Voice For Liberty

Search results for: “"real development"”

  • Real Development’s troubles should be red flag for Wichita

    Recent new stories that a prominent Wichita office building developed and owned by Real Development suffers from severe problems should cause the City of Wichita to halt any new partnerships being considered with the company, and to seek to remove itself from agreements that exist.

    The problems with the Wichita Executive Center — ranging from no air conditioning to malfunctioning elevators — have been extensively reported on by the Wichita Eagle. (See Developer pledges to fix all of downtown building’s problems.)

    The city’s involvement with the building is in the form of facade improvement loans made to the building’s owner. The city is confident that the loans will be repaid, as the principle and interest are assessed against the building as special taxes.

    But in what surely is a case of “putting lipstick on a pig,” Real Development spent extensively on the facade and a lobby renovation, but hasn’t been able to supply tenants with essential building services like air conditioning, elevators, and clean water.

    The Eagle reported that Mayor Carl Brewer was surprised to learn of the problems, but now pledges to oversee the city’s investments more closely.

    This problems with the Wichita Executive Center are not the first the “Minnesota Guys” have faced in Wichita. Some of the office condominiums the firm established have plummeted in value in just a few years.

    In May the Wichita Business Journal reported on this decline: “Prices on two bank-owned floors at the Broadway Plaza building — at the corner of Douglas and Broadway — were reduced last week to just $59,000 apiece. … They are just two of a handful office condo floors that originally were developed by Minnesota-based Real Development Corp. Most of them were sold to California investors, and many of them subsequently landed in foreclosure. Prices since then have plummeted.”

    Some of these floors carried mortgage loans of over $400,000 not long ago.

    Tax values on these properties have fallen, too. According to Sedgwick County records, one floor of the Broadway Plaza building that is owned by a bank was appraised at $388,000 in 2007. Its appraised value dropped to $210,900 in 2008, where it has remained since then. Another floor in the building went from $385,000 to $180,000 at the same time. This drop in real estate values is not reflective of the general trend of office values in downtown Wichita. A survey by two real estate firms shows rents for both class A and class B office space holding steady in downtown over the same time period.

    While the floors in question are not currently owned by Real Development, and that company did not default on bank loans, the projects were developed and marketed by Real Development.

    Another project developed by Real Development suffered problems dealing with ordinary issues. In 2009 a condo building that was developed by this company required special waivers of city policy in order to provide special assessment tax financing for facade repairs. Such repairs are the normal course of business, but this condominium association was not able to deal with the situation, and had to appeal to the city for help.

    The troubled Wichita Executive Center is the tallest building in this 2009 photograph. The two buildings that form the Exchange Place project are in the foreground.

    The problem that the City of Wichita faces is that it has entered into an agreement with the Real Development concerning the Exchange Place project. The amended redevelopment plan calls for the city to contribute $10 million in tax increment financing to Real Development.

    While work has not started on Exchange Place, it could at any time. In effect, the city is in a partnership with Real Development, and the city should be watching this company’s performance carefully, even if it is not required to. Based on that track record, the city should seek to revoke the tax increment financing redevelopment plan for Exchange Place.

  • Wichita proposed tax increment financing district subject of news

    Today’s Wichita Eagle carries two news stories regarding the proposed expansion of a downtown Wichita tax increment financing (TIF) district. The front-page story Condo vote key to downtown Wichita growth and the additional story Owners report mixed views of developers provided background on the vote the Wichita City Council may make at Tuesday’s 9:00 am meeting.

    The second article provides insight into Real Development’s track record in Wichita. While success in any real estate venture is not guaranteed, certain types of arrangements seem to have a high likelihood of problems, and these are reported on in the article.

    Not mentioned is the problems at the Lofts at St. Francis, a Real Development residential condominium project. Last summer I reported on how this building’s facade needed repair, and the city needed to intervene in order to finance the repairs. I wrote, and testified in front of the city council, that the inability of the homeowners association to deal on its own with such a simple matter indicated a defect somewhere: “While the homeowners association and the condominium owners might not have anticipated that repairs would be needed so soon after the building’s opening, they must have contemplated that repairs and maintenance — to either exterior or interior common areas — would be needed at some time.”

    The city waived two guidelines in its facade improvement program so that special assessment financing could be granted to the owners of condominiums in this building.

    Some private parties have an interest in seeing Real Development — the “Minnesota Guys” — continue to receive subsidy from the City of Wichita. At Tuesday’s city council meeting, several businessmen testified on behalf of Real Development on the basis that this company is good for the future of downtown Wichita. Some of these, such as a current Key Construction executive, have an obvious financial motive for wanting the project to proceed with city subsidy.

    Others, such as a former Key Construction company executive, may also have financial motives that are not immediately obvious. In particular, two tenants of Real Development buildings testified. Joe Tigert, the manager of the New York Life office in Wichita, spoke on behalf of Real Development. He didn’t reveal that he’s a tenant of Real Development at 125 N. Market. Joe Lloyd of Liebherr-Aerospace also spoke in favor of Real Development. His office is at 105 S. Broadway, another Real Development property.

    Those who speak at Wichita City Council meetings are not required to disclose their motivations for speaking. And unlike the requirement at the federal and state level, those who are being paid to lobby the council are not required to disclose the fact that they are being paid, or who is paying them, or how much they spend lobbying.

    An underlying current of thought that is emerging is that because of its extensive holdings in downtown Wichita, Real Development is too big to fail. If the city doesn’t grant their request for expansion of the amount of the TIF district, the future of downtown Wichita is in doubt.

    Citizens ought to reject this argument. If we want to have a robust downtown Wichita, we need development that is grounded in solid free-market fundamentals. Development propped up with subsidy will not have the solid foundation that downtown needs if it is to be successful over the long term.

  • Will the real robber barons please stand up?

    By Helen Cochran.

    At the April 13th meeting of the Wichita City Council a request from downtown developer Real Development will be made for an additional $2.2 million taxpayer subsidy for its condo project Exchange Place, located at Douglas and Market. With two weeks to go before this public hearing there is still time for council members to read The Myth of the Robber Barons by Burton Folsom. Folsom’s easy-to-read 134-page narrative lays out the case for entrepreneurship in America and can be read in one evening. It’s a history lesson worth reading by all.

    Folsom highlights two kinds of business developers: “political entrepreneurs” and ‘market entrepreneurs.” And while Folsom focuses on the larger-than-life entrepreneurs of the nineteenth and early twentieth century, the lessons gleaned have far reaching implications and relevance, even on a local level.

    According to Folsom, “political entrepreneurs” are those that seek government/taxpayer subsidy, public private partnerships, protective tariffs, special privileges, etc. Folsom makes a sound case that economic development fueled by political intervention invariably fails and undermines the very ideology it purports to serve.

    On the other hand “market entrepreneurs” are those that obtain their successes by producing a product that is better and of more value to the consumer, unbridled by the government controls and restrictions that come with subsidy. No one can argue that it is the market entrepreneurs that create the wealth in this country.

    Despite the anti-business rhetoric spewed by most historians and reinforced in school curriculums across this country, Folsom offers concrete evidence that the likes of Commodore Vanderbilt, John D Rockefeller, Andrew Mellon, the Scrantons of Pennsylvania, James J. Hill, and Charles Schwab should be revered because of the consumer benefits achieved when free markets are allowed to flourish without government involvement. Folsom contrasts these successes with failure-after-failure of those in the same respective industries that received government subsidy. Government cannot do it better and most certainly cannot do it cheaper.

    In Wichita, Real Development is one of several downtown “political entrepreneurs.” What was originally a $27.8 million project with an approved $9.3 million subsidy from the City of Wichita is now a $51.5 million project seeking an additional $2.2 million subsidy from the City. Real Development boasts that with approved additional City subsidy they will be able to qualify for a $30 million loan from the U.S. Department of Housing and Urban Development — a government guaranteed loan. This “guarantee” is none other than you and me. Our taxpayer dollars are lost if this project fails.

    According to Goody Clancy, the City’s downtown development consultant, there is a market for downtown development in Wichita. Specifically, Goody Clancy consultants found that downtown Wichita demand for residences is 1,000 units over the next five years.

    If such a market truly exists where are the market entrepreneurs and why are they not clamoring to develop? Why are local banks not willing to loan these political entrepreneurs money without a government guarantee? Michael Elzufon, one of the principals of Real Development, states this is a “low risk deal.” Yes, it’s a low risk deal for Elfuzon but I suggest it is a very high-risk deal for the taxpayer.

    The Wichita City Council, as with as many city councils nationwide, continues to insist that economic development in downtown Wichita requires government subsidy. Fear mongering becomes a tactic used when justifying subsidies offered to private enterprise to locate or expand here: “Everyone else is offering them” or “If we don’t subsidize, Company X will go elsewhere or relocate” or “Without subsidy this won’t happen.” Millions of taxpayer dollars have been invested in the name of economic development or downtown revitalization and when projects fail, millions more are spent in an attempt to salvage the project.

    Development succeeds when market entrepreneurs perceive a need and are willing to risk their own capital for success. Anything short of that has historically failed.

    The Myth of the Robber Barons is a must read for anyone interested in the writing on the wall but especially for those with the power to commit taxpayer money to projects that are better left to market entrepreneurs.

  • Wichita Exchange Place TIF should be rejected

    Tomorrow’s meeting of the Wichita city council will feature a public hearing as to whether a tax increment financing district that benefits Real Development should be modified. The TIF district is already approved in the amount of $9.3 million. The applicants are asking that the city’s contribution be increased to $11.8 million, plus approval of changes to the project plan.

    The first issue we should address is the purpose of these public hearings. Presumably notice of their existence is given not only so citizens and interested parties can plan to attend, but also so that there can be discussion of the details of the issue. This second reason is not fulfilled to any meaningful extent. There just isn’t time for anything to happen. The agenda report for this matter did not appear on the city’s website until around noon Friday, just two business days before the hearing.

    Furthermore, the plan may be revised as late as today — the day before the public hearing — according to reporting in today’s Wichita Eagle.

    There needs to be more time if these public hearings are to be anything but a sham. The city approved April 13 as the date for the public hearing on March 23. So the public hearing is announced, but details of the project are not known. How will the public — much less city council members — become aware of the final plan?

    The plan to be heard tomorrow is the second revision of the original plan, which was first approved in 2007. Some may criticize Real Development for the shifting plan. But this is the nature of business. Change, however, is something that government bureaucracy is particularly ill-equipped to deal with.

    There are reasons to be concerned with these particular applicants. Several floors in buildings they own in Wichita have been subject of foreclosure actions. While it is not Real Development that failed to pay the loans that were foreclosed on, this happened in buildings Real Development owns and developed with a condominium-style of ownership.

    There is also issue of allegations made by tenants of Real Development that it is not performing on its obligations. These tenants will not come forward in public, as they are afraid that if the city stops subsidizing Real Development, the tenants will suffer.

    But the largest and overriding issue is that the city should not be directing taxpayer investment outside the market process. It is an undeniable fact that the city is considering forcing Wichita taxpayers to risk an investment of around $10 million in this project. And if the investment doesn’t work out, the city is likely to force Wichitans to spend even more money on this project, as the city did when it made a no-interest and low-interest loan to a downtown theater that was underperforming in its TIF district.

    It would be one thing if TIF districts were good for the city, but there is no such evidence. There is evidence that TIF districts are great for the developers — after all, wouldn’t like to have their increase in property taxes spent for their exclusive benefit, which is the purpose of a TIF district — but not so good for the rest of the city. The article Tax Increment Financing: A Tool for Local Economic Development by economists Richard F. Dye and David F. Merriman states, in its conclusion:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development — not a surprising finding. What about the rest of the city? Continuing from the same study:

    We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

    So TIF districts may actually reduce the rate of economic growth in the rest of the city.

    Cato Institute Senior Fellow Randal O’Toole has written this about tax increment financing:

    TIF does not increase the total amount of development that takes place in a city or region; it merely transfers development from one part of the region to another. … The new developments in the TIF districts consume fire, police, and other services, but since they don’t pay for those services, people in the rest of the city either have to pay higher taxes or accept a lower level of services. This means people outside the district lose twice: first when developments that might have enhanced their property values are enticed into the TIF district and second when they pay more taxes or receive less services because of the TIF district.

    Similar findings apply to the issuance of industrial revenue bonds, as the city issued last week and issues frequently.

    Finally, I have a simple question for the mayor, city council, and city staff: Will any downtown development occur without public subsidy?

    Resources on tax increment financing:

    Exchange Place Redevelopment Plan April 13, 2010

  • Wichita mayor speaks on economic development

    At last week’s Wichita City Council meeting, Mayor Carl Brewer spoke in favor of the city’s economic development policy, specifically as it related to a downtown Wichita development partly financed with tax increment financing, or TIF.

    The mayor disagreed with those who have appeared at city council meetings to testify against the use of TIF. He told of how the city called mayors’ associations and the National League of Cities, and they said that most large cities use incentives. He learned that cities use some incentives that that Wichita has not yet heard of, which undoubtedly will give city staff some additional tools in the toolbox in the future.

    He said “Incentives are available, and we’re on the right track.”

    The mayor mentioned that Harvard and Yale experts said that Wichita had too much parking downtown. This is in agreement with the Goody Clancy proposal presented to the city last October. Wichita selected that firm to lead the planning process for the revitalization or redevelopment of downtown Wichita.

    He said that in a recent meeting of mayors he attended, he learned that the mayors of other cities are trying to figure out how to use incentives and recruit business. They’re not turning their backs on incentives, he said, adding that “What we’re doing is nothing new.”

    He told the audience that “We as a city are going to have to endure change, and we as a city are going to have to understand any time there’s change, there is going to be some pain.”

    He added that he appreciated input from those who oppose the various subsidies and incentives the city gives to developers, and the city did check to see if the information they provided to the city was correct.

    Commentary

    The National League of Cities, one of the organizations the mayor consulted with regarding the use of incentives for the purpose of economic development, promotes an expansion of the powers of cities to engage in taxpayer-funded economic development subsidies. Its mission statement sounds noble: “Its mission is to strengthen and promote cities as centers of opportunity, leadership, and governance.” But citizens should not be deceived. It promotes interventionist practices rather than economic freedom. An example is its celebration of the U.S. Supreme Court decision in Kelo v. City of New London, which the Wall Street Journal described as “one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development.”

    The mayor’s refusal to embrace economic freedom — which he has described as a “philosophy” that is not viable in the real world — means that Wichita is likely to continue to engage in the same competitive practices as do almost all other cities. It means that deals like the subsidy granted to Real Development is a template for other taxpayers-funded giveaways. As Council Member Paul Gray has warned, the plans for the redevelopment of downtown Wichita are likely to require many millions — perhaps hundreds of millions of dollars — of public assistance or investment. Since there isn’t enough tax increment financing available to pay for this, we can expect to see proposals for tax increases, such as a new city sales tax of perhaps one cent on the dollar, to pay for downtown redevelopment.

    A sales tax is the model for economic development in Oklahoma City. This has been promoted to Wichita and Sedgwick County leaders as a good idea for Wichita to pursue.

    What Wichita is missing out on is a way to truly distinguish itself from all the other cities and counties that are all using the same economic development tools. Presently about all we can do is offer subsidies that are larger than what other cities offer. But if we decided to forgo the use of the usual economic development subsidies and incentives, that would be something very unusual. It could really put Wichita on the map as a place to locate to.

    Since these economic development incentives and subsidies require other taxpayers, both individuals and businesses, to pay for their cost, Wichita could reduce the cost of doing business in Wichita for everyone. A company considering locating to Wichita could be confident that it would be operating in a low-tax environment. It wouldn’t have to hope that it fits into the city’s economic development policy guidelines. It wouldn’t have to hope that politicians and bureaucrats view its application favorably.

    Further, once a company locates here, it wouldn’t have to worry that other companies will receive incentives and subsidies that it will have to pay for. It would not need to worry about the other costs that subsidies impose, such as subsidized companies having lower overhead and are therefore better able to compete for employees.

    Eliminating interventionist policies from city hall could have other benefits. Is there a “good ‘ol boy” network of insiders that use Wichita city hall as their personal piggy bank? By eliminating the practice of granting incentives and subsidies, we could reduce or eliminate the cynical attitude of many citizens towards city government.

    We wouldn’t have to worry whether the campaign contributions made by those seeking favor from city hall were made in the interest of good government, or made in the hopes of getting a TIF district or other subsidy passed through the council.

    These ideas, however, are not seriously considered by the mayor or any city council members, at least to my knowledge. Instead, we in Wichita are doomed to finance an escalating economic development arms race. The economic freedom of Wichitans will decline.

    This is noteworthy in light of the mayor’s curious assertion in his remarks that we will have to “endure pain” caused by change. We’ve changed nothing.

  • Wichita Center City TIF Missed Linkage Between “Unrelated” Developers

    A missed linkage between developers involved in a Wichita tax increment financing (TIF) project means progress should be stopped until all facts are known.

    In July, 2007, the City of Wichita considered a development plan (the Center City South Redevelopment District) for a tax increment financing (TIF) district in downtown Wichita. The beneficiary of the TIF financing is Real Development, whose principals are commonly known as the “Minnesota Guys.”

    The report from the City Manager’s office to the council from July 17, 2007 states: “The City will acquire the property within the Project Area from DGL, LLC, an unrelated third party, for a cost not-to-exceed $1,975,000, and convey property to Lofts at Exchange Place, LLC.” (Page 164. The information for this item starts on page 131.)

    The “DGL, LLC” referred to as an “unrelated third party” is actually “DGL Investments, LLC.” We can be sure of this for two reasons: First, there is no “DGL, LLC” registered in either Kansas or Minnesota, but there is “DGL Investments, LLC” registered in both states, although the registration is forfeited in Kansas. Second, the current owner of Exchange Place, according to Sedgwick County records, is DGL Investments, LLC.

    (You may be wondering why I looked for record of this company in Minnesota. Well, these are the “Minnesota Guys” after all.)

    So who are the people behind DGL Investments, LLC? Here’s two clues:

    On a registration form for the Kaufman Building on file at the Kansas State Historical Society, the owner of the building is identified as “DGL Investments, LLC (contact Michael Elzufon – Real Development).” This form is dated November 20, 2006.

    There’s also a lease agreement dated September 1, 2006 between the Kansas Department of Corrections and DGL Investments, LLC, where the contact person is given as “Michael Elzufon – Real Development.”

    (Michael Elzufon is CEO of Real Development, the company that is developing the buildings that are the subject of this TIF district redevelopment plan.)

    It’s true that DGL Investments, LLC is not the same legal entity as the group the city is granting TIF financing to. So what the City Manager’s report says is true — on a technical level.

    But in less than an hour, I was able to find documents that establish a positive linkage between two companies that the city says are unrelated. It’s possible that these documents weren’t available online in July 2007. But there are other ways to discover the linkage between these two companies.

    I don’t know why the city wasn’t aware of this relationship. Wichita’s public information office forwarded my inquiry to someone who could answer my questions, but I’ve not received a response.

    But it appears that one of several things happened. Perhaps city staff wasn’t aware of the connection between DGL Investments, LLC and Real Development. This could have happened though staff’s negligence, or by relying on information provided by Real Development. Or maybe city staff knew of the relationship, but wanted to hide it from the city council and the people of Wichita.

    There could be other possibilities, too. None of them are good.

    So what should the city council do? This matter dates from July 2007, but this TIF district’s development plan was modified in December 2008. To my knowledge, the property has not been transferred, and the city hasn’t sent money to these developers. There is time, and in my opinion, the necessity, to stop progress on this TIF district until this oversight by city staff can be corrected.

  • Taxpayer-funded development in Wichita opposed

    Following is the tesimony of John Todd before the Wichita City Council on April 13, 2010.

    Good morning Mayor and members of the Wichita City Council. My name is John Todd. I oppose the expansion of the Exchange Place TIF and incentive package you are considering today that benefits Real Development, a group of downtown developers commonly known by many people as the “Minnesota Guys.”

    Shortly after the Minnesota Guys arrived in Wichita a few short years ago, they were invited to address the Wichita Independent Business Association to share their development plans for downtown Wichita. A Real Development partner indicated to me that the first building they purchased in downtown Wichita was in the $0.81 per square foot range and that after renovation the housing units they were creating were selling in the $200 per square foot range. Their plan for downtown Wichita was exciting and I complemented them for their insight in recognizing the opportunity they had discovered and seized upon in our downtown area.

    After the formal presentation I personally complemented the Minnesota Guys and thanked them for what they were doing downtown. They assured me that their redevelopment work in our downtown would be completed without government incentives, and I assured them that they would have my support as long as they stayed out of the public treasury.

    Well, so much for that dialogue. Now they are asking for a bigger bite from the public apple.

    The 2007 TIF financing plan provided for a $6 million dollar tax funded parking garage, and now they need a $9.3 million dollar facility? The 2007 agreement provided for a $3 million dollar “City Improvement Expenditure” as city reimbursement to the developers for land acquisition, demolition, site preparation and such other “redevelopment project costs” as permitted by Kansas law. That number has grown to $3.325 million dollars under today’s proposal. Where does this money come from under this proposal? Please ask Allen Bell to explain.

    Please refer to page 37 of today’s proposal, “Projected Debt Service Schedule” for the Tax Increment Financing Bonds needed to finance this project. Using data that was available to the public last Friday, the principal amount for this project is shown as $10.6 million dollars plus $5.2 million dollars in interest for a total principal and interest projected total cost of $15.8 million dollars.

    Based on the 2009 Mill levy of 120.360, Wichita Public Schools would forgo an estimated $7.5 million dollars in tax revenues for this project over the course of the project bonds, with Sedgwick County taxpayers participating at an estimated $3.9 million and the City of Wichita taxpayers at $4.2 million. Since this TIF expansion involves taxes from other government entitles, this TIF expansion should require the approvals of the Wichita Public Schools and the Sedgwick County Board of County Commissioners.

    Cato Institute Senior Fellow Randal O’Toole has written about tax increment financing. “TIF does not increase the total amount of development that takes place in a city or region, it merely transfers development from one part of the region (or the city) to another. … The new developments in the TIF districts consume fire, police, and other (city) services, but since they don’t pay for those services, people in the rest of the city either have to pay higher taxes or accept a lower level of services. This means people outside the district lose twice: first when developments that might have enhanced their property values are enticed into the TIF district and second when they pay more taxes or receive less services because of the TIF district.”

    A TIF study by economists Richard Dye and David Merriman concludes that while TIF’s are good for the favored development, they may actually reduce the rate of economic growth in the rest of the city.

    Today, this council along with our mayor has the opportunity to say no to the expansion of this tax-funded project.

  • More Subsidy for Downtown Wichita Developers

    Today’s Wichita Eagle reports that Wichita’s “Minnesota Guys,” formally known as Real Development, are seeking yet another subsidy as they work in downtown Wichita. The article in the Eagle is HUD loan sought for downtown Wichita apartment plan.

    In this case, the subsidy sought is a loan guarantee from the U.S. Department of Housing and Urban Development. Some readers say that a loan guarantee is not really a subsidy, as the government isn’t lending or giving Real Development any money. But it’s a subsidy nonetheless.

    A loan guarantee will let Real Development borrow at a lower interest rate than it could without the guarantee. That is a benefit that pays off year after year, as long as the loan is in effect. It also puts the United States taxpayer at risk, as if Real Development defaults on the loan, the U.S. Treasury must pay.

    Judging the risk of default for this loan is difficult. But if this application is approved, we’re stuck with this risk.

    The development receiving this subsidy has also received other subsidies, according to the Eagle: “They got the city of Wichita to agree to spend $3 million to buy Exchange Place and the Bitting Building, and give it to them. The city is also committed to spend up to $6.2 million for a parking deck along Douglas.”

    When the Minnesota Guys came to town a few years ago, they didn’t ask for subsidy, at least according to my research. I wrote to them, commending their position and asking why. Quoting from my letter: “If, as I believe, you have not sought help from our local government, I salute you, and I am very interested as to why.” No one responded to my query.

    We can now confidently place Real Development in the crony capitalist column. Its principals — Michael Elzufon and David Lundberg — have become adept at working the halls of government power for taxpayer subsidy. The danger that Wichita faces is that since these developments are built with capital raised from politicians rather than markets, their roots are shallow.

  • On Wichita’s Exchange Place TIF, Janet Miller speaks

    Last week’s meeting of the Wichita City Council featured a message from Council Member Janet Miller that illustrated her firm belief in centralized government planning for the purposes of economic development. It also contained a material mistake in the understanding of the facts of the project.

    In her remarks from the bench, Miller disagreed with those who testify at council meetings against tax increment financing (TIF). She said there is much information that says this type of economic development incentive is effective.

    She said “Sometimes I wonder what city folks are living in when they talk about the negative, or the lack of results from TIFs.” She then named several Wichita TIF districts that she said performed well.

    If her remarks were aimed at me and some of the other people who have testified at city council meetings against the formation of TIF districts, council member Miller may not have been listening very carefully. We do not deny that TIF districts produce results — within the district itself. Things get built, buildings get renovated. It is the effect of TIF on the city as a whole that we are concerned with.

    It’s the observed effects of TIF, as economists Dye and Merriman have found and I have mentioned to the city council, including Miller, several times: “We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.”

    It’s also the unobserved effects — the things that don’t happen because Wichita props up developers in politically-favored areas such as downtown. This form of centralized planning from Wichita city hall overrides the decisions that the citizens of Wichita make with their own pocketbooks, and concentrates power in the hands of bureaucrats and politicians.

    As Randal O’Toole has written: “TIF today is often part of a social engineering agenda that Americans should reject.”

    Miller praised the amount of office space Real Development has brought online in downtown Wichita. To the extent that this has been done without government assistance, this should be praised.

    She agreed with Vice Mayor Longwell’s assessment of this project, saying “This is not a tax abatement project.” She is just as wrong as is Longwell and other council members who believe this.

    In discussing the risk involved in this project, Miller told of how the disbursements from a HUD-guaranteed loan that will finance much of this project will made directly to contractors, not to Real Development. City of Wichita documents indicate that the City’s payments will be made in the same way. This is a quite peculiar arrangement: we are placing a huge bet of the success of downtown Wichita redevelopment in the hands of the principals behind Real Development, but evidently we don’t trust them enough to write them a check and be confident they will pay their bills.

    Miller also spoke of the jobs that will be created by this project. Implicit in her argument is that this project, or something similar, would not occur without the city’s subsidy. Her argument also ignores what economists tell us — that TIF districts simply transfer development from one part of town to another.

    What Wichitans should be most concerned about, however, is a misstatement by Miller that other council members may have relied on in making their decision on how to vote. Miller said: “The property tax increases, the increment that’s being calculated in this project, includes only the buildings in this project.”

    This statement directly contradicts the facts. In the Longhofer study, other properties owned by Real Development — the Petroleum Building, Sutton Place, 105 S. Broadway, and others — are used to support the TIF loan for the Exchange Place project. In response to my question, Wichita’s urban development director Allen Bell confirmed the same.

    In her message from the bench, Miller said that city staff and council members have had enough time to go over this proposal. Her mistaken remarks indicate, however, that the project is still not understood very well by the council, neither its mechanics or its economic effect.

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