Proposed Wichita sales tax won’t satisfy needs, appetites

The proposed Wichita sales tax does little to address the city’s delinquent infrastructure maintenance gap. Despite this, there are rumors of another sales tax next year for quality of life items.

Earlier this year the steering committee for the Wichita/Sedgwick County Community Investments Plan delivered a report to the Wichita City Council. The report contains facts that are relevant to the proposed Wichita one cent per dollar sales tax. Voters will decide on this in November.

Community Investments Plan document, February 2014
Community Investments Plan document, February 2014. Click for larger version.
The most important thing Wichita voters need to know that the city is delinquent in maintaining the assets that taxpayers have purchased. The cost to remedy this lack of maintenance is substantial. On an annual basis, Wichita needs to spend $180 million on infrastructure depreciation/replacement costs. Currently the city spends $78 million on this, the presentation indicates.

The “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.

How does this relate to the proposed sales tax? Of the funds the sales tax is projected to raise over five years, $27.8 million is allocated for street maintenance and repairs. That’s $5.6 million per year.

Wichita/Sedgwick County Community Investment PlanSubtract that from what the Community Investments Plan says we need to spend on deficient infrastructure, and we’re left with (roughly) $40 to $50 million per year in additional spending on deficient infrastructure. Remember, that’s on top of ongoing infrastructure depreciation/replacement costs.

Does the proposed sales tax do anything to address those needs? Possibly. Part of the sales tax would be used to augment the large water pipeline from the Equus Beds. That pipeline is 60 years old, but there is no indication that it needs replacement. But other than that, the proposed sales tax does not address deficient maintenance.

What will the city do about this deficiency? Is it likely that Wichitans will be asked to provide additional tax revenue to address the city’s deficient infrastructure? So far, city hall hasn’t asked for that, except for recommending that Wichita voters approve $5.6 million per year for streets from a sales tax.

But if we believe the numbers in the Community Investments Plan, we should be prepared for city hall to ask for much more tax revenue. That is, if the city is to adequately maintain the things that taxpayers have paid to provide.

Besides this maintenance backlog, there are other calls for new city spending.

Wichita has unmet maintenance requirements, and many wants on top of that.
Wichita has unmet maintenance requirements, and many wants on top of that.
Earlier this year the city council considered various proposals for spending a new source of tax money. Four survived the discussion and will be the recipient of sales tax funds, if Wichita voters approve. Those needs are a new water supply, jobs and economic development, transit, and street maintenance and repair.

There were proposals that did not make the, generally in the category of “quality of life” facilities. These include a new convention center, new performing arts center, new central library, newly renovated Lawrence-Dumont Stadium, renovation of the Dunbar Theater, renovation of O.J. Watson Park, and help for the homeless.

Evidently there are many who are not happy that these proposals will not receive sales tax money. Rumors afloat that groups — including city officials — are plotting for another sales tax increase to fund these items.

People are rightly concerned that even though the proposed Wichita sales tax ordinance specifies an end to the tax in five years, these taxes have a way of continuing. The State of Kansas recently had a temporary sales tax. It went away, but only partly. The Kansas state sales tax rate we pay today is higher than it was before the start of the “temporary” sales tax.

But the people who want to spend your tax dollars on these “quality of life” items aren’t content to wait five years for the proposed sales tax to end before asking for their share of sales tax revenue. They are plotting to have it start perhaps one year from now.

These are things that Wichita voters need to consider: There is a backlog of maintenance, and there is appetite for more tax revenue so there may be more government spending. Even if the sales tax passes, these remain unfulfilled.

To pay for a new Wichita water supply, are there other choices?

To pay for a new Wichita water supply, the city gives voters two choices. Either (a) vote for a sales tax, or (b) the city will issue long-term debt and the city will have to pay an additional $221 million in interest expense.

Are there alternatives, such as raising the funds through water bills over the same five-year period as the proposed sales tax? Would this let commercial and industrial water users participate in the costs of a new water supply?

In this excerpt from a water town hall meeting, Wichita Director of Public Works Alan King responds. View below, or click here to view at YouTube.

What is the purpose of a new Wichita water supply?

What is Wichita gaining with a new water supply? Is a new supply needed for basic uses such as household, commercial, and industrial? At a town hall meeting on water issues, Wichita Director of Public Works Alan King explains.

The expansion of the Aquifer Storage and Recovery project, or ASR, is the largest planned use of the proposed one cent per dollar Wichita sales tax.

Of note, the proposed water supply provides protection for what is called a one percent drought. There is debate as to whether the city should prepare for a two percent drought instead.

View a video excerpt of the meeting below, or click here to view at YouTube.

Has the Wichita ASR system proven its worth in production?

Last week the City of Wichita held a town hall meeting on water issues. The issue is ripe because the city has placed a one cent per dollar sales tax on the November ballot. The largest share of the revenue, 63 percent, is earmarked for expansion of the Aquifer Storage and Recovery project, or ASR.

I appeared at the meeting and expressed my concerns regarding things I had recently learned, which is that we’ve cut expectations for ASR production in half. Also, ASR is still in commissioning stage.

Alan King, Director of Public Works for the City of Wichita, said the individual components of the ASR systems have been tested, and that the tests have been successful. He confirmed that the original estimates of production were too high.

We also learned that there have been days where there was sufficient water in the Little Arkansas River to draw from it, but that sometimes the levels of bromide or atrazine have been too high, and the water could not be used.

View a video excerpt of the meeting below, or click here to view at YouTube.

"Yes Wichita" television advertisement.

Examining claims in favor of the proposed Wichita sales tax

In an advertisement in the Wichita Eagle and in a mailer sent to Wichita voters, the “Yes Wichita” group makes a series of statements regarding plans for a new water supply. It’s important that Wichita voters be aware of the complete facts and context of these claims so that they make an informed decision on how to vote.

The city has proposed a one cent per dollar sales tax. The largest portion — 63 percent or $250 million — is earmarked for a new water supply. Voters will see this question on the ballots for the November 4, 2014 election.

Advertisement from "Yes Wichita."
Advertisement from “Yes Wichita.” Click for larger version.
Here’s what the “Yes Wichita” group has stated under the heading “The Plan For Affordable Long-term Water Supply” along with what voters also need to know.

Save taxpayers $221 million over 20 years in costs. This statement is true only if the Wichita city council decides to pay for ASR expansion by using long-term debt. That decision has not been made. Besides that, there are other ways to raise this money. And if using debt for water projects is bad, why did the city borrow over $200 million for the current ASR project, and hundreds of millions for other water projects? See By threatening an unwise alternative, Wichita campaigns for the sales tax.

Wichita Water Supply Plan Capital Costs
Wichita Water Supply Plan Capital Costs
Replace 60 year old aging pipelines so water is transported safely. The sales tax plan for water calls for the augmentation of one pipe, as shown in the city’s plan. Not replacing pipes plural, as this advertisement indicates. Plus, the pipe that is the subject of the city’s water plan is 60 years old, but there is no indication that it needs replacement.

Tourists, visitors and renters help pay for our water. This is true. It is also true that if funds were raised through higher water bills, these people would also pay. Also, city documents regarding the sales tax state: “The State of Kansas estimates that 13% of sales taxes paid in the Wichita area are paid by non-residents based on a report at www.ksrevenue.org/pullfactor.html.” But at the “Yes Wichita” website, there is a different claim: “If we fund a new water source through a sales tax instead of water bills or property taxes, visitors and tourists will pay the sales tax, reducing the burden of this cost to Wichitans by about one-third.” Which is it? 13 percent, or 33 percent? Will “Yes Wichita” show us their figures or provide a reference for the basis of this claim?

Prevent future high water rate increases. This is true. If we experience a prolonged drought, water rates would have to rise to cover the fixed costs of the water utility. That is, if we have such a drought. That may not happen, or it may not happen for many years.

Fund ASR improvements which would provide new wells and a water storage site. This is true. What’s left is to decide whether making these additional investments in the ASR project is wise. We’ve learned that the expectations of ASR have been cut in half. We’ve learned that the ASR project is still in its commissioning phase, and it has not been turned loose for actual production for any significant period. I do not believe we have enough knowledge and experience to judge the success or failure of ASR. See Should Wichita expand a water system that is still in commissioning stage?

Downtown Wichita campaigns for higher taxes on groceries and no taxes on downtown

This is the Wichita Downtown Development Corporation. It routinely advocates for special deals whereby downtown developers don’t have to pay property taxes or sales taxes. Or if they do pay property taxes, they might be routed back to them for their exclusive benefit. But as you can see, WDDC campaigns for low-income households to pay more sales tax on groceries.

Say, did you know that WDDC is funded almost entirely with tax money? And that it wants to spend that money in secret?

Wichita Downtown Development Corporation 10-26-2014

Wichita Chamber campaigns for higher taxes on those least able to pay

This is the Wichita Metro Chamber of Commerce. It routinely advocates for special deals whereby businesses don’t have to pay taxes. Sometimes it arranges cash grants and tax credits for companies. But as you can see by the Yes Wichita sign in the window, the Wichita Chamber campaigns for low-income households to pay more sales tax on groceries.

Wichita Metro Chamber of Commerce 10-26-2014 16'36'26

Misleading Wichita voters on water pipes

"Yes Wichita" television advertisement.
“Yes Wichita” television advertisement.
Here’s a still image from a “Yes Wichita” television advertisement. This group campaigns in favor of the one cent per dollar Wichita sales tax that is on the November ballot.

This image misleads voters in two ways, one which is significant.

First, Wichita doesn’t have wooden water pipes, as shown in this advertisement.

Wichita Water Supply Plan Capital Costs
Wichita Water Supply Plan Capital Costs
Second, the sales tax plan calls for the augmentation of one pipe, as shown in the city’s plan. Not replacing pipes plural, as this advertisement indicates.

Plus, the pipe that is the subject of the city’s water plan is 60 years old, but there is no indication that it needs replacement.

Selective editing?

Here’s a snippet from a recent “Yes Wichita” advertisement and mailer. This group campaigns in favor of the one cent per dollar Wichita sales tax that is on the November ballot.

Yes Wichita advertisement Wichita Eagle 2014-10-26 excerpt 1

Following is the entire quote from the Wichita Eagle story. I’ve used bold type for the parts that the advertisement used. Everything else was discarded. Do you think it is misleading to leave out the part about how a significant portion of the rate increase will happen regardless of the sales tax vote?

Without the sales tax, water rates would have to increase 32 percent over the next four years to pay for expansion at the city’s Aquifer Storage and Recovery (ASR) facility northwest of Wichita. That would set the rates high enough so the city could start making bond payments in 2018, Public Works and Utilities Director Alan King said.

That increase would be on top of projected water rate increases totaling nearly 20 percent over the next four years to meet regular maintenance needs of the existing infrastructure.

So the total rate increase for the water base charge would be nearly 52 percent by 2018.”

Envelope of sales tax mailer sent by Wichita Mayor Carl Brewer to Bel Aire resident. Click for larger version.

Wichita sends educational mailer to non-Wichitans, using Wichita taxes

Why is the City of Wichita spending taxpayer money mailing to voters who don’t live in the city and can’t vote on the issue?

A resident of Bel Aire thought it was curious that she received an informational mailing regarding an issue she can’t vote on. The issue is the proposed one cent per dollar Wichita city sales tax that is on the November ballot.

Envelope of sales tax mailer sent by Wichita Mayor Carl Brewer to Bel Aire resident. Click for larger version.
Envelope of sales tax mailer sent by Wichita Mayor Carl Brewer to Bel Aire resident. Click for larger version.
What is curious about her receiving this mail about the Wichita sales tax? She can’t vote on this issue because she lives in Bel Aire, not in Wichita. Only those voters who live in Wichita will have the question on their ballots. Bel Aire is a nice town, but it is not Wichita.

So why did the City of Wichita spend tax dollars informing residents of Bel Aire about an issue on which they may not vote?

Many Wichitans question whether the city should have spent tax dollars on this mailer. Especially when it’s pretty clear that the material is designed to encourage citizens to vote in favor of the tax.

(If you doubt whether the city’s educational material is advocating for passage of the sales tax, consider this: The “Yes Wichita” group campaigns for passage of the tax. This group refers voters to the city’s website to learn about the issue. “Yes Wichita” would not do that if the city’s material contained anything that might discourage a “Yes” vote.)

I’ve been involved in political campaigns. I’ve always been quite careful to send mail only to those voters who live in the relevant jurisdiction. That is, I don’t waste donors’ money mailing to people who are not able to vote for my candidate.

The return address on this envelope indicates the mail came from the Office of the Mayor. So may I ask, Mayor Carl Brewer, why are you wasting taxpayer money sending mail to people who can’t vote on this issue?

Tax your food, but not his

Here’s a large sign that urges Wichita voters to approve a higher sales tax. This sign is located on the property of a restaurant that’s part of a chain. Its president actively campaigns for the higher sales tax. Say, did you know that restaurants do not pay sales tax on the food they purchase? But low-income Wichitans pay sales tax on their groceries, and at a rate that is nearly the highest in the nation. (Only 14 states have sales tax for groceries, and Kansas has the second-highest rate.)

Does this seem fair and just, that the president of a restaurant chain would campaign for higher sales tax on groceries? On top of this, almost two-thirds of the sales tax revenue would fund a project that protects wealthy neighborhoods from lawn irrigation restrictions during an extended drought. For this, low-income households are asked to pay higher sales taxes on their food.

Carlos O'Kelly's Yes Wichita 2014-10-24 03'08'41 PM

Tax not me, but food for the poor

This is Union Station in downtown Wichita. Its owner has secured a deal whereby future property taxes will be diverted to him rather than funding the costs of government like fixing streets, running the buses, and paying schoolteachers. This project may also receive a sales tax exemption. But as you can see, the owner wants low-income households in Wichita to pay more sales tax on their groceries.

Union Station Downtown Wichita 2014-10-24 02'46'19 PM

Cash register old

Wichita sales tax hike harms low income families most severely

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.

One of the criticisms of a sales tax is that it is regressive. That is, it affects low-income families in greatest proportion. This is an important consideration to explore, because in November Wichita voters will decide whether to create a new city sales tax of one cent per dollar. If enacted, the sales tax in Wichita would rise from 7.15 percent to 8.15 percent.

It’s an important issue because to hear some people talk, it seems as though they are saying the proposed tax is “one penny.” Anyone can afford that, they say. But the tax is an extra penny on each dollar spent, meaning that the cost of, say, fifty dollars of food at the grocery store increases by fifty cents, not one penny.

Further, we hear the sales tax spoken of as being a one percent increase. That’s true, if we mean a one percent increase in the cost of most things we buy. And one percent, after all, is just one percent. Not a big deal, people say. But considering the sales tax we pay, a relevant calculation is this: (8.15 – 7.15) / 7.15 = 14 percent. Which is to say, the amount of sales tax we pay will rise by 14 percent.

Click the table for a larger version.
Click the table for a larger version.
To explore the effect of the proposed sales tax on families of different incomes, I gathered data from the U.S. Census Bureau, specifically table 1101, which is “Quintiles of income before taxes: Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 2012, (Selected Values).” This table divides families into five quintiles. It gives annual expenditures for each quintile in various categories. For each category, I judged whether it is subject to sales tax. For example, for housing, I indicated it is not subject to sales tax. This is not totally accurate, as some of the spending in this category may be for taxable items like maintenance and repair supplies. Food is subject to sales tax in Kansas, although low-income families may apply for a rebate of the tax. Despite these shortcomings, I feel this data gives us an approximation of the effect of the sales tax. (Click on the table to view a larger version, or see below for how to obtain the data.)

As you might imagine, as income rises, so does total taxable expenditures. Of interest, the percent of expenditures that are taxable is relatively constant across income levels.

Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile. Click for larger version.
Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile. Click for larger version.
An important finding is the bottom line of the table, which shows the increase in cost due to the proposed sales tax as percent of income after taxes. This calculates the relative impact of the proposed sales tax increase as a percent of income. It is here that we expect to see the regressive nature of a sales tax appear. For all consumers, the increase in cost is 0.35 percent. For the lowest class of income, the increase in cost is 0.97 percent of income. It falls to 0.26 percent for the highest income class.

This means that the lowest income class of families experience an increase nearly four times the magnitude as do the highest income families, as a percentage of after-tax income. This is the regressive nature of sales taxes illustrated in numbers, and is something that Wichita policy makers and voters should consider.

I’ve made the data available as a Google Docs spreadsheet. Click here for access.

WichitaLiberty.TV July 2, 2014

WichitaLiberty.TV: The proposed one cent per dollar Wichita sales tax

In this episode of WichitaLiberty.TV: We’ll talk about the proposed Wichita sales tax, including who pays it, and who gets special exemptions from paying it. Then, can we believe the promises the city makes about accountability and transparency? Finally, has the chosen solution for a future water supply proven itself as viable, and why are we asking low-income households to pay more sales tax on groceries for drought protection? View below, or click here to view at YouTube. Episode 63, broadcast October 26, 2014.

Voting machine old style levers

By threatening an unwise alternative, Wichita campaigns for the sales tax

To pay for a new water supply, Wichita gives voters two choices and portrays one as exceptionally unwise. In creating this either-or fallacy, the city is effectively campaigning for the sales tax.

In November Wichita voters will decide whether to create a sales tax of one cent per dollar. The largest intended purpose of the funds is to create a new water supply.

Set aside for a moment the question whether Wichita needs a new water source. Set aside the question of whether ASR is the best way to provide a new water source. What’s left is how to pay for it.

City of Wichita information on proposed sales tax
City of Wichita information on proposed sales tax
To pay for a new water source, the city gives us two choices: Either (a) raise funds through the sales tax, or (b) borrow funds that Wichitans will pay back on their water bills, along with a pile of interest.

As you can see in the nearby chart prepared by the city, the costs are either $250 million (sales tax) or $471 million (borrow and pay interest). The preference of the city is evident: Sales tax. The “Yes Wichita ” group agrees.

Here’s what is happening. City hall gives us two choices. It’s either (a) do what we want (sales tax), or (b) we’ll do something that’s really bad (borrow and pay interest). Wichita voters shouldn’t settle for this array of choices.

Let me emphasize that. The city’s informational material says if voters don’t pass the sales tax, the city will do something unwise. But the city did that very same bad thing to pay for the current ASR project, that is, borrow money and pay interest. But now the city says pass the sales tax or we will do something bad to you. Pass the sales tax or the city will issue long-term debt and you will pay a lot of interest.

Pass the sales tax, or we will do again what we did to pay for the current ASR project. And that would be bad for you and the city.

Wichita Outstanding Gross General Obligation Debt per Capita
Wichita Outstanding Gross General Obligation Debt per Capita
Are there other alternatives for raising $250 million for a new water source (assuming it is actually needed)? Of course there are. The best way would be to raise water bills by $250 million 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.

Water bills would have to rise by quite a bit in order to raise $250 million over five years. The city could decide to raise rates by different amounts for different classes of water users. The city could adjust its tiered residential rate structure to be more in line with the average of other large cities. (See Wichita water rates seen as not encouraging conservation.) But the total cost of the higher water bills would be exactly the same as the cost of the sales tax: $250 million.

It’s important to have water users pay for a new water supply. The benefit is that water users will become acutely aware of the costs of a new water supply. That awareness is difficult to achieve. Many citizens are surprised to learn that the city has spent $247 million over the past decade on a water project, the ASR program. Almost all of that was paid for with long-term debt, the same debt that the city now says is bad.

Paying for a new water supply through water bills would let commercial and industrial users participate in paying the cost of the project. These water users usually don’t pay a lot of sales tax. A restaurant, for example, does not pay sales tax on the food ingredients it purchases. An aircraft manufacturer does not pay sales tax on the raw materials and component parts it buys. But these companies do have a water bill. Yet, the city recommends that low income households pay more sales tax on their groceries. The city says this is the best way to pay for a new water supply to protect our lawns and golf courses during a drought.

water fountain gargoyles fountain-197334_640

Should Wichita expand a water system that is still in commissioning stage?

In this script from the next episode of WichitaLiberty.TV, I report my concerns about rushing a decision to expand a water production system that has not yet proven itself.

Wichita plans and background sales tax coverFor the proposed Wichita sales tax, the largest share will go towards a new water supply. 63 percent of the tax revenue — that’s $250 million over five years — will go towards what the city has decided will satisfy our water needs. This is expansion of the Aquifer Storage and Recovery program, or ASR.

People have told me that I should take a look at the production of the ASR system. Many people have told me that. So I took a look. Now, I realize that I am not a geologist. I am not a civil engineer with experience in public utilities like water systems. But what I found is more than a little alarming.

As a result of my research, I’m concerned that we don’t have a track record of success for the ASR program, but we’re thinking about putting all our eggs in that basket. Here is some history. ASR is a system north of Wichita. It draws water from the Little Arkansas River, treats it, and injects it into the Equus Beds aquifer. That’s the recharge process. That water is then available for use in the future. (Wichita already gets 40 percent of its water from the Equus beds.) There was ASR Phase 1, and now there is Phase 2. Cost so far is $247 million.

In April, Wichita Public Works Director Alan King told the city council that based on experience, we now believe we will get half the production from ASR as we originally thought. By production, we mean the amount of water that is treated and injected into the aquifer. So I did the research and I found that the ASR program has not come close to meeting this goal. This is the goal that was cut in half from the original goal.

I understand that ASR phase 2 came online during a drought. I understand that there was a learning curve. But since July 2013 — remember that’s when it started raining so much it flooded — ASR has not been performing anywhere near expectations.

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative from July 2013. Click for larger version.
Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative from July 2013. Click for larger version.
In this chart, I start the horizontal axis with July 2013. The red line on top is what production was originally planned to be. Production will not necessarily be smooth, as production happens only on days when there is sufficient water in the river. But over time, this should be the trend.

The blue line is the expectations for production after being revised downwards.

In purple is actual production. Considering the 12 month stretch starting with July 2013, ASR produced 431 million gallons of recharged water. That is 23 percent of expectations, even after expectations were cut in half.

When I presented this information to the Wichita City Council this week, Alan King, the public works director, said “The information Mr. Weeks presented is accurate.” But he said my conclusions are not correct.

King told the council that during the timeframe of this chart, we weren’t looking to run the ASR system at maximum production levels. We were operating the facility in the most efficient manner possible. We were testing the individual components. We are still in a commissioning phase.

So based on this — we are still in a commissioning phase, we have not been running at maximum production levels — I believe we do not have enough experience to conclude that ASR is working. Couldn’t we wait until the ASR project is working at even half its design goal before making a decision to proceed with its expansion? This is too big a decision to make based on the scant evidence we have. Especially when we are asking low income and fixed income households to pay more sales tax on groceries to fund this project. Especially when Cheney Reservoir is full and there is no immediate crisis.

Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile. Click for larger version.
Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile. Click for larger version.
I did research on how an increase in sales tax affects households of different levels of income. Later the Wichita Eagle produced similar results. I showed that as a percentage of after-tax income, the proposed sales tax increase is four times as costly for low-income households as it is for high-income households. Remember, regarding a new water supply, we’re not worried about running out of drinking water, or even running out of water for industry and commercial users. We’re talking about restricting the watering of golf courses and lawns during an extended drought. We’re talking about not washing cars during a drought. Stripped to its essence, the city is asking low-income households to pay more sales tax on food so that lawns in wealthy neighborhoods may remain green at reasonable cost during a drought.

Here’s something else that troubles me regarding the water portion of the proposed sales tax. In the city’s informational material — the material that is meant to educate us on the issues — it’s said that if the sales tax does not pass, the city will use long-term debt to pay for ASR expansion, and that will cost an extra $221 million in interest expense. That course of action — using debt to pay for ASR expansion — is presented as a bad choice.

I want to remind you that the city borrowed over $200 million in long-term debt to pay for the present ASR system. That’s almost as much as the cost of the proposed ASR expansion.

City of Wichita information on proposed sales tax
City of Wichita information on proposed sales tax
Let me emphasize that. The city’s informational material says if voters don’t pass the sales tax, the city will do something unwise. But the city did that very same bad thing to pay for the current ASR project, that is, borrow money and pay interest. But now the city says pass the sales tax or we will do something bad to you. Pass the sales tax or the city will issue long-term debt and you will pay a lot of interest. Pass the sales tax, or we will do again what we did to pay for the current ASR project. And that would be bad for you and the city.

These are the choices the city gives voters. But others alternatives are available. If the city is concerned about the cost of debt financing, why not raise the money for ASR through a period of higher water bills for five years? This has the obvious benefit of having the people who actually use water pay for it. The cost of ASR expansion could be a separate line item on water bills so that we are acutely aware of how much this system costs. It’s important that we be aware of these costs. When paid through a sales tax, it’s difficult to track the money and know the total cost of the system to you. That’s something the city and the “Yes Wichita” group counts on. In fact, they say the sales tax is just one cent. Just one penny for every dollar you spend. You won’t even notice its impact.

Paying for a new water supply through water bills would let commercial and industrial users participate in paying the cost of the project. These water users generally don’t pay a lot of sales tax. A restaurant, for example, does not pay sales tax on the food ingredients it purchases. An aircraft manufacturer does not pay sales tax on the raw materials and component parts it buys. But these companies do have a water bill. Yet, the city recommends that low income households pay more sales tax on their groceries. The city says this is the best way to pay for a new water supply to protect our lawns and golf courses during a drought.

Here’s a thought. Sedgwick County Government is in a beneficial position regarding the water supply issue. The city is too wrapped up, too invested in advancing the ASR project. There are some big egos and political careers involved. There is an engineering firm that sees a big contract in its future.

Since county government is not in the business of providing water, it does not have these distractions and distortions. I think this places the county in the position of a referee, as an unbiased observer. The county is a governmental body that sincerely wants a secure water future for its largest city and for many of the smaller cities and residents that get their water from the Wichita system. Remember, many cities like Derby rely on the Wichita water system for their water. Collecting funds through water bills lets these customers help pay for the cost of a new water supply.

If city voters decide against the sales tax, which I hope is the outcome of the election, then the county commission could take the lead. It could commission a study of water issues. Since the county is not in the business of providing water, the study could be free of the biases and ambitions that infect whatever Wichita does. It could be conducted by an engineering firm that is not advocating for its own interests, as I fear is happening with Wichita.

I realize this would cost money and take time. But the city is on the verge of rushing into what I fear will be a costly mistake. Remember, Cheney Lake is full. There is no immediate water crisis. We do not have to rush to make a decision about expanding a system that has not yet entered full production, a system that is still in the commissioning stage. Wichita voters should not accept the false choices our city government is giving us.

Wichita Chamber of Commerce 2013-07-09 004

For Wichita Chamber of Commerce chair, it’s sales tax for you, but not for me

A Wichita company CEO applied for a sales tax exemption. Now as chair of the Wichita Metro Chamber of Commerce, he wants you to pay more sales tax, even on the food you buy in grocery stores.

High Touch Technologies in downtown Wichita.
High Touch Technologies in downtown Wichita.
When High Touch Technologies wanted to purchase and improve the building that houses its headquarters in downtown Wichita, the company asked for and received property tax relief and an exemption from paying sales taxes.

So far this story is not unusual. Many companies receive this type of tax relief. Some get it year after year, to the tune of some $658 million in the case of Boeing.

High Touch Technologies campaigns for higher sales taxes, even though it received a sales tax exemption.
High Touch Technologies campaigns for higher sales taxes, even though it received a sales tax exemption.
But the case of High Touch Technologies is of more than usual interest. At the time of the request in November 2013 the company’s CEO, Wayne Chambers, had just been selected as chair of the Wichita Metro Chamber of Commerce. The Chamber, along with its subsidiary Greater Wichita Economic Development Coalition, are the main agencies in charge of economic development for the Wichita area. Under Chambers’ leadership, these organizations recommended that the city council authorize a vote on raising the Wichita sales tax for the purposes of economic development. The council did that, and in November Wichita voters will decide whether to create a city sales tax of one cent per dollar. Twenty percent of the proceeds are earmarked for job creation.

To summarize: A Wichita company CEO applied for a sales tax exemption. Now he wants you to pay more sales tax, even on the food you buy in grocery stores.

Groceries vegetables

Kansas sales tax on groceries is among the highest

Kansas has nearly the highest statewide sales tax rate for groceries. Cities and counties often add even more tax on food.

Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile. Click for larger version.
Additional cost of proposed Wichita sales tax as percent of after-tax income, by income quintile. Click for larger version.
Only 14 states apply sales tax to food purchased at grocery stores for home consumption. This is generally in recognition that sales taxes are highly regressive. My research shows that the lowest income class of families experience a cost nearly four times the magnitude as do the highest income families, as a percentage of after-tax income. See Wichita sales tax hike would hit low income families hardest.

When we look at statewide sales tax rates applied to food, we see that Mississippi has the highest sales tax rate for food at 7.00 percent. Kansas is next at 6.15 percent, then Idaho at 6.00 percent.

Cities and counties often have additional sales taxes. Sedgwick County adds one percent for a total sales tax rate of 7.15 percent. If the proposed Wichita sales tax succeeds, the sales tax in Wichita, including on groceries, will be 8.15 percent.

It could be that some cities in other states have combined sales tax rates higher than what Wichita currently has, and what Wichita will have if the proposed sales tax passes. As an example, Oklahoma has a statewide sales tax of 4.5 percent that applies to groceries. With city and county taxes added, the rate in Oklahoma City is 8.375 percent. If the proposed sales tax passes, Wichita would be right behind at 8.15 percent.

Of note, those in Kansas have the possibility of receiving a food sales tax credit of $125. But this is something that must be applied for, and qualifying conditions must be met. Also, the credit is nonrefundable, meaning that applicants must have income tax liability of at least $125 to receive the full credit.

The following table shows the sales tax rate for states that apply sales tax to food. All other states have either no sales tax, or no sales tax on groceries. View below, or click here to open in a new window.

Wichita Old Town Square

Old Town Cinema TIF update

A Wichita city report provides a somber look at the finances of a tax increment financing district.

The City of Wichita Department of Finance has prepared an update on the financial performance of the Old Town Cinema Tax Increment Financing (TIF) District. There’s not much good news in this document. The financial performance would be worse if the city had included the costs of the no-interest and low-interest loan made to the owners of property in this TIF district. But it doesn’t appear that those costs are included. Here’s an excerpt from the report:

In 2000, the appraised value of the southeast retail building and the Warren Theatre declined 12% (from $4.5 to $3.9 million) and 33% from ($4.4 to $2.9 million), respectively. These declines occurred as a result of property tax appeals, which were made by the TIF District’s primary developer. In addition, the total appraised value of the northeast and southeast retail buildings and the Warren Theatre remains more than $3.6 million below estimates in the project plan and overall values have not yet recovered to pre-2009 levels.

The “property tax appeals” referred to in this paragraph are the doing of David Burk. The Wichita Eagle reported at the time: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

Several city officials expressed varying degrees of outrage with Burk’s action, with the city manager telling the Eagle that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”

Since then the city has granted several forms of subsidy to Burk and his partners.

The report from the finance department also told of problems with parking revenue:

Parking Revenue – The project plan assumed sufficient parking revenue cash flow over a fifteen-year period to provide $1.1 million towards principal debt obligations, assuming an interest rate of 4.5%. The Old Town Cinema TIF Fund has received substantially less parking revenue than was expected in the project plan. In some years, the TIF Fund has received no revenue from parking, and the highest amount received in any year was $51,130 (in 2008). From 2007, when the District first began receiving parking revenue, through 2013, a total of $153,130 in parking revenue has been transferred to the TIF Fund. Based on historical experience, additional parking revenue is not assumed and total parking revenue from 2004 to 2019 is conservatively projected at $153,130.

Later on, the report holds this:

Parking revenue collections are also substantially less than projected, because fees have not been increased as originally planned. The City’s general parking fee, which predates the Old Town Cinema TIF District, started at $7.50 per parking space per month. The fee was to increase to $25 per month over an eighteen-year period, with increases starting in approximately1996, according to Property Management. Fee increases never occurred, which were needed to pay for City parking activities. The general City fee differed slightly from that originally charged in the Old Town Cinema District, because the District initially charged a $10 per month fee, but this was reduced in about 2009 to $7.50 per month consistent with the parking fee charged elsewhere in the City, again according to Property Management.

The report also contains several financial statements. These statements do not contain a form of off-the-books support given to this TIF district. That was the no-interest and low-interest loan made to the Warren Theater, estimated to cost the city $1.2 million.

Click here to open the city’s report in a new window.

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative from July 2013. Click for larger version.

Wichita ASR water recharge project: The statistics

As Wichita voters consider spending $250 million expanding a water project, we should look at the project’s history. So far, the ASR program has not performed near expectations, even after revising goals downward.

In November Wichita voters will consider approval of a one cent per dollar sales tax. Of the $400 expected to be collected over five years, $250 million is earmarked for a new water source. The city has decided that the new water supply will be implemented through expansion of the Aquifer Storage and Recovery program or ASR. This is a program whereby water is taken from the Little Arkansas River, treated, and injected in the Equus Beds aquifer. That water is then available in the future as is other Equus Beds water.

The city believes that ASR is a proven technology that will provide water and drought protection for many years and recommends that voters approve $250 million for its expansion, although there is possibility that the cost may be $200 million.

According to city documents, the original capacity of the ASR phase II project to process water and pump it into the ground (the “recharge” process) was given as “Expected volume: 30 MGD for 120 days.” That translates to 3,600,000,000 (3.6 billion or 3,600 million) gallons per year. ASR phase II was completed in 2011.

At a city council workshop in April 2014, Director of Public Works and Utilities Alan King briefed the council on the history of ASR, mentioning the original belief that ASR would recharge 11,000 acre feet of water per year. But he gave a new estimate for production, telling the council that “What we’re finding is, we’re thinking we’re going to actually get 5,800 acre feet. Somewhere close to half of the original estimates.” The new estimate translates to 1,889,935,800 (1.9 billion or 1,900 million) gallons per year.

Based on experience, the city has produced a revised estimate of ASR production capability. What has been the actual experience of ASR? The U.S. Geological Survey has ASR figures available here. I’ve gathered the data and performed an analysis.

Annual production

In 2013 ASR recharged 366 million gallons, or 19 percent of the newly revised estimate of production capacity. In 2014 through September, ASR recharged 275 million gallons, or 14 percent of capacity. Extrapolating this nine months of production to a full year results in 367 million gallons produced for 2014, or 19 percent of capacity, the same value as in 2013. This may or may not be valid, but it gives an idea of how 2014 is proceeding.

So for the two most recent years, the ASR system has not operated near its designed capacity, even after revising that capacity downwards by half.

To place these production figures in context, the city uses 56 million gallons per day, on average. So the annual production of the ASR project is about 6.5 days of water usage.

Monthly production

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 1 and phase 2, monthly. Click for larger version.
Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 1 and phase 2, monthly. Click for larger version.
The ASR system is able to draw water from the river only when the flow is above a certain level, which is not every day of the year. So we may want to take a look at how the ASR system performs for shorter periods of time. Monthly data is available.

For a 30-day month, if the plant could be run at full design capacity each day, the production would be 900,000,000 (900 million) gallons. The best month ever for actual production was 192 million gallons, with the second best at 120 million gallons.

If we take the 12 best months for production, including before ASR Phase II started operations, the amount of water recharged is 924 million gallons. That’s 49 percent of the revised expected annual production of 1.9 billion gallons.

The cumulative deficit

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative. Click for larger version.
Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative. Click for larger version.
I’ve produced a chart of the cumulative production of the Wichita ASR project compared with the original projections and the lower revised projections. The lines for projections rise smoothly, although it is expected that actual production is not smooth. The second phase of ASR was completed sometime in 2011, but no water was produced and recharged that year. So I started this chart with January 2012. Data is from U.S. Geological Survey.

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative from July 2013. Click for larger version.
Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative from July 2013. Click for larger version.
Some have said that since 2013 was a drought year, it isn’t fair to evaluate the production of ASR during a drought. So to present ASR in the best possible light, I’ve prepared a chart starting in July 2013. That was when it started raining so much we had floods, and data from USGS shows that the flow in the Little Arkansas River was much greater. Still, the ASR project is not keeping up with projections, even after goals were lowered.

The city and the “Yes Wichita” campaign say the ASR project is proven and is working. The available data, however, does not support this claim.

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase 2, cumulative. Click for larger version.

Has the Wichita ASR water project been working?

Here is the cumulative production of the Wichita ASR project compared with the original projections and the lower revised projections. The second phase of ASR came online sometime in 2011, but no water was recharged that year. So I started this chart with January 2012. Data is from U.S. Geological Survey. (Click chart for larger version.)

The city and the “Yes Wichita” campaign say the ASR project is proven and is working. Do you agree?

Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR Phase 2, Cumulative

ASR Phase II Program Overview Map

Wichita geologist sees problems with city water plan

The following was written by local geologist Karma Mason, who also serves on the State Water Board. What are the implications of moving forward with a rushed, poor plan? Mason explains what Wichita voters should consider as they vote in the proposed one cent per dollar sales tax. $250 million of the projected $400 million five-year sales tax is earmarked for a new water supply.

Over the past year, the city of Wichita has evaluated potential new water supply options. Recently, the city revealed enhancement of the aquifer storage and recovery project (ASR) as the preferred new supply. Although ASR enhancement may ultimately prove a viable option, there are still significant uncertainties.

First, a current state-level requirement prohibits the city from using any ASR-stored water should the Equus Beds become stressed during a drought.

Second, we have already spent more than $200 million on the ASR, and it has yet to significantly affect the amount of water stored in the Equus Beds.

Third, in a drought scenario (i.e., dust bowl), the Equus Beds will be over-utilized, resulting in accelerating the migration of the chloride plume to city supply wells. This likely will result in additional costs, beyond the proposed $250 million, to treat the chloride-containing water.

Fourth, there have been recent discussions at the state level about working with irrigators to lease their water rights to the city in a drought scenario, or even establishing a water bank for the area. These options could result in providing needed water in a dust bowl scenario at a much-reduced cost.

Finally, city representatives state that when using existing state guidelines for drought planning, Wichita already has adequate water for another 20-plus years.

Our community has an opportunity to work together to solve its long-term water needs. Fortunately, our current supply is adequate to allow more time for full evaluation of our options.

You, too, may be a Kansas budget analyst

kansas-policy-institute-logoTo help Kansans understand the options for future Kansas budgets, Kansas Policy Institute has produced a calculator that lets voters experiment with scenarios of their own making. Click here to view the calculator.

The work is based on KPI’s recent policy brief on the Kansas budget. The policy brief is just ten pages in length. It may be downloaded from KPI at A Five-Year Budget Plan for the State of Kansas: How to balance the budget and have healthy ending balances without tax increases or service reductions or alternatively from Scribd here (may work better on mobile devices). A press release from KPI announcing the policy brief is at 5 Year Budget Plan Outlines Path To Protect Essential Services and Tax Reform.

Water 32401

Wichita water rates seen as not encouraging conservation

Wichita water rates are about average for households using modest amounts of water. But households using a lot of water pay much less than average, leading us to wonder if Wichita could adjust its rates to encourage conservation and/or generate more revenue.

Data from a 2012 Black & Veatch survey of water and sewer rates in 50 large cities reveals an interesting characteristic of water rates.

Many cities have tiered water rates, where as a household uses more water, the marginal cost per gallon rises. This is the case in Wichita. Each household has its average winter consumption (AWC) as measured during the winter months. Presumably this is the water that is used for cooking, cleaning, flushing, bathing, and other indoor household needs. For Wichita city customers, for usage up to 110 percent of this value, or AWC, the rate is $1.77 per thousand gallons. For water used from 111 percent to 310 percent of AWC, the rate is $6.25 per thousand gallons. For use over this level, the rate is $9.13 per thousand gallons.

This means that water used inside the house — the presumed basis of AWC — has a low price in both winter and other seasons. But water used much above that value is more expensive. This is probably water used for swimming pools, irrigation of lawns, and other outside summer uses.

(The water usage is not the only cost that appears on Wichitans’ water bills. There is a minimum monthly charge and a charge for sewer service, and others.)

Water bills for different levels of usage. Average of 50 cities on top; Wichita on bottom. Click for larger version.
Water bills for different levels of usage. Average of 50 cities on top; Wichita on bottom. Click for larger version.
Back to the Black & Veatch survey. For the 50 cities in the survey, considering only the water portion of bills, the average cost for using 3,750 gallons per month is $19. For using 15,000 gallons, the cost is $65. That’s a ratio of 3.4 to 1.

For Wichita, the survey reported costs of $18 and $36, for a ratio of 2.0 to 1.

These are two important numbers: 3.4 and 2.0. They mean that while Wichita water becomes marginally more expensive as more is used, the slope is not nearly as steep as the average. It means that households that use low amounts of water pay about average rates, but those using a lot of water pay rates much less than average.

Does this mean that if Wichita is serious about conservation of water, that it could ramp up summer water rates more in like with other cities? It looks that way.

And would this provide the revenue the city says it needs to develop a new water supply?

Wichita plans and background sales tax cover

Is Wichita campaigning for the sales tax?

To pay for a new water supply, Wichita gives voters two choices and portrays one as exceptionally bad and unwise. This either-or fallacy created by the city is a form of campaigning for the sales tax in disguise.

In November Wichita voters will decide whether to create a sales tax of one cent per dollar. The largest intended purpose of the funds is to create a new water supply.

Set aside for a moment the question whether Wichita needs a new water source. Set aside the question of whether ASR is the best way to provide a new water source. What’s left is how to pay for it.

City of Wichita information on proposed sales tax
City of Wichita information on proposed sales tax
To pay for a new water source, the city gives us two choices: Either (a) raise funds through the sales tax, or (b) borrow funds that Wichitans will pay back on their water bills, along with a pile of interest.

As you can see in the nearby chart prepared by the city, the costs are either $250 million (sales tax) or $471 million (borrow and pay interest). The preference of the city is evident: sales tax. The “Yes Wichita ” group agrees.

Here’s what is happening. City hall gives us two choices. It’s either (a) do what we want (sales tax), or (b) we’ll do something that’s really bad (borrow and pay interest). Wichitans shouldn’t settle for this array of choices.

Are there other alternatives for raising $250 million for a new water source (assuming it is actually needed)? Of course there are. The best way would be to raise water bills by $250 million 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.

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. The benefit of having water users pay for a new water source is that water users will become acutely aware of the costs of a new water supply. That awareness is difficult to achieve. Many citizens are surprised to learn that the city has spent $247 million over the past decade on a water project, the ASR program. Almost all of that was paid for with long-term debt, the same debt that the city now says is bad.

Fog and tree

Wichita city hall doesn’t need a sales tax to burn off the fog

As Wichita voters consider promises of transparency and reporting regarding job creation, the city fails to make even the most basic information available.

In November, Wichita voters will consider whether to authorize a sales tax of one cent per dollar. Part of that would be used for economic development with the aid of creating jobs. The city promises a transparency in decision making and reporting of results regarding this jobs fund.

Material produced by the city on July 22 contains: “Decisions about who receives funding, the number of jobs, and the impact on community would be made in public meetings and tracked through a website. Reports would be made on a regular basis to elected officials.”

On its website, the “Yes Wichita” group promises that “Results will be measured and reported publicly.” Also, “Decisions and results are made in public meetings and transparent with website tracking results, investments and return on investment to community.”

In other words, sales tax boosters are promoting transparency and presentation of results.

The thing is, the city and its affiliated groups could be doing this right now if they wanted to. They could have been doing it for many years, if they had wanted to.

A specific example

Premier Processing is a company located in Wichita that received forgivable loans from both Wichita and Sedgwick County five years ago. The loans included clawback provisions calling for repayment of the loans if jobs targets were not met.

Unfortunately, the job targets were not met. Premier has repaid the loans to both governments. (I’ve requested further details from the city, such as whether the company paid the interest that the contract specified in case of default.)

Are you aware of this news? It’s not likely that you are aware, as neither Sedgwick County or the city made this information public. But this is the type of information the city and “Yes Wichita” promise will be available in the future.

It’s true that the city doesn’t have a fancy website on which to report these results. But that isn’t needed right now. If the city is truly interested in reporting results to citizens, it could have written a simple press release. Two or three sentences is all that’s needed. The city could have dictated these sentences to a newspaper or television reporter. This is not difficult. It would cost next to nothing.

But the city didn’t do that. Instead, someone tipped me, and I asked. If not for that, we would not know. This is the culture at Wichita city hall.

"Yes Wichita" campaign headquarters, located in a building that received a sales tax exemption.

In Wichita, pro-sales tax campaign group uses sales tax-exempt building as headquarters

While “Yes Wichita” campaigns for higher sales taxes, it operates from a building that received a special exemption from paying sales tax.

Many Wichitans remember the building at the northwest corner of First and Market Streets as the Kansas Gas and Electric Building. Today, under new ownership, it’s being converted to luxury apartments under the name “The Lux.”

“Yes Wichita” campaign headquarters, located in a building that received a sales tax exemption.
“Yes Wichita” campaign headquarters, located in a building that received a sales tax exemption.
The new owners of The Lux felt that they shouldn’t have to pay sales tax on things they purchase (like construction materials) while renovating the building. So they approached the city. On October 2, 2012 the city granted their request and initiated the process whereby The Lux will avoid paying sales taxes.

Fast forward two years. Now there’s a proposal to add one cent per dollar to the sales tax in Wichita. A group named “Yes Wichita” formed to promote the higher sales tax.

When “Yes Wichita” — a group that campaigns for you to pay higher sales taxes on nearly everything from baby formula to automobiles — needed campaign headquarters, do you know where it decided to locate?

That’s right. In The Lux, a building that does not have to pay sales tax on materials used in its conversion to luxury apartments.

Really. I’m not kidding.

Business at Full Throttle 2013 - 2017

Voter support of taxpayer-funded economic development incentives

In a poll, about one-third of Wichita voters support local governments using taxpayer money to provide subsidies to certain businesses for economic development.

In April Kansas Policy Institute commissioned SurveyUSA to conduct a scientific poll concerning current topics in Wichita. The press release from KPI, along with a link to the complete survey results, is available at Poll: Wichitans don’t want sales tax increase.

The second question the survey asked was “In general, do you agree? Or disagree? With the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development?” Following are the results for everyone, and then divided by political party and political ideology.

Overall, 55 percent disagreed with using taxpayer money to provide subsidies to certain businesses for economic development. 34 percent agreed.

The results are fairly consistent across political party and ideology, although Republicans are somewhat more likely to agree with using taxpayer funds for economic development incentives, as are those who self-identify as political moderates.

kansas-policy-institute-2014-04-q02-01

kansas-policy-institute-2014-04-q02-02

kansas-policy-institute-2014-04-q02-03

Wichita City Hall

For Wichita, another economic development plan

The Wichita City Council will consider a proposal from a consultant to “facilitate a community conversation for the creation of a new economic development diversification plan for the greater Wichita region.” Haven’t we been down this road before?

This week the Wichita City Council will consider funding “the formulation of a new economic development strategy.” Here’s a summary provided by the city:

Wichita State University approached STARNet about developing a proposal to assist WSU, the Wichita Metro Chamber of Commerce and the community with the formulation of a new economic development strategy. Over a period of almost ten months STARNet will manage a four phase process that will lead to an integrated economic development strategy that will prioritize how and where to deploy resources. The process will include a comprehensive review of the region’s assets and issues, development of a common vision, identification of priorties [sic] and egagement [sic] of stakeholders committed to strategy implementation.

Starnet proposal to Wichita City CouncilIt sounds from this as though the city has not been engaging in economic development and strategizing. This reminds me of the $658 million in tax abatements Boeing received over several decades. Wasn’t that economic development? The answer from pro-sales tax forces was no, that wasn’t paid in cash. Also, even though Boeing has left Wichita, the facilities still generate $6 million in property taxes. So, it really worked after all, they say.

(The tax abatements Boeing received were more valuable to the company than equivalent grants of cash. See What Boeing received from Wichita was better than cash.)

Here’s something else from the proposal summary: “Project Objective: Support formulation of a Wichita Economic Development Strategy that integrates existing initiatives (e.g. GWEDC and WSU); is supported by the majority of regional stakeholders and can be used to guide policy discussions for use of new City/County revenues for job formation.” (emphasis added)

I thought we already had a plan for the sales tax revenue, according to the city and the “Yes Wichita” group. Now we are told we need to start an expensive and lengthy planning process?

What about the cost and funding? “The total estimated cost of the project is $234,929. Funding partners include WSU, Wichita Metro Chamber of Commerce, Greater Wichita Economic Development Coalition, Wichita Downtown Development Corporation, the City of Wichita and Sedgwick County. The City of Wichita is being asked to contribute an amount not to exceed $42,986. The funding partners will have an agreement with WSU who, in turn, will hold the contract with STARNet.”

Here is the first thing that will be done, according to the proposal: “Secure Co-chairs to Lead Initiative: This regional initiative begins with the designation of at least two or more high level, objective, economic leaders agreeing to co–chair the on–going initiative. The co-chairs are often effective when chosen from an existing regional development group.”

Wichita Chamber Leadership CouncilThis is written as through Wichita has been doing nothing in this regard. I wonder what the leaders of the Wichita Metro Chamber Leadership Council thinks of this? Here’s what the Chamber says about this council:

The Leadership Council is a think tank comprised of 100 top business, non-profit and public-sector CEO’s for the purpose of discussing and pursuing resolutions of major issues or projects to make the Wichita area competitive for job creation, talent attraction, capital investment and therefore long-term economic prosperity. Created by the Wichita Metro Chamber of Commerce, the Council is co-chaired by Charlie Chandler (Intrust Bank Chairman and CEO) and Jeff Turner (retired CEO of Spirit AeroSystems). The Council was formed in 2012 and held its first meeting in September of the same year.

So we’ve had two prominent Wichita business leaders shepherding an initiative for two years. Is this effort now discarded?

Here’s something to watch for. Proposals like this contain buzzwords — something new and exciting, something that leaders can use to show they’re on the cutting edge. So note this language in the proposal:

Moreover, economies don’t stop at municipal or county boundaries; they go where their residents drive to work—the “comutershed”. (Misused punctuation in the original.)

I wonder when city leaders start using this neologism — comutershed — if they will correct the spelling of one of its base words.

I urge taking a look at the proposal. The agenda packet is here: Wichita City Council, October 14, 2014.

school-blackboard-56661

Kansas school spending updated for 2014

Updated figures for Kansas school spending are now available from the Kansas State Department of Education.

Kansas school spending per student, adjusted for CPI, 2014
Kansas school spending per student, adjusted for CPI, 2014
In actual dollars, state aid rose from $3,198,060,481 for the school year ending in 2013 to $3,267,998,852 for the current year. Total spending rose from $5,852,470,791 to $5,975,517,681 for the same years. Enrollment rose by 3,192 full-time equivalent students.

On a per-student basis, state aid rose from $6,984 to $7,088, and total spending rose from $12,781 to $12,960.

Kansas school spending per student, compared to base state aid, adjusted for CPI, 2014
Kansas school spending per student, compared to base state aid, adjusted for CPI, 2014
Nearby charts show the trends in Kansas school spending after adjusting for inflation using the consumer price index. For the past several years, spending per pupil (adjusted for inflation) is largely flat. (Click charts for larger versions.)

Of interest is the role of base state aid per pupil. This is the starting point for the Kansas school finance formula. As can be seen in the chart, this value has declined over the years, after adjusting for inflation.

Kansas school spending per student, ratio of state aid per pupil to base state aid per pupil, 2014
Kansas school spending per student, ratio of state aid per pupil to base state aid per pupil, 2014
The school finance formula contains many adjustments and weightings that are applied to determine total state funding. As can be seen in the same chart, this value has been on a rising trajectory over the past two decades (adjusted for inflation), although its rise has not been steady.

As we can also see, nearly two decades ago base state aid was nearly the same value as total state aid. But over the years total state aid has risen faster than base state aid has fallen. For the school year just ended, total state aid per pupil was 1.85 times base state aid per pupil.

Hand credit card debt

Wichita debt levels seen to rise

As part of the campaign for a proposed Wichita sales tax, the city says that debt is bad. But actions the city has taken have caused debt levels to rise, and projections are for further increases.

According to the most recent edition of Wichita’s Performance Measure Report, the city’s debt levels are projected to rise, based on three measures.

Click for larger version
Wichita Outstanding Net General Obligation Debt as a Percentage of Assessed Value
One measure, named “Outstanding Net General Obligation Debt as a Percentage of Assessed Value,” is projected to rise. From 2007 through 2011, the average value for this measure was 1.50 percent. Since then its actual value has risen, and the city projects it to continue to rise, reaching 3.59 percent in 2015 and then 3.44 percent in 2016. (Click charts for larger versions.)

Describing this measure, the city document explains “The level of outstanding debt as a percentage of assessed valuation is based on currently anticipated debt needs of the 2011-2020 Adopted Capital Improvement Program. The percentage is expected to increase as additional debt financing projects are implemented.” (emphasis added)

In “Factors impacting outcomes,” the city explains “Slow assessed valuation growth coupled with increasing debt will lead to an increase in this measure.” (emphasis added)

Wichita Outstanding Gross General Obligation Debt per Capita
Wichita Outstanding Gross General Obligation Debt per Capita
Another measure is “Outstanding Gross General Obligation Debt per Capita.” From 2007 to 2009 the average value was $1,216. It has risen since then, although not steadily. The value is projected to peak at $1,626 in 2015 and then fall to $1,610 in 2016.

City documents explain: “Slow population growth coupled with increasing debt lead to an increase in this measure.” (emphasis added)

Wichita Outstanding General Obligation Debt Service as a Percentage of Debt Service Fund Taxes Levied
Wichita Outstanding General Obligation Debt Service as a Percentage of Debt Service Fund Taxes Levied
Another measure is “Outstanding General Obligation Debt Service as a Percentage of Debt Service Fund Taxes Levied.” This measure is projected to rise to over twice its recent low value of 30 percent in 2009 to 64 percent in 2015 and 2016.

The performance report describes this measure as “… outstanding General Obligation debt divided by taxes levied by the Debt Service Fund.” Its importance is this, says the city: “This is a measure of flexibility; if the percentage is lower, there are more future opportunities to initiate projects paid for with bonds.”

The document also explains: “In the past, the City of Wichita’s borrowing needs have been lower because more projects were paid for with cash, rather than bonds.” Additionally, “Anticipated debt issuances will increase, based on programmed CIP improvements.”

Business records file folders

In Wichita, promises of accountability and transparency

Boosters of the proposed Wichita sales tax promise transparency. But Wichita has not delivered on that in the past, and still rebuffs the public’s 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.


Wichita City Council Member Pete Meitzner does not support the public’s right to know how taxpayer funds are spent.

Why is this important? Supporters of the proposed Wichita sales tax promise transparency in operations and spending, especially regarding the jobs fund. But requests for spending records by the city’s quasi-governmental agencies are routinely rebuffed. Simple requests for contracts without outside entities are rejected. The city supports this refusal to comply with the Kansas Open Records Act.

Here are some things voters may want to consider as they evaluate promises of future transparency and accountability:

  • 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.
  • The city council seems pleased with city manager Robert Layton. He has not advocated for citizens’ right to know how taxpayer money is spent despite being presented with compelling reasons why the city should act to increase transparency.
  • The Kansas Open Records Act does not prohibit the city and these agencies from releasing spending records. The city and agencies have made this decision, and have spent taxpayer resources fighting against the release of spending records.
  • If the city and its quasi-governmental agencies are serious about accountability and transparency, they could release the requested records today.
  • The city is unable to provide spending records in computer-readable form except for images. This data is not readily usable.
  • One of the co-chairs of the “Yes Wichita” group, Harvey Sorensen, has been a vigorous defender of government’s ability to spend taxpayer funds in secret, telling the city council that advocates for transparency simply want to embarrass the city, and there is no public purpose for their requests.

Given this background, on what basis do we believe that the city and its agencies will change their attitude towards citizens’ right to know how taxpayer funds are spent?

If the city wants to convince citizens that it has changed its attitude towards government transparency and citizens’ right to know how tax money is spent, it could positively respond to the records requests made by myself and Kansas Policy Institute.

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 Budget Cover, 1990

Wichita voters’ opinion of city spending

As Wichita voters prepare to decide on the proposed one cent per dollar sales tax, a recent survey found that few voters believe the city spends efficiently.

Wichita City Budget Cover, 1990In April Kansas Policy Institute commissioned SurveyUSA to conduct a scientific poll concerning current topics in Wichita. The press release from KPI, along with a link to the complete survey results, is available at Poll: Wichitans don’t want sales tax increase.

The first question the survey asked was “In the past few years, have Wichita city officials used taxpayer money efficiently? Or inefficiently?” Following are the results for everyone, and then divided by political party and political ideology.

Overall, 58 percent believe city spending was inefficient, compared to 28 percent believing spending was efficient.

The results are surprisingly consistent. An exception is that political independents strongly believed that city spending was inefficient. Those identifying as liberal were more likely to say that city spending was inefficient.

kansas-policy-institute-2014-04-q01-01

kansas-policy-institute-2014-04-q01-02

kansas-policy-institute-2014-04-q01-03

While Wichita asks for new taxes, it continues to spend and borrow

The City of Wichita says it doesn’t have enough revenue for things like street maintenance and transit, but continues to borrow for spending on new projects.

The City of Wichita is asking voters to approve a sales tax of one cent per dollar. Part will be used to bolster areas of spending where the city admits not spending enough: Street maintenance and transit. (These shortfalls are based on the city’s goals.)

The city says it does not have enough revenue to pay for these items. But voters need to know that the city continues to spend on new things. In fact, it borrows quite a bit to finance new things.

As an example, last month the city issued $368 million in bonded debt. Part — about half — was to refinance short-term bonds. The other half was new debt.

Here’s something listed as what the city paid for with part of the bond proceeds: “Douglas and Hillside Redevelopment, $3,685,000.00.” The new intersection is nice, although the previous version wasn’t bad.

To relate this to the proposed sales tax Of the funds the sales tax is projected to raise over five years, $27.8 million is allocated for street maintenance and repairs. That’s $5.6 million per year to be spent in addition to what the city has already planned to spend.

So to reconstruct just one intersection, the city spent two-thirds of the dedicated portion of the sales tax for streets.

WaterWalk Place in downtown Wichita, September 30, 2014
WaterWalk Place in downtown Wichita, September 30, 2014
Here’s what voters need to keep in mind. The city claims it doesn’t have enough revenue to pay for the upkeep of streets — the streets that taxpayers have already paid for. But the city borrows money for new projects like this and many others. Then, the city tells us it doesn’t have enough money to maintain what we already have, and voters need to pass a sales tax.

By the way, how do you feel about the progress of the WaterWalk development in downtown? There’s not much going on there. Here’s how much the city borrowed to spend on that project, according to the bond documents: “WaterWalk – Eastbank Development, $7,145,000.00″

Moving Wichitans in the Future: Paving and Transit Via Sales Tax?

From Kansas Policy Institute, the third and final free conference examining issues related to the proposed one cent per dollar Wichita sales tax. Voters will decide on this in November.

Moving Wichitans in the Future: Paving and Transit Via Sales Tax?

A free event on Thursday October 23, 2014 from 7:30 am to 11:00 am

A review of the paving and transit portions of the proposed 1% sales tax in the City of Wichita.

Full Agenda and Speaker Line-Up

8:00 a.m. — Summary of Urban Transportation: Wendell Cox, author and international transportation consultant

9:00 a.m. — Details of Wichita Plan: Alan King, director of Wichita Public Works, and Steve Spade, director of Wichita Transit

10:00 a.m. — Reform Ideas From Around The Country: Len Gilroy, Director of Government Reform at the Reason Foundation

KPI is not taking a position on the larger sales proposal or its component pieces. KPI is hosting these events featuring multiple expert opinions on the underlying policy pieces in an effort to present Wichitans with a variety of views. A July event covered the water proposal and the “jobs fund” was reviewed in September.

The event will be held at the WSU MetroPlex, Room 185
5015 E. 29th Street North

Wichita City Hall 2014-08-05 11

Water options for Wichita

There are solutions to the Wichita water shortage (to the extent it exists) that originate outside city hall. Dr. Art Hall of KU explains in this excerpt from WichitaLiberty.TV. View below, or click here to view at YouTube. Originally broadcast September 28, 2014. For more on this topic see:

Water, economic development discussed in Wichita and For Wichita leaders, novel alternatives on water not welcome.

Where is Duane Goossen, former Kansas budget director?

From Kansas Policy Institute.

Duane Goossen hides from honest scrutiny … again

By Dave Trabert

Former state budget director Duane Goossen published a scathing review of the KPI 5-Year State Budget Plan a few days ago on his blog, so I wrote and asked if he would join Steve Anderson and me for a public discussion of the facts and issues. He ignored our invitation for civil discussion, just as he did when we explained how he distorted the truth about education finance.

Duane Goossen
Goossen claims we made an $802 million math error and tries to fool unsuspecting readers by saying we didn’t account for all of what is purported to be a $1.3 billion shortfall.  We didn’t account for it because there is no $1.3 billion shortfall!

As we explained in How Budget Deficits are Fabricated in Kansas, Kansas Legislative Research Department (KLRD) counts budget changes multiple times in arriving at what they call a $1.3 billion shortfall.  Once money is cut from the base budget … it’s gone. It doesn’t have to be cut again every year into the future.

According to KLRD, the spending adjustments needed to maintain a zero ending balance total $482.3 million over five years.

In order to get to $1.3 billion, one must count the FY 2016 change FOUR times … the FY 2017 change is counted THREE times … the FY 2018 change is counted TWICE … and only the FY 2019 change is counted once.

Goossen also mischaracterizes several proposed uses of excess cash reserves as “cuts” to transportation and education. As clearly explained in our Budget Plan, we are proposing that a KDOT surplus of $150 million be returned to the General Fund and that sales tax transfers to KDOT be reduced so that future surpluses are not created. We suggest that school districts and universities be required to use a portion of excess cash reserves, allowing education funding to reduced one time while excess funds are spent down.

He also falsely claims we are recommending a $100 million cut to the Kansas Bioscience Authority, when our plan merely suggests funding KBA at the same amount it received in 2014. The budget savings comes about by removing a statutory set-aside of $25 million per year that isn’t planned to be spent.

These are just some of the outlandish claims made by Goossen, which probably explains why he ignores invitations to have a civil public discussion of the facts.  He has nothing to gain and everything to lose.

Our budget plan shows multiple options to balance the budget without service reductions or tax increases…healthy ending balances…increased funding for education and Medicaid…and record-setting spending overall.  But media won’t even look at the plan and others are spreading false claims about it.

Kansans are being inundated with the false choice of tax increases or service reductions … all for political gain.

Legal publications in the Wichita Eagle, occupying nearly the entire page.

A simple step towards government transparency in Wichita

Kansas law requires publication of certain notices in newspapers, but cities like Wichita could also make them available in other ways that are easier to use.

Legal publications in the Wichita Eagle, occupying nearly the entire page.
Legal publications in the Wichita Eagle, occupying nearly the entire page.
Do you read the legal publications in your local newspaper? Often they are lengthy. Many pertain to just one person or company. All are supplied using ink expressed as fine print on the chemically processed flesh of dead trees.

But some legal publications are important and of interest to the general public.

Kansas law requires that many legal notices must be printed on a newspaper. That law needs to be changed. As you might imagine, newspapers resist this reform, as it might mean a loss of revenue for them. (That’s right. Newspapers don’t print these notices as a public service.)

Although the law requires publishing notices in a newspaper, it doesn’t prohibit publishing them in electronic form. If governmental agencies would make their legal publications available in ways other than the newspaper, citizens would be better served.

This would be easy to do. It would be quite inexpensive. The material is already in electronic form. The notices would become searchable through Google and other methods. Government transparency would increase. Interested parties could capture and store notices this material for their own use. Once people get used to this method of publication, it will make it easier to get state law changed.

So why doesn’t the City of Wichita (and Sedgwick County and the District Court) post their legal notices on their websites?

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