best business processes, supported by modernized information systems that facilitate collaboration with our partners;
  • We measure and report on our work, using processes that show progress and results in how we carry out programs and activities; and
  • We engage in work that produces results that matter for our customers.

Labor unions have harmed our standard of living

This Labor Day, as progressives promote their protection and advancement of workers, let’s become aware of the harm that labor unions have caused. George Reisman summarizes:

Far from being responsible for improvements in the standard of living of the average worker, labor unions operate in more or less total ignorance of what actually raises the average worker’s standard of living. In consequence of their ignorance, they are responsible for artificial inequalities in wage rates, for unemployment, and for holding down real wages and the average worker’s standard of living. All of these destructive, antisocial consequences derive from the fact that while individuals increase the money they earn through increasing production and the overall supply of goods and services, thereby reducing prices and raising real wages throughout the economic system, labor unions increase the money paid to their members by exactly the opposite means. They reduce the supply and productivity of labor and so reduce the supply and raise the prices of the goods and services their members help to produce, thereby reducing real wages throughout the economic system.

The full article is Labor Unions Are Anti-Labor.

Wichita City Council chambers

Wichita planning results in delay, waste

Wichita plans an ambitious road project that turns out to be too expensive, resulting in continued delays for Wichita drivers and purchases of land that may not be needed.

A major road construction project in east Wichita is deferred after the design is too expensive, reports the Wichita Eagle. (East Kellogg interchange plan getting major reboot, August 30, 2014)

It’s bad news that Wichita drivers will suffer through more years of delay as they travel through east Wichita. The value of the lost hours sitting in traffic? It’s impossible to say.

But here’s something that will probably be easy to appraise: The waste of taxpayer dollars due to the actions of government planners. From the Eagle story:

It’s unclear how the redesign would affect the ongoing lawsuit between the city of Wichita and 10 property owners whose land was taken by eminent domain for the project. The city also has acquired another 30 parcels in the area.

A court-appointed panel of three appraisers awarded the owners of the 10 parcels a collective $19.6 million for their properties in November.

The Wichita City Council approved the award, as required by the court, but the amount far exceeded an internal estimate in the $4 million to $5 million range.

In December, the city sued the landowners to see if a court would reduce the valuations.

Some of that land probably would not be needed if the interchange is redesigned.

Did you catch that? The city spent nearly five times as much as original estimates to seize property through eminent domain, and also purchased other property. Buildings with remaining useful life have been razed. Now, we learn that this land may not be needed.

As Wichita city hall asks citizens to trust the plans for the proceeds of a new sales tax, remember lessons like this.

As Wichita asks for more taxes, it continues to waste what it has

The lights are on at the Wichita Transit Center on a sunny day — on a day the buses are not running.

The City of Wichita is recommending that voters approve a new city sales tax. Part would be used to fund the existing bus transit system and expand service.

Wichita Transit Center, Sunday August 31, 2014. It may be difficult to detect that some lights are on, as it's a sunny day.
Wichita Transit Center, Sunday August 31, 2014. It may be difficult to detect that some lights are on, as it’s a sunny day.
Whether or not you agree with that goal, people want government to spend taxpayer money carefully and efficiently. This is why it’s annoying to see the outside lights turned on in the middle of a sunny day. Especially so on Sunday, when the Transit Center is not open and buses do not run.

Wasting electricity like this is common at the Transit Center and other parts of downtown Wichita. I’m pretty sure that fixing this problem won’t fix the transit system’s failing finances. But we’ve learned that Wichita city hall isn’t concerned about blatant waste of taxpayer funds. And when we see city hall indifferent to the blatant waste of tax dollars, what about all the waste that’s not easy to see like street lights burning during the day?

Intrust Bank Arena, Wichita, KS

Wichita arena sales tax not a model of success

Supporters of a new sales tax in Wichita use the Intrust Bank Arena as an example of successful application of a sales tax.

As Wichita debates the desirability of a sales tax, a former sales tax is used as a model of success. Let’s take a look at a few of the issues.

Ongoing vs. capital expenses

A portion of the proposed sales tax will be used for operational expenses, and the demand for this spending will not end when the sales tax ends.

The sales tax for the Intrust Bank Arena was used to build a capital asset and establish a small reserve fund. Spending on capital assets is characterized by a large expense in a short period of time as the asset is constructed. Then, the spending is over — sort of.

For the proposed Wichita sales tax, 63 percent is scheduled for capital asset spending on an enhanced water supply. The remainder, 37 percent, is for operation of the bus transit system, street repair, and economic development. These three items are operational in nature, meaning they are ongoing expenses. It’s not likely that after five years the bus system will be self-sustaining, or that streets will no longer need repair, or that there will be no more clamoring for economic development.

There is a large difference, then, between the arena sales tax and the proposed Wichita sales tax. While sales tax boosters say the tax will end in five years, the likelihood is that because much of it will have been paying for operational expenses, there will be great pressure to continue the tax and the spending it supports. That’s because the appetite for tax revenue by government and its cronies is insatiable. An example: As the arena sales tax was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)

Intrust Bank Arena economics

Having promoted a false and incomplete picture of the economics of the Intrust Bank Arena, civic leaders now use it as a model of success.

The building of a new arena in downtown Wichita was promoted as an economic driver. So far, that hasn’t happened. There have been spurts of development near the arena. But the arena is also surrounded by empty lots and empty retail space, and there have been months where no events took place at the arena.

Regarding the accounting of the profits earned by the arena, we need to realize that civic leaders are not telling citizens the entire truth. If proper attention was given to the depreciation expense of Intrust Bank Arena, that would recognize and account for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena. This would be a business-like way of managing government — something we’re promised. But that hasn’t happened.

Civic leaders and arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and it hides the true economics of the arena. An example of the incomplete editorializing comes from Rhonda Holman of the Wichita Eagle, who earlier this year wrote “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.”

There are at least two ways of looking at the finances of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2103, the accounting method used in this agreement produced a profit of $705,678, to be split (not equally) between SMG and the county. The county’s share, as Holman touted, was $255,678. (Presumably that’s after deducting the cost of producing an oversize check for television cameras.)

The Operations of Intrust Bank ArenaWhile described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2013 Comprehensive Annual Financial Report for Sedgwick County. The CAFR, as described by the county, “… is a review of what occurred financially at Sedgwick County in 2013. In that respect, it is a report card of our ability to manage our financial resources.” Regarding the arena, the CAFR states:

The Arena Fund represents the activity of the INTRUST Bank Arena that opened on January 9, 2010. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any. The Arena had an operating loss of $4.7 million. The loss can be attributed to $5.3 million in depreciation expense.

Financial statements in the same document show that $5,295,414 was charged for depreciation in 2013, bringing accumulated depreciation to a total of $21,190,280.

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,295,414 in depreciation expense. Instead, depreciation accounting provides a way to recognize the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

Any honest reckoning of the economic performance of Intrust Bank Arena must include depreciation expense. We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.

Effect on sales and jobs

Taxes have an impact. Definitely.

Boosters of the proposed Wichita sales tax say that since it is so small — “just one cent,” they say — its effect won’t be noticed. I wonder: If increasing prices by one percent has no effect, why don’t merchants raise their prices by one percent right now and pocket the profit?

Taxes have an impact. The problem with assessing the impact is that the results of the tax are usually concentrated and easy to see — a new arena, water supply, repaved streets, more buses, etc. But the consequences of the tax are usually spread out over a large number of people and collected in small amounts. The costs are dispersed, and therefore more difficult to detect. But there has been an analysis performed of a situation parallel to the Intrust bank Arena tax.

A paper titled “An Assessment of the Economic Impact of a Multipurpose Arena” by Ronald John Hy and R. Lawson Veasey, both of the University of Central Arkansas, (Public Administration & Management: An Interactive Journal 5, 2, 2000, pp. 86-98) looked at the effect of jobs and economic activity during the construction of the Alltel Arena in Pulaski County, Arkansas. This arena cost $50 million. It was funded in part by a one percent increase in the county sales tax for one year (1998). The sales tax generated $20 million.

In the net, considering both jobs lost and jobs gained due to sales tax and construction effects, workers in the wholesale and retail trades lost 60 jobs, and service workers lost 52 jobs. There was a net increase of 198 jobs in construction.

The fact that jobs were lost in retail should not be a surprise. When a sales tax makes nearly everything sold at retail more expensive, less is demanded. It may be difficult to estimate the magnitude of the change in demand, but it is certain that it does change.

The population of Pulaski County in 2000 was 361,474, while Sedgwick County’s population at the same time was 452,869, so Sedgwick County is somewhat larger. The sales tax for the arena lasted 2.5 times as long, and our arena was about three times as expensive. How these factors affected the number of jobs is unknown, but it’s likely that the number of jobs lost in Sedgwick County in retail and services was larger that what Pulaski County experienced.

Wichita City Hall.

When Wichita officials promise to look out for your interests, remember last summer

When the City of Wichita tells citizens that it will thoroughly investigate and vet potential economic development projects and partners, remember what the city did just last summer.

Citizens of Wichita are rightly concerned whether our elected officials and bureaucrats are looking out for their interests, or only for the interests and welfare of a small group of city hall insiders — the cronies.

Now, selling a new sales tax, part of which would pay for economic development, city officials say they will really be careful. Officials have made these promises before, but just last summer an incident show just how little the city cares about citizens. The video below explains, or click here to view in high definition on YouTube. For an article on this topic, see Wichita performs a reference check, sort of.

Tax Foundatation State and Local Tax Burden, August 2014

State and local tax burdens presented

For two decades the Tax Foundation has estimated the combined state and local tax burden for all the states. I’ve created an interactive visualization that lets you compare states and see trends in rank over time.

In its publication, the Tax Foundation explains:

For nearly two decades, the Tax Foundation has published an estimate of the combined state and local tax burden shouldered by the residents of each of the fifty states, regardless of the jurisdictions to which those taxes are paid. We argue that it is important to note that a taxpayer’s true tax burden must include the substantial taxes they pay directly or indirectly to out-of-state governments.

Tax Foundatation State and Local Tax Burden, August 2014When organizations analyzing federal tax burdens, such as the Congressional Budget Office or the Urban-Brookings Tax Policy Center, measure tax burdens by income group, they go beyond measuring the legal incidence of a tax (who writes the check to the government) and account for the fact that taxes legally imposed on a given person in one income group (such as employers via the payroll tax) can be shifted to a different person in another income group (like employees). Similarly, our state and local tax burden estimates account for the shifting of taxes from one group to another under a different variable by which household are organized: state of residence rather than income level. …

In this annual study, our goal is to move the focus from the tax collector (how much revenue is collected) to the taxpayer (how much income is foregone). We aim to find what percentage of state income residents are paying in state and local taxes and whether those taxes are paid to their state of residence or to others. …

When answering the question of which state’s residents pay the most in state and local taxes, it should be clear that such tax burden measures are not measures of the size of government in a state, nor are they technically measures of the complete burden of taxation faced by a given state’s residents.

The most recent version of the report is located at Annual State-Local Tax Burden Ranking FY 2011.

To use the visualization, hover over any state from the map. Click here to open the visualization in a new window. The most recent data is for fiscal year 2011. Data from Tax Foundation; visualization created using Tableau Public.

Mechanic Industry Force Muscles Workers mechanic-63201_1280

Employment in the states

There are dueling claims and controversy over employment figures in Kansas and our state’s performance relative to others. I present the actual data in tables and interactive visualizations that you can use to make up your own mind.

(Let’s keep in mind that jobs are not necessarily the best measure of economic growth and prosperity. Russell Roberts relates an anecdote: “The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: ‘Then why not use spoons instead of shovels?'”)

It’s important to note there are two series of employment data provided by the U.S. Bureau of Labor Statistics, which is part of the U.S. Department of Labor. The two series don’t measure exactly the same thing. A document from BLS titled Employment from the BLS household and payroll surveys: summary of recent trends explains in brief: “The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. … These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”

Employment in the States, Year-Over-Year Change, Private Industries, Kansas Highlighted
Employment in the States, Year-Over-Year Change, Private Industries, Kansas Highlighted
Importantly, since the CES gets its data from employers, it reports on jobs located in the state where the company is located, not where workers live. Similarly, the CPS reports data based on where people live, not where they work. For areas that straddle state lines — like the Kansas City Metropolitan Area — this is an important factor.

Another BLS document explains in detail the differences between the CPS and CES data. For example: CES: “Designed to measure employment, hours, and earnings with significant industrial and geographic detail” CPS: “Designed to measure employment and unemployment with significant demographic detail.”

Another difference: CES: “Self-employed persons are excluded.” CPS: “Self-employed persons are included.” (See Understanding the employment measures from the CPS and CES survey.)

Employment Levels, Year-Over-Year Change, Kansas Highlighted
Employment Levels, Year-Over-Year Change, Kansas Highlighted
I’ve gathered data from BLS and made it available in two interactive visualizations. One presents CPS data; the other holds CES data. You can compare states, select a range of dates, and choose seasonally-adjusted or not seasonally-adjusted data. I’ve create a set that allows you to easily choose Kansas and our nearby states, since that seems to be relevant to the current discussion. (I included Texas in this set, as we often compare ourselves to that state.) The visualizations show indexed data, meaning that we see the relative change in values from the first date shown. There is also year-over-year changes illustrated.

Here is the visualization for Current Establishment Survey data, and here is visualization for Current Population Survey data.

Voice for Liberty radio logo for featured posts 01

Voice for Liberty Radio: Kansas Secretary of Revenue Nick Jordan

Voice for Liberty Radio 150x150In this episode of Voice for Liberty Radio: Nick Jordan is Secretary of Revenue for the State of Kansas. He spoke to the Wichita Pachyderm Club on the topic “An Analysis of Governor Brownback’s Tax Policy” on August 22, 2014. In the shownotes for this episode you can find the link to the handout he distributed.

Here’s Kansas Secretary of Revenue Nick Jordan at the Wichita Pachyderm Club on August 22, 2014.

Shownotes

Handout: Kansas Tax Policy: Key Points
Kansas Department of Revenue
Wichita Pachyderm Club

Elephant and Donkey

Kansas campaign material repository

An accessible collection of campaign material will help hold candidates and campaigns accountable.

I’ve started a collection of Kansas political campaign material such as mailers, palm cards, handouts, and door hangers. This collection could be valuable in holding candidates of all parties accountable for their words. Independent organizations may advocate for or against candidates and ballot measures, and these need to be held accountable, too.

It can be difficult to gather campaign material. Some is mailed or distributed only to small geographic districts. Or, material is mailed only to voters with certain characteristics, such as party registration or voting consistency. Unless you live in a “blended” household (with voters of different political parties), you may never see many campaign mailers. While some campaigns may make their mailers or similar material available on their websites or Facebook pages, it’s not common that the negative mail pieces — the ones that often contain the type of distortions that need to be exposed — are publicized by campaigns. (That may say something about negative campaigning.)

You may view the material here.

There are several ways to contribute to the repository.

On your computer. A useful and valuable extension for Internet Explorer, Firefox, and Chrome browsers is FireShot. It will save partial or entire web pages in a variety of formats, including pdf.

Printed material. The traditional scanner still makes the best captures. But now many people have a document capture system in their pocket and carry it with them at all times. It’s their smartphones. For information about using smartphones to capture documents, see Your smartphone is your activism toolkit. It’s not difficult to create valuable captures if you have the right app on your smartphone.

Signs, etc. Take a photograph. It’s useful to take a wide shot to show context, and then a close-up to see the detail.

You may send me digital files at bob.weeks@gmail.com. Or, you can send me postal mail at 2451 Regency Lakes Ct., Wichita, KS 67226. I won’t be able to return material you send me unless you include return postage.

Before capturing and distributing material that has your name and address (or other personal information) consider obliterating it with a marker or scissors.

Jennifer Baysinger: More than one business voice in Wichita

By Jennifer Baysinger

Monday’s decision by the Chamber of Commerce to support Wichita’s sales tax initiative was disappointing, though not a surprise. Even without a clear plan from City Hall, the Chamber has been vocally supportive of the referendum for months.

Wichita Chamber of Commerce 2013-07-09 004However, there is more than one business voice in Wichita. I believe the Chamber’s decision is unrepresentative of our city’s business community as a whole.

It was business leaders who first approached me with concerns regarding the potential tax hike when the Coalition for a Better Wichita began to take shape. Making it more expensive to be a business owner and consumer in Wichita simply seemed counterintuitive to us.

As a small business owner, I know it is not a simple task to be successful. There are dozens of complicated decisions that have to be made every day in order to realize a profit. There are rarely easy answers on the road to success. As a result, it is puzzling that the Wichita Chamber decided a so-called select committee can simply pick what companies, in a myriad of markets, deserve public money to be bestowed upon them. Highly-compensated mutual fund managers rarely beat the S&P averages. Why do we think this committee will do any better?

Rather than creating a level playing field for the businesses in our city that will allow all entrepreneurs to thrive on their own merits, this select committee will direct taxpayer funds to the chosen few. This government spending of additional tax dollars raises the cost of government for everyone — including the business startups struggling to succeed.

Whether we are talking about private dollars, or public money, $400 million is a lot of money. That $400 million could do so much more for our wonderful city than what has been proposed.

There truly is no need to rush such an important decision that will cost us all. Voters should reject this haphazard proposal. Let’s start over and make a real effort to engage our community’s citizens to find out what we all can do to make this great City even better. Let’s invest in ourselves, not some committee whose job is to give away our tax money.

Jennifer Baysinger is the spokesperson for the Coalition for a Better Wichita. She can be contacted at jennifer@abetterwichita.com.

Be careful about sharing personal information.

Your smartphone is your activism toolkit

Your smartphone is a valuable tool for activism. Here are two ways to get involved.

Many people wonder how they can be involved in helping to improve government as a citizen activist. It may be that you have a valuable tool that’s in your pocket, and that you take everywhere you go: Your smartphone.

Street lights in downtown Wichita, July 22, 2014.
Street lights in downtown Wichita, July 22, 2014.
You may have seen me showing photographs of street lights burning in downtown Wichita during the middle of sunny afternoons. Have you ever spotted government waste like that? I’m sure that you have. I think people forget they have a fairly high-quality camera with them at all times in their smartphones. So here’s something that you can do: Take a photograph or shoot some video. Send it to me or to your local government watchdog. People like me need information. I need tips. Put your smartphone to work for something beside selfies.

Another thing you can do with your smartphone that is very helpful is to capture documents. Here’s an example. At election time, campaigns and political groups send a lot of mail pieces to voters. Some of these will contain falsehoods or distortions that need to be exposed so that the guilty parties can be held accountable. But much of the time, these political mailings go unnoticed. That’s because a Kansas House of Representatives campaign, for example, covers a relatively small population. Then, campaigns may send mail to only the people they consider active voters, and may narrow down the list using other criteria like political party. Or campaigns may send certain mail pieces to small subsets of voters. So any single campaign mail piece may go to a relatively small number of households.

What can you do to help? Use your smartphone or regular camera to capture documents like campaign mailers. You can do this by simply take a regular photograph with the built-in camera app. That usually works well enough if you follow a few guidelines, and with a little practice you can create documents are are very usable.

Probably the three most important things to remember are to avoid glare, maintain perspective, and crop. If your light source or flash creates glare on the document, the document may not be usable. By perspective, I mean having your camera square and perpendicular relative to the document so that its dimensions are not distorted. (I find that placing the document on the floor and then getting right over it helps.) Finally, cropping removes unneeded parts of the image. Remember, what we’re trying to do here is to create usable documents that can be read. We don’t have to worry about creating archival-quality documents like you would be if you’re digitizing and preserving family photographs.

As I said, you can do this with the regular camera app in your smartphone. But there are specialized document scanning apps. I’ve used several, and one I can recommend is called Scanbot. Another is CamScanner.

Using Scanbot
Using Scanbot
Scanbot is free for both Apple and Android smartphones and tablets, although there is a paid version with extra features like optical character recognition. What I like about Scanbot is that as you’re taking a photo, the app coaches you on the screen with tips like “too dark,” “get closer,” or “perspective.” Finally, it will command “don’t move” and it will snap the photo. You can then add more pages.

When finished, it creates a pdf from the scan. That’s really handy, as you then have one pdf document that holds all pages of the campaign mailer or other document. Then, you can have the app send the pdf by email or upload it to cloud-based storage systems like DropBox or Google Drive. (I recommend both of these systems.)

Be careful about sharing personal information.
Be careful about sharing personal information.
I should warn you: If you plan on sending something that you received in the mail that has your address or any other personal information on it, be aware and be careful. You could erase it using an editing app on your smartphone or computer, but in many cases the easiest thing to do is to obliterate your address with a marker pen before you capture the document. Or, you might cover it with paper, or excise it with scissors.

This type of intelligence-gathering is extremely valuable. Now, you may be thinking “Wait a minute. Don’t political campaigns post their mailers on their websites or Facebook?” The answer is some do, and some don’t. For the negative mail pieces — the ones that often contain the type of distortions that need to be exposed — it’s rare for a political campaign to make these mailers available to the public.

So this is a way you can be involved in gathering information. It could be campaign mailers, political campaign handouts, meeting agendas, material distributed at meetings, things you see on your computer screen, anything. It could be material distributed

I can’t tell you how many times people have complained to me about something they received in the mail or at a meeting. I ask “can you scan it and send it to me?” Well, not many people have scanners in their home. But now many people have smartphones. With a little practice, you can capture these documents in electronic form.

Then, what do you do with these documents? The campaigns of candidates that you support need intelligence like this. News reporters need documents for tips and substantiation of stories. You can share documents on social media like Facebook and Twitter. You can send them to me or your local government watchdog person or organization. There’s a lot you can do.

Government officials at all levels count on the average citizen not being interested or informed about government. We can hold government more closely accountable if we have information, and this a way that anyone can help.

Individual liberty, limited government, economic freedom, and free markets in Wichita and Kansas