Tag Archives: Carl Brewer

Wichita Mayor Carl Brewer

WichitaLiberty.TV February 2, 2014

In this episode of WichitaLiberty.TV: A Kansas college professor claims that college costs are rising only a tad faster than inflation. We’ll take a look at the actual numbers. Then, this week Wichita Mayor Carl Brewer delivered the annual State of the City address. A few things deserve comment. Episode 30, broadcast February 2, 2014. View below, or click here to view at YouTube.

The state of Wichita, 2014

Wichita city hall

Wichita Mayor Carl Brewer delivered the annual State of the City address. He said a few things that deserve discussion.

This week Wichita Mayor Carl Brewer delivered his annual State of the City address. We expect a certain amount of bragging and over-the-top community pride, things like “Wichita is the BEST place to work and raise a family!” That’s good, to a point. Because if we take these boasts seriously, and if they are not based on factual information, then we have a problem. We may believe that everything is fine in Wichita. But if the actual state of the city is otherwise, we may take unwise action that ultimately is harmful.

(While the city took prominent measures to promote the mayor’s speech, so far the text has not been made available on the city’s website. But you may click here to read it.)

Here’s an example, and perhaps the most important. The mayor said “Our community partnerships have helped us overcome the challenges of the great recession — which brought layoffs to many sectors of our economy.” But the problem is that we haven’t overcome the recession.

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If we take a look at job growth in Wichita over the last two decades, we see Wichita performing very poorly. That’s not only on an absolute basis, but relative to our self-chosen peer cities. The relative part is important, because the recession was nation-wide. All cities suffered. Note that there are a few cities over which Wichita ranked higher: Springfield, Illinois, and Wichita Falls, Texas. These cities are relevant because we recently hired people from these cities to lead our economic development efforts.

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I’ve shown data like this to the city council. I don’t think they believed me. I can understand their reluctance, as it’s not easy to admit things like this. Few like to admit failure. But that doesn’t excuse a reluctance to face facts. I also believe that some council members think that city hall critics take joy in presenting these figures. At least for me, that’s not true. I realize that these statistics tell a story of human hardship. So for those who don’t believe or trust my research, here’s a chart prepared by the Wichita Metro Chamber of Commerce for a presentation to its leadership committee. It uses a different time frame and a slightly different set of peers for comparison, but the results are the same: Wichita lags behind in terms of job growth.

Greater Wichita Economic Development Coalition

Despite this evidence, the mayor thinks we’re doing well, and he is proud of our economic development efforts. In his address, he told the audience this: “For the past five years — the Greater Wichita Economic Development Coalition has helped generate nearly 10,000 jobs and more than 400 million in capital investment.”

That sounds like a lot of jobs. But we have to temper that number. We know that we don’t update our job statistics to reflect jobs that didn’t last for very long. We also must realize that some of these jobs would have been created without the involvement of our economic development agencies. We also must realize that these economic development efforts have a cost, and that cost is harmful to our economy and job creation.

But even if we give our economic development agencies sole credit for these 10,000 jobs, let’s apply a little arithmetic to provide some context. The Bureau of Labor Statistics tells us that the labor force in the Wichita Metropolitan area is about 302,000 people. that number, by the way, has been declining since 2009. If we take the 10,000 jobs — recognizing that was for five years — that averages to 2,000 jobs per year. That’s in the neighborhood of six percent of the labor force.

Does that represent a significant factor in the Wichita area economy? Remember, that calculation gives government more credit that it deserves. When we combine this with Wichita’s lackluster performance in creating jobs compared to our peers, I really don’t think we should be proud of our government’s economic development efforts.

In his State of the City Address, Wichita Mayor Carl Brewer also said we need to “continue to diversify our economy.” But we’re not doing that. Our economic development programs heavily favor the aviation industry, which makes it more difficult for aspiring companies in other diverse industries to start and thrive.

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The mayor told the audience that “We will also continue to support our successful affordable airfares program.” This is the program whereby Wichita and the state of Kansas pay a discount airline to provide service in Wichita. It was AirTran, but is now Southwest. It is thought that if one airline has low fares, others will reduce their fares to match. That’s probably the case. But I’ve done the research, and there is another effect. As can be seen in the nearby chart, the number of flights and the number of available seats is declining in Wichita. These measures are also declining on a national level, but they are declining faster in Wichita than for the nation.

The mayor also asked for cooperation in using Southwest Airlines, advising the audience: “So when you make your corporate travel plans, please remember our community’s commitment to supporting low-cost carriers.” Well. How would you feel if you worked for one of our air carriers that don’t receive a subsidy, such as American, United, and Delta? How would you feel if you owned stock in one of these airlines, as does nearly everyone who holds broad-based index funds in their retirement or investment accounts?

In the past, the subsidized discount carrier has carried around ten percent of Wichita’s passengers. So we are vitally dependent on the legacy, or major, airlines, and we don’t need to insult them, as I believe the mayor did.

(To help you explore Wichita airport data, I’ve created an interactive visualization. Click here to open the visualization in a new window. You may add or remove any number of airports. Or, if you’d like to watch a video, click on Wichita Airport statistics: The video.)

Water was another topic that the mayor touched on. He told the audience: “The city has also invested in the second phase of the aquifer storage and recovery project known as ASR. New construction was completed in time to help with the drought. More than 100 million gallons were diverted from the little Arkansas River directly to customers.” 100 million gallons sounds like a lot of water. But what is the context? Well, 100 million gallons is about how much water we use on a single hot summer day.

And what about the ASR, or aquifer storage and recovery program? Its cost, so far for Phases I and II, is $247 million. Two more phases are contemplated. Despite this investment, and despite the plan’s boasts, Wichitans were threatened with huge fines for excessive water usage. The Wichita City Council also started a rebate program so that citizens were forced to pay for other people to buy low-water usage appliances. Expensive city decorative fountains were dry for a time.

Why were these measures necessary? A document created in March 2013 — that’s just as Wichita realized the city was running out of water — is titled “Wichita Area Future Water Supply: A Model Program for Other Municipalities.” It states: “In 1993 the Wichita City Council adopted an Integrated Local Water Supply Plan that identified cost effective water resources that would be adequate to meet Wichita’s water supply needs through the year 2050.” This squares with what former mayor Bob Knight recently told the Wichita Pachyderm Club, that when he was in office, Wichita had sufficient water for the next 50 years. He was told that about 10 years ago.

Just to give you an idea of how seriously we should take the claims made in speeches like this, here’s what the mayor told us in his 2009 State of the City Address: “We will continue work on the state-of-the art water supply system, known as the ASR project. It will provide the Wichita area with sufficient water for the next 50 years. Economic Development is not possible without an adequate water supply.” The mayor’s right. We need an adequate water supply. But it appears that despite huge expense and the boasts of city officials — including the mayor — we don’t have a secure water supply.

The mayor also addressed transit. He asked the community to answer a few questions, such as:

Should we have more stops to drop off and pick up riders?
Should we run later hours during the week and on the weekends?
Should we find new partners to extend our service area and help with costs?

The problem with questions like these are that citizens don’t have all the information needed to make an informed answer. Would we like to have more bus service? Who could answer no to such a question?

But if the mayor had told us that the cost per passenger mile for Wichita transit buses is 95 cents, or that only 30 percent of the operating costs are paid by fares, people might answer these questions differently. (That 30 percent would be lower if we included the cost of capital, that is, the cost of the buses.) And when the mayor asked citizens to weigh in at the Activate Wichita website: I looked, and there’s no topic for transit.

But even if citizens were informed of these costs, their answers are still not fully reliable. That’s because of the disconnect between the payment for the service and the actual bus service. Because so much of the cost of providing bus service is paid for someone else, we don’t really see the total cost of a bus trip. That’s often a problem with services provided by the government. Since someone else is paying, there’s not the same concern for receiving value as there is when people spend their own money.

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The Activate Wichita website, by the way. When citizens are asked to rate ideas, to express their approval or — well, that’s the problem. Your choices for voting on an idea are: “I Love It!” … “I Like It!” … “It’s OK.” … “Neutral.” That’s it. There’s no voting option for expressing disagreement or disapproval with an idea. “Neutral” is as much dissent as Wichitans are allowed to express in this system. On this system that city leaders say they rely on for gathering citizen input, there needs to be a voting selection that expresses disagreement or disapproval with an idea. Otherwise when votes are tallied, the worst that any idea can be is “neutral.” City planners may get a false impression that all these ideas a fine and dandy.

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On the topic of citizen involvement: The mayor also told us this: “A few weeks ago – the city launched the Office of Community Engagement.” That’s something that the city needs, based on data the city has gathered. The Wichita Performance Measures Report holds some data from a survey called the National Research Center National Citizen Survey. Survey respondents were asked to rate “the job Wichita does at welcoming citizen involvement.” The results are shown in the nearby chart I created from data in the most recent version of the Wichita Performance Measure Report. The numbers are the percent of respondents giving “excellent” or “good” as their response to the question. The values for the last three administrations of the survey are between 35 percent and 39 percent. The report says this performance is “much below” a benchmark set by the National Research Center. The report tells us that the city expects to re-survey citizens in 2014. For that year, the city has given itself the lofty target of 40 percent of citizens rating the job Wichita does at welcoming citizen involvement as excellent or good. Maybe an Office of Community Engagement will help.

Last year the city conducted an extensive survey of residents. Of this survey, the mayor said: “We learned that more than 70% of our residents are willing to rise above their personal interests to do what’s best for the community.”

The problem with this is that it relies on the false concept of a conflict between personal interests and what is good for the community. In the marketplace, which is the opposite of government, people advance their self-interest in one legitimate way: By finding out the goods and services that others want, and then providing them. If you can do this well and efficiently, you can earn profits. It’s the quest for profits — that’s self interest — that drives people to figure out what others want, and then to work hard to provide that. Everyone benefits.

This quest for profits could, and should, apply to areas that are under the control of government. But people are so afraid that someone will earn a profit by serving their fellow man. Recently John Stossel spotlighted a park in New York City that is run by a private corporation with the aim of earning a profit. People are happy with the new park. They feel safe, even though the park doesn’t discriminate and still lets homeless people stay there. There’s commerce going on, selling food, for example. People like that, and evidence of that is the profit being earned. But Stossel’s guest was critical and unhappy because someone was earning a profit, even though park patrons were happy with the park and most were unaware of its private sector operation.

So when the park was operated by the city — for the common good, that is — not many people used it. It was dirty and trashy, and people didn’t feel safe. Under the profit motive, people like the park and they use it. So where is the conflict between personal interest and what is good for the community?

Now, not everything government does is bad. But when government dabbles in areas that the private sector can do very well, we see problems. As an example, the city wants to help real estate developers, but the city handled a recent situation so badly that the mayor apologized in his address, saying “We are also taking steps to ensure we have integrity and openness when we solicit proposals for development in the core area.”

Citizens that pay attention at city hall also note there are several small groups that contribute heavily to campaigns. Then the mayor and council members vote to give financial benefits to these people. These are not isolated incidents. This behavior is repeated over and over. Some cities have laws against this type of behavior. But in Wichita, while we’re being encouraged to put “what is good for the community” above our personal self-interest, we see city hall run over by cronyism. That is, by people using city government for their own interests. In the name of the “common good,” of course.

At the end of his speech, the mayor asked citizens to “get into the game,” saying: “We need you to be a player — not a spectator — to win a better and brighter tomorrow.”

But we’ve seen what happens when people want to be involved, but not in the way the mayor and council want. Do you remember the chart of airport data? Last year I presented that information to the city council. It so happened that Sedgwick County Commissioner Karl Peterjohn had appointed me to the Airport Advisory Board, and later in that same meeting the city council voted on my appointment. I was rejected. Only one council member voted in my favor. The Wichita Eagle reported: “Mayor Carl Brewer was clear after the meeting: The city wants a positive voice on the airport advisory board, which provides advice to the council on airport-related issues.” A positive voice is more valued than a critical voice, it seems.

Council members shall refrain 01

You may also remember how Susan Estes of Americans for Prosperity testified at a meeting of the Wichita City Council. She cited a section of the Wichita City Code that says council members shall refrain from making decisions involving, among other things, friends and business associates. She asked the mayor to observe that part of the city code. But the mayor lashed out at Estes and others and threatened a lawsuit.

At least this year the mayor didn’t mention the importance of open and transparent government, as he usually does. Because based on Activate Wichita — where there is no disagreement allowed, to rejecting board appointments simply because someone might be critical of the city’s programs, to threatening those who ask the mayor and council members to follow the laws that they passed, to the city’s hostile attitude towards the citizen’s right to know: The message we get is this: The city welcomes your involvement, but only up to a point. Question the authority, and you’re not welcome.

That’s the state of Wichita government, that government to be distinguished from the many wonderful people who live here. We can be thankful for the difference.

For Wichita’s economic development machinery, failure

Delano Clock Tower, WichitaCompared to a broad group of peer metropolitan areas, Wichita performs very poorly. As Wichita embarks upon a new era of economic development, we need to ask who to trust with this important task.

The good news: In a recent op-ed, Wichita Mayor Carl Brewer wrote that the city needs to make a decision regarding “A more aggressive approach to job creation.” (Carl Brewer: Wichita can have a great next year, December 22, 2013 Wichita Eagle)

The bad news: Wichita has performed very poorly in job creation in recent decades, and even if we decide on a more aggressive approach, pretty much the same crew is in charge.

Many in Wichita don’t want to recognize and confront the bad news about the performance of the Wichita-area economy. Last year, when presenting its annual report to local governmental bodies, the leaders of Visioneering Wichita would not present benchmark data to elected officials.

Some, however, have recognized the severity of the problem. In 2008 Harvey Sorensen, who has been chair of Visioneering Wichita, chair of the Wichita Metro Chamber of Commerce, and has held other civic leadership positions, wrote in the pages of the Wichita Eagle: “We are losing ground competitively with our peer communities.” (Community Needs a Common Vision, August 24, 2008 Wichita Eagle)

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So what is the record of the Wichita metropolitan area regarding job creation, that seeming to be the most popular statistic our leaders cite and promote? I’ve prepared statistics from the Bureau of Labor Statistics, U.S. Department of Labor for Wichita and a broad group of peer cities. I included our Visioneering peer cities, cities that Visioneers traveled to on official visits, and a few others. The result, shown nearby, is not pretty. (Click on charts for larger versions, or click here to use the interactive visualization)

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If we look at job creation starting in 1990, Wichita lags behind our Visioneering peers, but not behind all the peer cities that I selected. Wichita does better than Springfield, Illinois, for example. I chose to include that as a peer metropolitan area because that’s the immediate past city that Gary Plummer worked in. He was president of that city’s Chamber of Commerce, and is now president of the Wichita Chamber. Note the position of Springfield: Last place.

In next-to-last place we see Wichita Falls, Texas. I chose to include it because it is the immediate past home of Tim Chase. He was the head of Wichita Falls Economic Development Corporation. He’s now president of Greater Wichita Economic Development Coalition, the primary organization in charge of economic development for the Wichita area.

In second-to-last place we see Pittsburgh, which I added because Visioneering leaders recently made a visit there.

Then, we come to Wichita.

If we look at job creation since 2007, the year before Sorensen wrote his op-ed, we find Wichita in a common position: Last place in job creation, and by a wide margin except for two cities. One is Wichita Falls, where our present GWEDC president recently worked. The other city that barely out-performs Wichita is Chattanooga, which I included because Visioneering civic leaders recently traveled there to learn from that city.

Over the decades in which Wichita has performed poorly, there have been a few common threads. Brewer has been council member or mayor since 2001. Economic development director Allen Bell has been working for the city since 1992. City Attorney Gary Rebenstorf has served for decades. At Sedgwick County, manager William Buchanan has held that position for more than two decades. On the Sedgwick County Commission, Dave Unruh has been in office since 2003, and Tim Norton since 2001. It is these officials who have presided over the dismal record of Wichita.

Wichita City Manager Robert Layton has had less time to influence the course of economic development in Wichita. But he’s becoming part of the legacy of Wichita’s efforts in economic development.

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These leaders often complain that Wichita does not have enough “tools in the toolbox” to compete with other cities in economic development. Wichita does, however, have and use incentives. The State of Kansas regularly offers incentives so generous that Kansas business leaders told the governor that they value these incentives more than they would value elimination of the state corporate income tax.

Incentives: We have them. They haven’t worked for us.

It is nearly certain that this year Wichitans will be asked to approve a higher sales tax in order to pay for many things, including the more aggressive approach to job creation that Brewer mentioned. Based on the track record of our elected officials and bureaucrats, we need to do this: Before approving the tax and expenditures, Wichitans need to take a long look at the people who have been in charge, and ask what will be different going forward.

WichitaLiberty.TV January 5, 2014

In this episode of WichitaLiberty.TV: A look back at a few problematic issues regarding ethical government in Wichita in 2013. Topics include: Campaign contributions, the timing of city and school board elections, Mayor Carl Brewer’s integrity and threats, the need for campaign finance reform, the firing of a television news reporter, the apparently non-transparent way the city formulates policy, and the useless feedback systems the city relies on. Episode 26, broadcast January 5, 2014. View below, or click here to view at YouTube.

Wichita’s policymaking on display

Wichita city hall logo

When asked to provide documents that establish the city’s proclaimed policy, Wichita city hall is not able to do so, leaving us to wonder just how policy is made.

At an April meeting of the Wichita City Council, both Urban Development Director Allen Bell and Wichita city manager Robert Layton explained that for downtown projects, the city’s policy that the debt service fund must show a cost-benefit ratio of 1.3 to one or better doesn’t apply. (Video of Bell explaining this policy is here, and of Layton doing the same, here. Meeting minutes are here.)

More about this policy is available in In Wichita, economic development policies are questioned.

In that article, I mentioned that I attempted to find a document that states this policy. I asked the city to provide this document, or perhaps tell me when the city council acted to approve this policy, just as it has approved other similar policies.

After two days of searching, city officials have said that there is no such document that establishes this policy.

The people of Wichita ought to ask city hall just when this policy was made. City officials say Wichita has a transparent, open government. The Public-Private Partnership Evaluation Criteria for the redevelopment of downtown Wichita states “The business plan recommends public-private partnership criteria that are clear, predictable, and transparent.”

But in the first project to be approved under this plan, the city finds itself apparently making policy on the fly to fit the needs of a group of politically-connected developers. This is not economic development. Instead, it’s cronyism.

Some have said that we should just shrug this off as an innocent oversight. But this project is steeped in cronyism. It is the poster child for why Wichita and Kansas need pay-to-play laws so that city council members are prohibited from voting to send millions to their significant campaign contributors and the mayor’s fishing buddy.

Soon the city will probably ask Wichitans to trust it with more tax revenue so the city can do more for its citizens. The city commissioned a survey to justify this. Also, the mayor wants a dedicated stream of funding so that the city can spend more on economic development.

In other words, the city wants its citizens to trust their government. But in order to gain that trust, the city needs to avoid episodes like this.

Wichita economic development: Worth higher taxes?

In this excerpt from WichitaLiberty.TV: Wichita city and business leaders are likely to ask Wichitans to support a higher sales tax in order to support additional economic development efforts. Should Wichitans vote in favor of this? View below, or click here to view at YouTube.

Another thing that a tax increase in Wichita might be used for is for economic development. That is, paying subsidies to companies so that they will provide jobs in Wichita.

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It’s felt that Wichita needs to step up its economic development efforts because things haven’t been going well lately. Not that everyone agrees. You’ve seen the charts I showed you, showing the growth of jobs in Wichita and also other economic indicators. When we compare Wichita with the nation as a whole and with our Visioneering peer cities, Wichita is almost always in last place. When I presented this data to the Wichita city Council, the Council members did not believe these numbers. So here’s a chart that was presented recently at a Wichita Metro Chamber of Commerce meeting. It uses the same data source that I use, the Bureau of Economic Analysis, and it shows the same data using the same methodology. It comes to the same conclusion: Wichita performs poorly.

Our chamber of commerce and its leadership will use this poor performance to argue that Wichita needs to spend more money on economic development. And that’s a problem.

Your chamber of commerce radio buttons
Very often, local chambers of commerce support principles of crony capitalism instead of pro-growth policies that allow free enterprise and genuine capitalism to flourish.

Now you may be confused. Most people probably think that local chambers of commerce, since their membership is mostly business firms, support pro-growth policies that embrace limited government and free markets. But that’s not always the case. Here, in an excerpt from his Wall Street Journal article “Tax Chambers” Stephen Moore explains:

“The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

“In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes, state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

This is the argument that the Wichita Chamber of Commerce and the city council will be making: We don’t spend enough on business welfare. Capitalism and the free market: These things don’t work, they will tell us. Only government can save Wichita from decline. Business leaders will tell us we need more taxes for more spending on economic development. But be careful here:

There’s a difference between “business leaders” and “capitalists.”

Last year Charles Koch explained the difference in an article in the Wall Street Journal. He wrote:

“Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.”

He continued:

“The effects on government are equally distorting — and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

In his article, Koch makes an important observation when he defines cronyism: “We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.”

You regular viewers know that we have a problem with cronyism in Wichita. This is exemplified by incidents like where a mayor votes to send millions of taxpayer dollars to a man who owns movie theaters, and then the mayor sells his barbeque sauce in those theaters. It’s when a real estate developer lists the mayor and city manager as business references when bidding for a city project and thinks that no one will care or notice. It’s when a city council member receives thousands in campaign contributions from an out-of-state construction company right at the time he votes to award a contract to that company. It’s when the city council votes to give over-priced no-bid construction contracts to their significant campaign contributors.

In other words, instead of allowing people to direct resources to where they believe they will be most useful, our local government direct resources to their cronies. Where it’s useful for their political careers.

I’m of the opinion that it has harmed Wichita’s economic growth. It’s one of the reasons why Wichita is the bottom line in the charts we’ve seen. But many of our business leaders, and almost all of our political leaders, propose more of the same.

That’s right. Instead of focusing on things like water and sewer pipes, government wants to raise taxes so that it can direct more of our economy. Having neglected our water and sewer infrastructure to the point where the mayor says we need to spend at the rate of $70 million dollars per year for the next 30 years, our city leaders are going to ask us for more tax money so that they can try to fix the Wichita economy.

Returning to Stephen Moore’s article. Here he quotes Jon Caldera of the Independence Institute. “I used to think that public employee unions like the National Education Association were the main enemy in the struggle for limited government, competition and private sector solutions. I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

Let’s ask our business and political leaders some questions. First, will we acknowledge Wichita’s poor economic performance, or will we continue to ignore the facts and statistics? Second: Will we realize that the cozy relationship between city hall and a small group of insiders — Wichita’s cronies, if you will — is harmful and corrosive? Third: Will we realize that free enterprise and capitalism work better than cronyism?

Wichita can advocate for government transparency, or not

Wichita City Hall

Government should be responsive to citizens when they make legitimate requests for records. Wichita should not hide behind non-profit entities and tortured interpretations of the law in order to keep records secret.

When the Wichita City Council considers renewing its contract with Go Wichita Convention and Visitors Bureau, the council has another opportunity to decide whether it is truly in favor of open government and citizen access to records.

Go Wichita, along with the Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition, contends that it is not a “public agency” as defined in Kansas law, and therefore does not have to fulfill records requests. Mayor Carl Brewer and most council members are comfortable with this tortured interpretation of the law. Inexplicably, the Sedgwick County District Attorney agreed with the city.

I, along with many others, believe the city’s interpretation of the law is incorrect. So do many in the Kansas Legislature, and action may be taken there to eliminate the ability of Wichita to keep public records from the public. We can call it Gary’s Law, after Wichita City Attorney Gary Rebenstorf, who provides the legal advice the city relies upon.

The legal stance of the City of Wichita certainly isn’t good public policy. Citizens should be able to learn how taxpayer money is spent. Agencies like Go Wichita, WDDC, and GWEDC need to open their check registers as has Sedgwick County, for example.

In the meantime, there is nothing to prevent the city from asking Go Wichita to act as though it was a public agency as defined in the Kansas Open Records Act and to fulfill records requests. This would let Wichitans know that the city is truly interested in open and transparent government.

It’s easy to bluster about open government. In one of his “State of the City” addresses, Mayor Brewer promoted the city’s efforts in accountability and transparency, telling the audience: “We must continue to be responsive to you. Building on our belief that government at all levels belongs to the people. We must continue our efforts that expand citizen engagement. … And we must provide transparency in all that we do.” Many other city documents mention transparency as a goal for the city.

Earlier this year, the city won an award for government transparency regarding the city’s website. In a statement, the city manager said the city “will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”

Until the city asks that these quasi-governmental organizations subject themselves to the Kansas Open Records Act, the message from the City of Wichita is clear: Accountability and transparency is provided on the city’s terms, not on citizens’ terms and the law.

Why open records are important

labette-community-college-donationHere’s an example as to why this issue is important: In 2009 Mike Howerter, a trustee for Labette Community College, noticed that a check number was missing from a register. Based on his inquiry, it was revealed that the missing check was used to reimburse the college president for a political contribution. While it was determined that the college president committed no crime by making this political contribution using college funds, this is an example of the type of information that citizens may want regarding the way public funds are spent.

This is the type of information that I have requested. It is what is needed to perform effective oversight. It is what the City of Wichita has decided to avoid.

This item in the past

Two years ago I asked that the city council approve the contract with Go Wichita only after adding a provision that Go Wichita consider itself a public agency under the Kansas Open Records Act. Following are a few notes from the meeting (video may be viewed here or at the end of this article):

Discussion of this matter at the meeting reveals that city staff believes that the annual reports filed by Go Wichita along with periodic checks by city staff are sufficient oversight.

City Attorney Gary Rebenstorf cited the law regarding enforcement of the Kansas Open Records Act, stating that the Kansas Attorney General or the courts is the next step to seek enforcement of KORA. While Rebenstorf is correct on the law, the policy of the Kansas Attorney General is to refer all cases to the local district attorney. The Kansas AG will not intervene in this matter.

Randy Brown, who is chair of the Kansas Sunshine Coalition for Open Government and former opinion page editor of the Wichita Eagle was at the meeting and spoke on this matter. In his remarks, Brown said “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.”

Brown said that he’s amazed when public officials don’t realize that transparency helps build trust in government, thereby helping public officials themselves. He added “Open government is essential to a democracy. It’s the only way citizens know what’s going on. … But the Kansas Open Records Act is clear: Public records are to be made public, and that law is to be construed liberally, not by some facile legal arguments that keep these records secret.”

He recommended to the council, as I did, that the contract be contingent on Go Wichita following the Kansas Open Records Act.

Misunderstanding the scope of KORA

In remarks from the bench Wichita City Council Member James Clendenin (district 3, southeast and south Wichita) asked the city manager a series of questions aimed at determining whether the city was satisfied with the level of service that Go Wichita has provided. He then extended that argument, wondering if any company the city contracts with that is providing satisfactory products or service would be subject to “government intrusion” through records requests. Would this discourage companies from wanting to be contractors?

First, the Kansas Open Records Act does not say anything about whether a company is providing satisfactory service to government. That simply isn’t a factor, and is not a basis for my records request to Go Wichita. Additionally, the Kansas Open Records Act contains a large exception, which excepts: “Any entity solely by reason of payment from public funds for property, goods or services of such entity.” So companies that sell to government in the ordinary course of business are not subject to the open records law. Go Wichita is distinguished, since it is almost entirely funded by taxes and has, I believe, just a single client: the City of Wichita.

Finally, we should note that the open records law does not represent government intrusion, as Clendenin claimed. Open records laws offer citizens the ability to get an inside look at the working of government. That’s oversight, not intrusion.

Is the city overwhelmed with records requests?

Wichita City Council Member Pete Meitzner (district 2, east Wichita) asked that there might be a workshop to develop a policy on records requests. He expressed concern that departments might be overwhelmed with requests from me that they have to respond to in a timely fashion, accusing me of “attempt to bury any of our departments in freedom of information acts [sic].”

In making this argument, Mr. Meitzner might have taken the time to learn how many records requests I’ve made to the city. The answer, to the best of my recollection, is that I have made one request this year to the city citing the open records act. It was denied. I have made perhaps a half-dozen informal requests, most of which I believe were fulfilled consuming just a few moments of someone’s time.

As to his concern over the costs of fulfilling records requests: The law allows for government and agencies to charge fees to fulfill requests. They often do this, and I have paid these fees. But more important than this, the attitude of council member Meitzner is typical of elected officials — disdain for providing records to citizens. Government should be responsive to citizens. As Randy Brown told the council, government should welcome opportunities to share information and be open and transparent. The city should not hide behind non-profit entities and torture the law in order to keep records secret.

Wichita’s attitude towards citizens

Randy Brown’s remarks are an excellent summation of the morality and politics of the city’s action and attitude regarding this matter.

The council ought to be wary of taking legal advice from city attorney Gary Rebenstorf. He has been wrong several times before when issuing guidance to this council regarding the Kansas Open Meetings Act, which is similar to the Open Records Act. He’s taken the blame and apologized for these violations. He was quoted in the Wichita Eagle as saying “I will make every effort to further a culture of openness and ensure that like mistakes are avoided in the future.”

But Rebenstorf’s attitude, as gauged accurately by Randy Brown, is to rely on facile legal arguments to avoid complying with the clear meaning and intent of the law.

Why city council members would be opposed to what I have asked is unknown. Perhaps they know that among the public, issues relating to open records generally aren’t that important. Citizens ought to note the actions of Mayor Brewer. The mayor could easily put this matter to an end. He speaks of wanting to have open and transparent government, but when it comes time to make a tough call, his leadership is missing.

It’s becoming evident that Kansans need a better way to enforce compliance with the Kansas Open Records Act. It seems quite strange that local district attorneys are placed in a quasi-judicial role of deciding whether citizen complains are justified. If citizens disagree — and nearly everyone I’ve talked to thinks that the opinion issued by the Sedgwick County District Attorney is this matter is nonsensical and contrary to the letter and spirit of the law — they find themselves in the position of suing their government. That is costly, and citizens soon realize their own taxpayer dollars are used against them.

Wichita logic open records

WichitaLiberty.TV November 24, 2013

WichitaLiberty.TV.09In this episode of WichitaLiberty.TV: Host Bob Weeks takes a look at proceedings of a Wichita City Council meeting and uses it to illustrate some of the reasons why the Wichita-area economy is not growing very rapidly. Episode 21, broadcast November 24, 2013. View below, or click here to view at YouTube.

Wichita economic development, a few issues

wichita-chamber-commerce-2013-11-05What should we conclude when the incoming chair of the Wichita Metro Chamber of Commerce uses the threat of moving his company out of Wichita to extort tax breaks from the Wichita City Council?

What lesson should we learn when the Wichita Metro Chamber of Commerce is likely to recommend higher taxes for Wichitans, but its incoming chair asks to be excused from paying these taxes?

What example do we establish when the incoming chair of the Wichita Metro Chamber of Commerce asks for tax breaks on office space he will rent, thereby giving him an advantage over other downtown landlords that do pay their full share of taxes?

Should we ask how Wichita Mayor Carl Brewer will achieve his goal of building the tax base when people ask to be excused from contributing to that base?

These are some of the issues the council should weigh tomorrow. For more on this matter, see In Wichita, the case for business welfare.

Downtown Wichita tax base: Growing?

IMG_1956

There’s been much investment in downtown Wichita, we’re told, but the goal of increasing the tax base is farther away rather than closer.

Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base.

In his State of the City Address for 2013, Wichita Mayor Carl Brewer told the audience (based on his prepared remarks):

As you know, revitalizing downtown has been a key part of growing our community in recent years, recognizing that a healthy and thriving downtown improves our ability to attract new business, keep our young people here, and expand our tax base. With $100 million in completed downtown projects in 2012 and another $115 million starting this year, we’ve made extraordinary progress toward having the downtown that Wichitans have dreamed of. … As development continues downtown, we are closer to reaching our goals of increased pride, an increased tax base, and bringing more businesses and jobs to Wichita.

ssmid-investment-quote-2013

In its report on the economics of downtown Wichita redevelopment, the Wichita Downtown Development Corporation says:

The Downtown SSMID (Self Supported Municipal Improvement District — shown above) has seen a ten-year total amount of $396,850,538 in public investment and $564,776,159 in private investment. SSMID property values have increased over $300 million in the last ten years.

The Wichita Downtown Development Corporation sold the planning process to Wichitans by making the argument that “it will grow existing tax base revenues.”

Wichita downtown self-supporting municipal improvement district (SSMID) boundary map

To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.

Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.

With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little). This process is the success story that Mayor Brewer and boosters of public investment in downtown trumpet, as the mayor did twice in one paragraph in his State of the City Address.

So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?

The answer is that after a period of increasing values, the assessed value of property in downtown has has been declining. The peak was in 2008. The nearby table holds the figures.

This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.

Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars in worth, we are told.

So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?

Wichita downtown self-supporting municipal improvement district (SSMID) assessed property valuation

Data can be viewed here.

Curious Wichita ethics enigmas

Wichita City Hall

As he has done previously, Wichita Mayor Carl Brewer decided not to vote on a matter involving Spirit Aerosystems at the November 5, 2013 meeting of the Wichita City Council.

The mayor didn’t give a reason for recusing himself, but it’s probably because he was formerly an employee at Spirit. So it’s good that he did this. But if we’re going to observe ethics protocols like this — and we should — let’s do them correctly. The mayor should have announced at the start of this item that he had to recuse himself, and then he should have left the bench and probably also the council chambers. Instead, Brewer presided over the presentation and discussion of the item, and then stated he wouldn’t be voting. It’s a small matter, but we might as well do things right.

What is much more important — and curious — is this: Brewer feels he can’t vote on an item involving a company where he was an employee. But, he has no such compunction about voting on matters that send taxpayer money to his fishing buddy, even via no-bid contracts.

Even more curious: Brewer thought it was ethical to vote to send taxpayer money to the movie theater owner who also sells his barbeque sauce.

Add to this confusing mix of ethical judgment calls: The mayor feels he can’t shop for his personal automobile in Wichita because he doesn’t want to be accused of getting a “special deal,” in his words.

If someone can explain this line of reasoning by the mayor and/or the city, I’d appreciate being enlightened.

It’s good to know that this mayor is concerned about ethical behavior when shopping for a car or voting on matters concerning his former employer. But I’m surprised, as this concern for virtue doesn’t match the behavior of the mayor and many members of the Wichita City Council. Shall we run down the list?

Exhibit 1: In August 2011 the Wichita City Council voted to award Key Construction a no-bid contract to build the parking garage that is part of the Ambassador Hotel project, now known as Block One. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.

Wichita mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.

The no-bid contract for the garage was just one of many subsidies and grants given to Key Construction and Dave Burk as part of the Ambassador Hotel project. Both of these parties are heavy campaign contributors to nearly all city council members. Brewer and the head of Key Construction are apparently friends, embarking on fishing expeditions.

What citizens need to know is that Brewer and the Wichita City Council were willing to spend an extra $1.3 million of taxpayer money to reward a politically-connected construction firm that makes heavy campaign contributions to council members. Only one council member, Michael O’Donnell, voted against this no-bid contract. At the time, no city bureaucrats expressed concern about this waste of taxpayer money.

Exhibit 2: In July 2012 Brewer participated in a decision to award the large contract for the construction of the new Wichita airport to Key Construction, despite the fact that Key was not the low bidder. The council was tasked to act in a quasi-judicial manner, to make decisions whether discretion was abused or whether laws were improperly applied. Brewer’s judgment was in favor of Key Construction, even though its bid had the same defect as the lower bid. This decision cost taxpayers and airport users an extra $2 million, to the benefit of a major campaign donor and fishing buddy.

Exhibit 3: In a Wichita Eagle story that reported on “city-financed downtown parking garages that spiraled well over budget” we learned this: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.”

Despite this personal experience, Brewer wrote a letter recommending Key Construction (and only Key), observing “Key is known for their consistent quality construction, budget control and on schedule delivery.”

Exhibit 4: In 2008 the Wichita City Council approved a no- and low-interest loan to movie theater owner Bill Warren and his partners. Reported the Wichita Eagle: “Wichita taxpayers will give up as much as $1.2 million if the City Council approves a $6 million loan to bail out the troubled Old Town Warren Theatre this week. That’s because that $6 million, which would pay off the theater’s debt and make it the only fully digital movie theater in Kansas, would otherwise be invested and draw about 3 percent interest a year.”

Warren Theater Brewer's Best 2013-07-18

Warren’s theaters have received other financial benefits from the city under Brewer’s leadership, too. Then — and I swear I am not making this up — when Brewer started manufacturing and selling barbeque sauce, it was sold at Warren’s theaters.

Really. It happened.

What can we say about a mayor who is concerned about the appearance of impropriety when voting on economic development incentives for his former employer, but is not able to understand the problems with his own behavior in office?

That he feels he needs to shop for a car outside the city, but at the same time has no problem voting for overpriced no-bid contracts for campaign contributors and friends?

That he feels he can’t vote to give a tax break to his former employer, but votes to give millions to a campaign contributor, and then sells his barbeque sauce in that person’s business?

It’s difficult to understand or reconcile these decisions.

WichitaLiberty.TV November 3, 2013

In this episode of WichitaLiberty.TV: Host Bob Weeks notices a recent Kansas City Star editorial made the case for higher school spending in Kansas, but is based on a premise that doesn’t exist in fact. Bob wonders if the City of Wichita is concerned with measuring and managing its economic development efforts. Amanda BillyRock illustrates another chapter of “Economics in One Lesson” titled “Fetish of Full Employment.” Episode 19, broadcast November 3, 2013. View below, or click here to view at YouTube.

Wichita economic development not being managed

The Wichita Eagle has reported that Wichita has increased its granting of property tax exemptions in recent years. (Wichita doubles property tax exemptions for businesses, October 20, 2013) Buried in the story is the really important aspect of public policy. In his reporting, Bill Wilson wrote:

The Eagle asked the city last week for an accounting of the jobs created over the past decade by the tax abatements, a research project that urban development staffers have yet to complete.

“It will take us some time to pull together all the agenda reports on the five-year reviews going back to 2003. That same research will also reveal any abatements that were ‘retooled’ as a result of the five-year reviews,” city urban development director Allen Bell said. “I can tell you that none of the abatements were terminated.”

wichita-economic-development

One might have thought that the city was keeping records on the number of jobs created on at least an annual basis for management purposes, and would have these figures ready for immediate review. But apparently that isn’t the case.

We need to recognize that because the city does not have at its immediate disposal the statistics about job creation, it is evident that the city is not managing this effort. Or, maybe it just doesn’t care.

This is a management problem at the highest level. In January when the city council awarded city manager Robert Layton a large raise, the praise from council members was effusive. This means one of several things: (a) that the mayor and city council have not asked for these job creation numbers, or (b) city council members don’t care about the numbers, or (c) they’re not interested in knowing the numbers. There could be other explanations, but all point to a lack of bureaucratic management and political oversight.

I wonder why the city officials didn’t explain that according to their analysis and way of thinking, these tax abatements don’t have a cost. When presented to the council, each abatement opportunity is generally accompanied by a benefit-cost analysis that purports to show that the city, county, school district, and state gain more in tax revenue than they forego from the abatement. Does this extra government revenue create jobs?

In any case, the number of jobs stemming from our economic development efforts is small. In his State of the City Address for 2012, Mayor Carl Brewer said that the city’s efforts in economic development had created “almost 1000 jobs.” While that sounds like a lot of jobs, that number deserves context. According to estimates from the Kansas Department of Labor, the civilian labor force in the City of Wichita for December 2011 was 192,876, with 178,156 people at work. This means that the 1,000 jobs created accounted for from 0.52 percent to 0.56 percent of our city’s workforce, depending on the denominator used. This minuscule number is dwarfed by the normal ebb and flow of other economic activity. (The mayor didn’t mention job creation figures in his 2013 address.)

The case of InfoNXX

Here’s an example of property tax abatements granted for which the city received little in return. In 2005, with great fanfare, the city announced that its economic development recruitment efforts had landed InfoNXX, an operator of call centers. The council agenda report of November 15, 2005 recommended that the council approve a letter of intent for tax abatements. The report stated this:

The Greater Wichita Economic Development Coalition has worked with a national site consultant to recruit a new company to Wichita. InfoNXX, Inc., major provider of telephone directory assistance and enhanced information services to leading communications companies, businesses and consumers located principally in the United States, United Kingdom, France, and Italy. As a result of the recruitment effort, InfoNXX will locate a large customer service center in the former MCI Building, near Rock Road and K-96 in northeast Wichita, and hire over 900 customer care representatives. As an economic development incentive, the City offered InfoNXX Industrial Revenue Bonds (IRBs) and property tax abatement on equipment and furnishings, subject to City Council approval.

RECOMMENDED ACTION: Approve a Letter of Intent to InfoNXX Inc. for Industrial Revenue Bonds in an amount not-to-exceed $6 million, subject to the Letter of Intent conditions, for a term of six-months, approve a 100% tax abatement on all bond-financed property for an initial five-year period plus an additional five years following City Council review, and authorize the application for a sales tax exemption on bond-financed property.

On December 13, 2005 the council approved the ordinance granting the tax abatements.

Fast forward to the February 15, 2011 council agenda packet. The five year initial property tax abatement granted in 2005 was over, and the council could extend it for another five years if the committed goals had been met. The agenda report gave this summary for capital investment: “Purchase furniture, fixtures and equipment for a capital investment of $6 million.” Results, according to city documents, were “Invested $7,331,379 million [sic] in FF&E.”

For job creation, the 2005 commitment was “Create 944 new jobs in five years.” Results, according to city documents, were “Created 870 new jobs; current job level is 185.”

InfoNXX was short of its job creation commitments, but the city used a loophole to grant a one-year extension of the tax abatement. That one-year extension was never the subject of further consideration, as InfoNXX changed its name, and in January 2012 closed the Wichita facility that was the subject of these incentives.

It’s unfortunate for Wichita and the InfoNXX employees that the facility closed. The important public policy consideration is that we learn from this. So, when Wichita counts the number of jobs created, does it adjust for short-lived jobs like these?

The answer, I believe, is no. We don’t adjust our job creation statistics, and we don’t learn.

gwedc-office-operations

In fact, we don’t even keep current. GWEDC — that’s the Greater Wichita Economic Development Coalition credited with recruiting InfoNXX to Wichita — doesn’t update its website to reflect current conditions. InfoNXX closed its facility in Wichita in 2012, and as we saw above, city documents said that at its peak the company employed 870 in Wichita. As of today, here’s what GWEDC says on a page titled Office Operations:

Wichita hosts over a dozen customer service and processing centers – including a USPS Remote Encoding Center (985 employees), InfoNXX (950), T-Mobile (900), Royal Caribbean (700), Convergys (600), Protection One (540), Bank of America (315) and Cox Communications (230.) (emphasis added)

So the official Wichita-area economic development agency proclaims the existence of a company that no longer exists in Wichita, and claims a job count that the company never achieved. This is beyond careless negligence. This is malpractice.

The USPS Remote Encoding Center mentioned? It’s being closed this year.

Going forward

In his State of the City address for 2013 the Wichita mayor lamented the fact that Wichita has no dedicated funding source for economic development. It’s likely that Wichitans will be asked to approve increased taxes for economic development, as well as for many other things we want like a new central library, new water and sewer pipes, improved public transit, and downtown development.

But before Wichita officials ask for more taxes so there can be more spending, they need to convince us that they care about measuring and managing results. They haven’t shown this so far.

Wichita contracts, their meaning (or not)

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

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

section-1106

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

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

Warren Theater Brewer's Best 2013-07-18

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

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

3. Bill Warren also owns movie theaters.

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

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

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

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

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

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

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

Wichita does it again

Government takes and gives

Wichita never seems to learn. Its government, that is.

The last time Key Construction was awarded a no-bid contract for building a parking garage in Wichita, it almost cost Wichita taxpayers an extra 27 percent. Now the Wichita City Council has done it again, awarding Key another no-bid contract for a project paid for by taxpayers.

In August 2011 the Wichita City Council voted to award Key Construction a no-bid contract to build the parking garage that is part of the Ambassador Hotel project, now known as Block One. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.

Today the council voted to award Key another no-bid contract. City officials said that the garage is too intertwined with the rest of the project to be put out to bid. They said that in 2011, too.

After the 2011 incident, Wichita city manager Robert Layton told the Wichita Eagle that he would seek a policy change against no-bid contracts. But that didn’t happen today.

So taxpayers are likely to overpay again, and for a project benefiting a politically-connected firm.

There is hope for the taxpayers, however. After the 2011 award to Key, then-council member Michael O’Donnell objected. It’s said that Wichita City Council Member and Vice Mayor Pete Meitzner (district 2, east Wichita) also objected. That’s when the city decided to put the garage out to competitive bid and saved taxpayers $1.3 million.

It’s possible this could happen again. Meitzner was absent for today’s vote. New council member Jeff Blubaugh now represents the same district that O’Donnell did two years ago. Maybe Wichita taxpayers can ask O’Donnell to talk to Blubaugh about this. Perhaps as Meitzner prepares his bid to be the next mayor, he could use this as an opportunity to exercise leadership in favor of taxpayer stewardship instead of protecting the system of cronyism.

Key Construction and Mayor Carl Brewer

Should Mayor Carl Brewer have participated in voting on this matter? Here’s a section from the Wichita city code as passed in 2008:

“[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”

Wichita mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.

This no-bid contract for the garage is just one of many subsidies and grants given to Key Construction and its partners at taxpayer expense. Key, its executives, and their spouses are heavy campaign contributors to nearly all city council members. Brewer and the head of Key Construction are apparently friends, embarking on fishing expeditions.

What citizens need to know is that Brewer and the Wichita City Council were willing to spend an extra $1.3 million of taxpayer money to reward a politically-connected construction firm that makes heavy campaign contributions to council members. Only one council member, Michael O’Donnell, voted against this no-bid contract. At the time, no city bureaucrats expressed concern about this waste of taxpayer money.

Then, in July 2012 Brewer participated in a decision to award the large contract for the construction of the new Wichita airport to Key Construction, despite the fact that Key was not the low bidder. The council was tasked to act in a quasi-judicial manner, to make decisions whether discretion was abused or whether laws were improperly applied. Brewer’s judgment was in favor of Key Construction, even though its bid had the same defect as the lower bid. This decision cost taxpayers and airport users an extra $2 million, to the benefit of a major campaign donor and fishing buddy.

In a Wichita Eagle story that reported on “city-financed downtown parking garages that spiraled well over budget” we learned this: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.”

Despite this personal experience, Brewer wrote a letter recommending Key Construction (and only Key) for a project, observing “Key is known for their consistent quality construction, budget control and on schedule delivery.” The mayor’s recommendation is not consistent with the reality of Key’s experience with the City of Wichita.

Lavonta Williams and James Clendenin

Although city code has no prohibition against council members voting to enrich their significant campaign contributors with no-bid contracts, there ought to be such a law. And when the recipient company is a very significant contributor, we can’t help but wonder about the wisdom and stewardship exhibited by the council.

In 2012, as incumbent council members Wichita City Council Member James Clendenin (district 3, southeast and south Wichita) and Wichita City Council Member Lavonta Williams (district 1, northeast Wichita) were preparing to run for re-election, their campaigns, that year, were financed entirely by two sources. One of these was a group of principals and executives of Key Construction.

Those associated with Key Construction gave a total of $7,000. Williams received $4,000, and $3,000 went to Clendenin. For Williams, this was the only campaign money she received in 2012.

With relationships like these, can we have and confidence that the mayor and council are looking out for the interests of the citizens of Wichita, or for the interests of the significant campaign contributors and fishing buddies?

Wichita performs a reference check, the video

Citizens of Wichita are rightly concerned about whether our elected officials and bureaucrats are looking out for their interests, or only for the interests and welfare of a small group of city hall insiders. The video below explains, or click here to view in HD on YouTube. For an article on this topic, see Wichita performs a reference check, sort of.

Wichita performs a reference check, sort of

Wichita city hall logo

For a video presentation of this material, click on Wichita performs a reference check, the video.

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

A recent application filed with Wichita City Hall regarding the West Bank Development Project raises two questions: Did the government officials listed as references give their permission, and were any of the references contacted to learn what they knew about the applicants?

The application filed by the River Vista development team shows this: The team, consisting of George Laham, Dave Wells, Dave Burk, and Bill Warren listed numerous local, state, and federal officials as references. Here’s the list of officials that appeared one or more times:

Wichita city manager Robert Layton
Wichita Mayor Carl Brewer
Wichita City Council Member Jeff Longwell (district 5, west and northwest Wichita)
Wichita City Council Member and Vice Mayor Pete Meitzner (district 2, east Wichita)
Sedgwick County District Attorney Marc Bennett
Sedgwick County Sheriff Jeff Easter
Sedgwick County Commissioner Dave Unruh
Sedgwick County Commissioner Tim Norton
Kansas Governor Sam Brownback
U.S. Representative Mike Pompeo

Except for Jeff Easter, none of these officials gave permission for their names to be used in this way. (We didn’t get a response regarding Tim Norton.)

Furthermore, none of these officials were contacted by the evaluation committee whose job it is to vet these potential city partners.

A few questions: First, do you think it is appropriate for the city manager to be listed as a reference, given that anyone who reads this document would take it as an endorsement? No, of course it is not appropriate.

Related: Do you think it’s appropriate for the city manager to endorse one of the applicants? We don’t know if the presence of the city manager’s name as a reference implies an endorsement, because George Laham did not ask the city manager if he could be listed as a reference. We know this because we asked.

Further, the committee that evaluated the development teams did not call the city manager to inquire about George Laham. We asked about this, too. But making inquiries of references: Isn’t that what an evaluation committee or vetting team should do? But we know that the evaluation committee did not contact even one of these officials that were listed as references.

These applicants likely knew that the evaluation committee would not contact these references. Therefore, they freely listed these government officials. Which makes us wonder — what is the point of having an evaluation committee?

Even further: Is it appropriate for the city to partner with people who think it’s proper to list the city manager as a reference without asking if that was permissible, knowing that the manager wouldn’t be contacted? Same question regarding the mayor, governor, our U.S. Congressman, and district attorney?

In light of this — numerous government officials listed as references without their permission or knowledge, an evaluation committee that never contacted these officials, and the information that these references could have provided: Do you think the evaluation committee fulfilled its duty to perform due diligence on behalf of the interests of the people of Wichita?

What the evaluation committee might have learned

If the evaluation committee had contacted these references, here’s what might have been learned.

Dave Wells: Wells is president of Key Construction. Last year the Wichita Eagle reported on “city-financed downtown parking garages that spiraled well over budget.” Noting the cost overruns, reporter Bill Wilson wrote: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.” (Wichita city manager proposes eliminating no-bid construction projects.)

Also, two years ago Key Construction proposed — and was awarded by the city council — a no-bid contract for a parking garage. But the city later put the contract to competitive bid. Key, which first bid $6 million, later bid $4.7 million. If the desire of the majority of the city council, including Mayor Carl Brewer, had been realized, Wichita taxpayers would have sent an extra — and unnecessary — $1.3 million to a politically-connected construction company.

By the way, the mayor’s relationship with Wells means he should not have voted on this matter.

Dave Burk, Dave Wells: These two were original partners in WaterWalk, which has received over $40 million in subsidy, with little to show for results.

Dave Burk: He’s received many millions from many levels of government, but still thinks he doesn’t get enough. This is what we can conclude by his appeal of property taxes in a TIF district. Those taxes, even though they are rerouted back to him for his benefit, were still too high for his taste, and he appealed. The Wichita Eagle reported in the article (Developer appealed taxes on city-owned property): “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.”

rebenstorf-quote-dave-burkA number of Wichita city hall officials were not pleased with Burk’s act. According to the Eagle reporting, Burk was not authorized to do what he did: “Officials in the city legal department said that while Burk was within his rights to appeal taxes on another city-supported building in the Cinema Plaza, he did not have authorization to file an appeal on the city-owned parking/retail space he leases. … As for Burk signing documents as the city’s representative, ‘I do have a problem with it,’ said City Attorney Gary Rebenstorf, adding that he intends to investigate further.”

Council member Jeff Longwell was quoted by the Eagle: “‘We should take issue with that,’ he said. ‘If anyone is going to represent the city they obviously have to have, one, the city’s endorsement and … two, someone at the city should have been more aware of what was going on. And if they were, shame on them for not bringing this to the public’s attention.'”

In a separate article by the Eagle on this issue, Wichita city manager Robert Layton said that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.'”

The manager’s quote is most directly damaging. In a tax increment financing (TIF) district, the city borrows money to pay for things that directly enrich the developers, in this case Burk and possibly his partners. Then their increased property taxes — taxes they have to pay anyway — are used to repay the borrowed funds. In essence, a TIF district allows developers to benefit exclusively from their property taxes. For everyone else, their property taxes go to fund the city, county, school district, state, fire district, etc. But not so for property in a TIF district.

This is what is most astonishing about Burk’s action: Having been placed in a rarefied position of receiving many millions in benefits, he still thinks his own taxes are too high. Now he wants more city taxpayer subsidy.

warren-bailout-poses-dilemma

Bill Warren: In 2008 the Old Town Warren Theater was failing and its owners — Bill Warren being one — threatened to close it and leave the city with a huge loss on a tax increment financing (TIF) district formed for the theater’s benefit. Faced with this threat, the city made a no-interest and low-interest loan to the theater. Reported the Wichita Eagle: “Wichita taxpayers will give up as much as $1.2 million if the City Council approves a $6 million loan to bail out the troubled Old Town Warren Theatre this week. That’s because that $6 million, which would pay off the theater’s debt and make it the only fully digital movie theater in Kansas, would otherwise be invested and draw about 3 percent interest a year.”

Besides Warren, you may — or may not — be surprised to learn that the theater’s partners included Dave Wells and Dave Burk, the same two men mentioned above. Also, Mayor Brewer’s relationship with Warren means he should not have voted on this matter.

It hasn’t worked, but Wichita will do it again

man-digging-coinsTomorrow the Wichita City Council will, in all likelihood, issue more business welfare in an effort to create jobs in Wichita.

The applicant company is asking for relief from paying property taxes under the city’s Economic Development Exemption (EDX). The city’s economic development policy has a formula that determines how much tax can be excused, based on job creation and capital investment. In this case, according to city documents, “WSM Industries qualifies for a 59%, five-plus-five year tax exemption.” Not 50 percent, and not 60 percent. Precisely 59 percent is what the city judges.

Here’s how the tax savings breaks down among the various taxing jurisdictions:

City of Wichita: $4,500
Sedgwick County: $4,081
USD 259: $7,920
State of Kansas: $209
Total: $16,710

An analysis performed for the city indicates a favorable benefit-cost ratio for these incentives. This inspires a question: If we really believe in this benefit to the city (and similar benefits to the county, school district, and state), why doesn’t the city make more investments like this? Surely there are other worthy companies could expand if not for the burden of property taxes. And that’s what tomorrow’s contemplated action means, if we are to believe it is anything but cronyism and business welfare: Property taxes in Wichita are what prevented this company from expanding. Erase 59 percent of the company’s property tax burden, and it is able to make new capital investment and jobs.

If it really is so easy to promote economic growth and job creation, we should be doing things like this at every city council meeting. Several times each meeting, don’t you think?

I also wonder about companies that made expansions as did this applicant company, but did not ask the city for incentives. What is their secret?

The reality is that these economic development incentives don’t work, if we are willing to consider the effect on everyone in the region instead of just this applicant company, and also if we are willing to consider the long-term effects instead of only the immediate.

Peer-reviewed research on economic development incentives — this is the conclusion of all the studies — find business location decisions to be favorably influenced by targeted tax incentives. That’s not a surprise. But the research also finds that the benefits to the communities that offered them were less than their costs.

Wichita and Peer Job Growth, Total Employment

If peer-reviewed research is not convincing, let’s take a look at the record of Wichita.
Here is a chart of job growth for Wichita, the nation, and our Visioneering peers. (Click it for a larger version, or click here for the interactive visualization, or here to watch a video.) The data shows that Wichita hasn’t been doing well.

So if we believe that an active role for government in economic development is best, we have to also recognize that our efforts aren’t working. Several long-serving politicians and bureaucrats that have presided over this failure: Mayor Carl Brewer has been on the city council or served as mayor since 2001. Economic development director Allen Bell has been working for the city since 1992. City Attorney Gary Rebenstorf has served for many years. At Sedgwick County, manager William Buchanan has held that position for more than two decades. On the Sedgwick County Commission, Dave Unruh has been in office since 2003, and Tim Norton since 2001. It is these officials who have presided over the dismal record of Wichita.

Wichita City Manager Robert Layton has had less time to influence the course of economic development in Wichita. But he’s becoming part of the legacy of Wichita’s efforts in economic development.

For Wichita, more districts, more taxes, more bureaucracy

red-tape-person-upset

Tomorrow the Wichita City Council will consider formation of a Tourism Business Improvement District. Actually, the council will formation of a planning committee to determine boundaries, parameters, budgets, and how to fund the budget.

The impetus behind the TBID, according to city documents, is “Go Wichita has proposed that a TBID be created to enhance its marketing efforts.” Go Wichita is the Wichita Convention and Visitors Bureau. The source of its funds, again from city documents: “A fee is assessed to each of these properties based on room night sales. This fee is usually determined as a percentage of the room rate or as a flat dollar amount per night. The funds collected in the district are spent exclusively for the benefit of the hotels and are usually programmed by the local convention and visitor’s bureau.”

What will be done with the money that is raised? “The funds generated from the district would be used to increase convention advertising in key meeting planner publications, convention sales initiatives in key markets and digital advertising. Additionally, a significant portion of the new funds would be earmarked for leisure marketing efforts.”

Tomorrow’s action contemplated by the council is just the formation of a planning committee, not he actual TBID. So there’s still time to think this through. Here’s what I hope the city considers:

First, is there any way to distinguish this “fee” from a tax? A tax that will probably be passed along to visitors to Wichita?

Second: Is there any way to characterize this as anything other than an expansion of bureaucracy in Wichita? I really wonder if the hotel operators know what they’re getting themselves mixed up in. If the hotels feel they need more marketing firepower to attract business to Wichita, I’m sure they’d do better to form a voluntary association to undertake this task. This would be nimble and flexible in way that a government bureaucracy can never be. But who will stand up to this expansion of our tourism bureaucracy? A hotel owner that wishes to receive referrals? Like most government bureaucrats, those who will run this new program “profit” from increasing their power and influence, and by expansion of their budgets, perks, and staffs. They won’t look favorably on those who don’t go along with the program.

Then: The members of the committee are appointed by the mayor. Hotel owners: Do you want Carl Brewer to be in charge of appointing people to oversee something important to your business?

Finally, the people of Wichita need to realize that pursuit of convention and tourism business is not the wisest path to follow. Wall Street Journal reporting from last year concluded with:

“Mr. Sanders, the University of Texas professor, predicts the glut of convention space will only get worse, because a number of cities continue to push expansions. He blames cities’ hired consultants, who he said predict “all these people are going to come and do wonderful things to your economy.”

“But the problem is they aren’t coming anymore, because there are lots of other convention centers … that desperately want that business,” he said. “So Atlanta steals from Boston, Orlando steals from Chicago and Las Vegas steals from everywhere.”

The “Mr. Sanders” referred to in the Journal reporting is Heywood T. Sanders, who is professor in the Department of Public Administration at the University of Texas at San Antonio. He is a noted critic of public efforts to chase convention business for economic development. His 2005 report report Space Available: The Realities of Convention Centers as Economic Development Strategy was published by the left-leaning think tank The Brookings Institution. It provides a look at the realities of the convention trade.

Sanders writes that convention center business has been on the decline, and it started well before the terrorist attacks in 2001. In a section titled “Trends: Portrait of a Faltering Industry” we can read that attendance is down, exhibit space demand is down, and hotel room demand in cities has fallen too.

The author notes that the decline in convention business is a structural decline: “[Reasons for decline] are the product of industry consolidation, particularly in the hardware and home improvement industry, reductions in business travel in the face of increasing cost and difficulty, and alternative means of conveying and gathering information.” These are not cyclical trends that are likely to reverse in the future.

Despite shrinking demand, cities are building more convention space: “Despite diminishing demand, the last few years have seen a remarkable boom in the volume of exhibit space in U. S. convention centers.” The building of larger convention centers in many cities means that more cities are able to host the larger events, or, cities can now host several smaller events simultaneously. The result, says the author, is fierce competition for both large and small events.

What about the costs? The author introduces a section on costs with: “The studies that justify both the new center space and the publicly-owned hotels paint a picture of tens of thousands of new out-of-town visitors and millions of dollars in economic impact. Despite that rhetoric, these projects carry real risks and larger potential costs, particularly in an uncertain and highly competitive environment.”

The convention center is just the start of costs: “A new [convention] center is thus often followed by a subsidized or fully publicly-owned hotel.” Wichita, of course, has a fully publicly-owned hotel, the large 303-room Hyatt. Now Wichita has been providing, and will probably continue, subsidy programs to other downtown hotels. None of the hotels alone provide as many rooms as Wichita convention planners say the city needs, so we are likely to see proposals for a subsidies to hotels continue.

In fact, until Wichita has as many hotel rooms as our nation’s largest convention cities have, there is always a larger goal — a next step on the ladder. Can you imagine our city leaders ever proclaiming that we have enough hotel rooms in downtown Wichita?

Other things Sanders says that are likely to be proposed are a sports arena. Wichita, of course, recently opened a taxpayer-financed and government-owned facility, the Intrust Bank Arena. After a brief honeymoon fling with good financial performance, the arena has settled down to a less-acceptable level of revenue production. Residents of Sedgwick County, which owns the arena, should be cautioned that the financial results hailed by the county don’t include depreciation costs, so the true financial picture is not anywhere near complete.

Entertainment, retail, and cultural attractions are often proposed, Sanders writes, and Wichita downtown planners have indicated their desire for these.

The conclusion to this paper describes Wichita’s current situation and foreshadows what is likely for the future of Wichita:

But if taxing, spending, and building have been successful, the performance and results of that investment have been decidedly less so. Existing convention centers have seen their business evaporate, while new centers and expansions are delivering remarkably little in terms of attendance and activity.

What is even more striking, in city after city, is that the new private investment and development that these centers were supposed to spur — and the associated thousands of new visitors — has simply not occurred. Rather, city and convention bureau officials now argue that cities need more space, and more convenience, to lure those promised conventions. And so underperforming convention centers now must be redeemed by public investment and ownership of big new hotels. When those hotels fail to deliver the promises, then the excuse is that more attractions, or more retail shops, or even more convention center space will be needed to achieve the goal of thousands of new visitors.

We already see some of this excuse-making taking place: Private investment in downtown Wichita has been weak, it is said, because there’s not yet a critical mass of development. It is promised by downtown boosters that given enough public money, critical mass will be achieved, and private investment will rush in. But since there is no definition of what constitutes critical mass, this excuse is always available to justify failure.

WichitaLiberty.TV August 18, 2013

WichitaLiberty.TV logo

In this episode of WichitaLiberty.TV, host Bob Weeks shows his “Prezi” that illustrates the disregard for the law shown by Wichita’s mayor. Then, Bob walks viewers through a visualization that illustrates the unintended consequences of government intervention at the Wichita Airport. Finally, Bob introduces Henry Hazlitt’s book “Economics in One Lesson,” which will be the topic of future episodes of WichitaLiberty.TV. Episode 9, broadcast August 18, 2013. View below, or click here to view on YouTube.

Wichita income is not keeping up

Visioneering Wichita uses per capita income growth as one benchmark of economic progress. What do the numbers say about the city’s progress? The following video illustrates. View below, or click here to view in higher resolution at YouTube, which may work better for some people.

For more in this, and to access the interactive visualization, see Wichita personal income growth benchmark.

WichitaLiberty.TV August 11, 2013

WichitaLiberty.TV logo

In this episode of WichitaLiberty.TV, host Bob Weeks asks if shoppers have ever paid extra sales tax in Wichita’s Community Improvement Districts, and describes efforts by the city to avoid disclosure of this tax. Then, are there similarities between Wichita and Detroit? Finally, a Sedgwick County Commissioner is worried about agriculture being driven out of the county, but Bob thinks he doesn’t need to worry. Episode 8, broadcast August 11, 2013. View below, or click here to view on YouTube.

Wichita job growth under the Visioneering/Brewer regime

Wichita has set ambitious goals in job growth, but it doesn’t seem that the Visioneering program has produced results. But apparently Wichita government officials are satisfied.

One of the benchmarks of Visioneering is “Exceed the highest of the annual percentage job growth rate of the U.S., Omaha, Tulsa, Kansas City and Oklahoma City.”

In May, Suzie Ahlstrand of the Wichita Chamber of Commerce presented Wichita City Council members with the benchmark documents, but didn’t elaborate on these in her presentation.

I can understand her reluctance to focus on these numbers. They’re not good. Tremendous opportunities have been lost and wasted, and people have suffered. Yet, city leaders seem satisfied. Thrilled, even.

An interactive visualization holding job numbers for Wichita and our Visioneering peers is available at Wichita job growth and Visioneering peers. Or, watch the video below (or click here to watch at YouTube, which may work better for some people).

More illumination of Wichita City Council ethics

Today on the Joseph Ashby Show, the host shines additional light on problems with the Wichita City Council.

Joseph Ashby Show, August 8, 2013 (excerpt).

Some background material:

Joseph Ashby on Wichita City Council

Kansas Affordable Airfares program: Benefits and consequences

Wichita airport statistics: The visualization

Wichita Airport statistics: The video

Wichita Eagle: Wichita City Council rejects conservative blogger for airport advisory board

WE Blog: Peterjohn’s comment was inappropriate

Joseph Ashby Show: Upcoming Wichita City Council meeting

It will be a busy Tuesday in Wichita

Fish, sauce, and the law: You make the call

Joseph Ashby on Wichita City Council

Today on the Joseph Ashby Show, the host shines light on some problems with the Wichita City Council.

Joseph Ashby Show, August 7, 2013 (excerpt).

Some background material:

Kansas Affordable Airfares program: Benefits and consequences

Wichita airport statistics: the visualization

Wichita Eagle: Wichita City Council rejects conservative blogger for airport advisory board

Joseph Ashby Show: Upcoming Wichita City Council meeting

It will be a busy Tuesday in Wichita

Fish, sauce, and the law: You make the call

Wichita’s evaluation of development team should be reconsidered

Dump truck carrying coinsIn an effort to avoid mistakes made in the past and inspire confidence in the process, parties wishing to receive economic development subsidies for projects in downtown Wichita are evaluated on a variety of measures. The evaluation matrix released for a project to be considered next week by the Wichita City Council, however, ought to be recalculated.

City documents describe one of two competing projects as this: “River Vista is proposed by River Vista LLC, a development group comprised of George Laham, Dave Burk, Dave Wells and Bill Warren.”

wichita-evaluation-matrix-2013-08

It’s this ownership team that ought to cause the city concern. Two of the evaluation criteria are “Past project experience with the City of Wichita” and “References, especially from other municipal partners.” This development team was awarded the maximum number of points possible for each (points being a positive measure). Here are a few things that the evaluation committee may not have considered when awarding these points.

Dave Wells: Wells is president of Key Construction. Last year the Wichita Eagle reported on “city-financed downtown parking garages that spiraled well over budget.” Noting the cost overruns, reporter Bill Wilson wrote: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.” (Wichita city manager proposes eliminating no-bid construction projects.)

Despite these two cost overruns on city projects, Wichita Mayor Carl Brewer wrote in a letter recommending Key Construction on a different matter: “Key is known for their consistent quality construction, budget control and on schedule delivery.” Maybe that’s what the evaluation committee relied on.

Also, two years ago Key Construction proposed — and was awarded by the city council — a no-bid contract for a parking garage. But the city later put the contract to competitive bid. Key, which first bid $6 million, later bid $4.7 million. This no-bid contract awarded to Key was cronyism in the extreme. If the desire of the majority of the city council, including Mayor Carl Brewer, had been realized, Wichita taxpayers would have sent an extra — and unnecessary — $1.3 million to a politically-connected construction company. See Campaign contributions show need for reform in Wichita for an example of how Key Construction has mastered political cronyism.

By the way, the mayor’s relationship with Wells means he should not participate in voting on this matter.

Dave Burk, Dave Wells: These two were original partners in WaterWalk, which has received over $40 million in subsidy, with little to show for results.

Dave Burk: He’s received many millions from many levels of government, but still thinks he doesn’t get enough. This is what we can conclude by his appeal of property taxes in a TIF district. Those taxes, even though they are rerouted back to him for his benefit, were still too high for his taste, and he appealed. The Wichita Eagle reported in the article (Developer appealed taxes on city-owned property): “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.”

rebenstorf-quote-dave-burkA number of Wichita city hall officials were not pleased with Burk’s act. According to the Eagle reporting, Burk was not authorized to do what he did: “Officials in the city legal department said that while Burk was within his rights to appeal taxes on another city-supported building in the Cinema Plaza, he did not have authorization to file an appeal on the city-owned parking/retail space he leases. … As for Burk signing documents as the city’s representative, ‘I do have a problem with it,’ said City Attorney Gary Rebenstorf, adding that he intends to investigate further.”

Council member Jeff Longwell was quoted by the Eagle: “‘We should take issue with that,’ he said. ‘If anyone is going to represent the city they obviously have to have, one, the city’s endorsement and … two, someone at the city should have been more aware of what was going on. And if they were, shame on them for not bringing this to the public’s attention.'”

Council member Lavonta Williams was not pleased, either, according to her quotations: “‘Right now, it doesn’t look good,’ she said. ‘Are we happy about it? Absolutely not.'”

In a separate article by the Eagle on this issue, we can learn of the reaction by two other city hall officials: “Vice Mayor Jim Skelton said that having city development partners who benefit from tax increment financing appeal for lower property taxes ‘seems like an oxymoron.’ City Manager Robert Layton said that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.'”

The manager’s quote is most directly damaging. In a tax increment financing (TIF) district, the city borrows money to pay for things that directly enrich the developers, in this case Burk and possibly his partners. Then their increased property taxes — taxes they have to pay anyway — are used to repay the borrowed funds. In essence, a TIF district allows developers to benefit exclusively from their property taxes. For everyone else, their property taxes go to fund the city, county, school district, state, fire district, etc. But not so for property in a TIF district.

This is what is most astonishing about Burk’s action: Having been placed in a rarefied position of receiving many millions in benefits, he still thinks his own taxes are too high. Now he wants more city taxpayer subsidy.

warren-bailout-poses-dilemma

Bill Warren: In 2008 the Old Town Warren Theater was failing and its owners — Bill Warren being one — threatened to close it and leave the city with a huge loss on a TIF district formed for the theater’s benefit. Faced with this threat, the city made a no-interest and low-interest loan to the theater. Reported the Wichita Eagle: “Wichita taxpayers will give up as much as $1.2 million if the City Council approves a $6 million loan to bail out the troubled Old Town Warren Theatre this week. That’s because that $6 million, which would pay off the theater’s debt and make it the only fully digital movie theater in Kansas, would otherwise be invested and draw about 3 percent interest a year.”

Besides Warren, you may — or may not — be surprised to learn that the theater’s partners included Dave Wells and Dave Burk, the same two men mentioned above. Also, Mayor Brewer’s relationship with Warren means he should not participate in voting on this matter.

With the history of these parties working in public-private partnerships, the Wichita City Council needs to question the matrix delivered by the evaluation committee.

Sedgwick County votes for harmful intervention

man-digging-coinsIt’s harmful when citizens are not armed with information and research. But when government officials and bureaucrats with the power to tax and plan our economies are uninformed, people suffer as our economy becomes less prosperous than it could be.

Today, in the name of creating jobs, the Sedgwick County Commission voted in favor of granting an economic development incentive to an expanding Wichita manufacturing firm. Commissioners Karl Peterjohn and Richard Ranzau voted against the award.

The action taken today is in addition to an award by the State of Kansas, and another likely to be awarded by the Wichita City Council. See Why is business welfare necessary in Wichita? for more background.

Intervention in the economy such as this does more harm than good, as we’ll see in a moment. It’s important that we learn the facts about incentives like these, as the Wichita area has the potential to become even more dependent on incentives and subsidies as a way of economic development.

For example, the president of Greater Wichita Economic Development Coalition recently broadcast an email with the subject heading “Investor Alert: WBJ outlines Mars Deal Development Incentives as one example of Aggressive Competition.” The email read as follows:

Dear Investors,

You are well aware of the Mars deal in Topeka and you are likely aware that no city outside the greater Kansas City Metro Area was given the opportunity to bid this project.

In my mind the take away from this Wichita Business Journal article is that our competition — local, state and international — have enormous tools to ensure economic development success.

The Mars project has the potential to receive $9.1 million in local incentives over the next five years not including the property tax abatement estimated at $10.0M.

Tim Chase

Messages like this — that we don’t have enough tools to compete — are common in Wichita. Politicians like Wichita Mayor Carl Brewer call for devoted revenue streams to fund economic development incentives.

What, though, is the track record of incentives? Those who, like myself, call for an end to their use: Don’t we want people to have jobs?

We need to decide what to believe. Should we believe our own eyes — that is, what we can easily see or are being told by our leaders — or something else?

Here’s a summary of the peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view. “Peer-reviewed” means these studies were stripped of identification of authorship and then subjected to critique by other economists, and were able to pass that review.

Ambrosius (1989). National study of development incentives, 1969 — 1985.
Finding: No evidence of incentive impact on manufacturing value-added or unemployment, thus suggesting that tax incentives were ineffective.

Trogan (1999). National study of state economic growth and development programs, 1979 — 1995.
Finding: General fiscal policy found to be mildly effective, while targeted incentives reduced economic performance (as measured by per capita income).

Gabe and Kraybill (2002). 366 Ohio firms, 1993 — 1995.
Finding: Small reduction in employment by businesses which received Ohio’s tax incentives.

Fox and Murray (2004). Panel study of impacts of entry by 109 large firms in the 1980s.
Finding: No evidence of large firm impacts on local economy.

Edmiston (2004). Panel study of large firm entrance in Georgia, 1984 — 1998
Finding: Employment impact of large firms is less than gross job creation (by about 70%), and thus tax incentives are unlikely to be efficacious.

Hicks (2004). Panel study of gaming casinos in 15 counties (matched to 15 non-gambling counties).
Finding: No employment or income impacts associated with the opening of a large gambling facility. There is significant employment adjustment across industries.

LaFaive and Hicks (2005). Panel study of Michigan’s MEGA tax incentives, 1995 — 2004.
Finding: Tax incentives had no impact on targeted industries (wholesale and manufacturing), but did lead to a transient increase in construction employment at the cost of roughly $125,000 per job.

Hicks (2007a). Panel study of California’s EDA grants to Wal-Mart in the 1990s.
Finding: The receipt of a grant did increase the likelihood that Wal-Mart would locate within a county (about $1.2 million generated a 1% increase in the probability a county would receive a new Wal-Mart), but this had no effect on retail employment overall.

Hicks (2007b). Panel study of entry by large retailer (Cabela’s).
Finding: No permanent employment increase across a quasi-experimental panel of all Cabela’s stores from 1998 to 2003.

(Based on Figure 8.1: Empirical Studies of Large Firm Impacts and Tax Incentive Efficacy, in Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It, Russell S. Sobel, editor. Available here.)

In discussing this research, the authors of Unleashing Capitalism explained:

Two important empirical questions are at the heart of the debate over targeted tax incentives. The first is whether or not tax incentives actually influence firms’ location choices. The second, and perhaps more important question, is whether, in combination with firms’ location decisions, tax incentives actually lead to improved local economic performance.

We begin by noting that businesses do, in fact, seem to be responsive to state and local economic development incentives. … All of the aforementioned studies, which find business location decisions to be favorably influenced by targeted tax incentives, also conclude that the benefits to the communities that offered them were less than their costs.

So yes, business firms are influenced by incentives. But the cost of the incentives is greater than the benefit. This research shows, over and over, that the cost-benefit ratio analysis that decision makers use is not meaningful or reliable.

So why do we use incentives? Why do so few in government or the public understand? Continuing from Unleashing Capitalism:

Given serious doubts about the efficacy of tax incentives, why are they so popular? The answer is that businesses looking to expand their plants or to move to new locations have strong incentives to lobby for tax breaks and other subsidies that add to owners’ profits and, moreover, encouraging a bidding war between two or more state or local governments promises to increase the value of the incentives they can extract from any one of them. Politicians interested in re-election, in turn, have strong incentives to respond to private firms’ self-serving subsidy demands in order to take credit for enticing a high-profile company to town or to avoid blame for the jobs that would be lost if an existing employer moved to another location. The politicians will be supported on the tax-incentive issue by other groups having immediate financial stakes in the process, including local real estate developers, investment bankers (who float public bond issues and arrange financing for the incoming firm), and economic development officials whose livelihoods depend on success in chasing after ornaments to add to the local or state economy.

The special interests of subsidy-seeking private firms dominate the political process because voter-taxpayers are only weakly motivated to become informed about the costs of tax incentive programs and to organize in opposition to them. They see the jobs “created” at a new plant; they do not see the jobs that are lost elsewhere in the economy as a result of the higher tax burden imposed on other businesses and as a result of the economic resources reallocated from productive activities toward lobbying government to obtain these favors. Nor can they readily see the higher future tax bill they themselves will be required to pay in order to amortize and service the public debt issued to finance the subsidies diverted into the pockets of the owners of politically influential private companies.

“Politicians interested in re-election.” This describes almost all elected officials.

“Economic development officials whose livelihoods depend on success in chasing after ornaments.” This is Tim Chase and the other members of the economic development regime in Wichita.

Today, in explaining his vote in favor of granting a target economic development incentive, Sedgwick County Commissioner Dave Unruh recognized a “certain pragmatism that is required here.” He said we’re really concerned about jobs, and that jobs is the number one priority. Sometimes creating jobs requires us, he said, to compete in the practical world. It would be better if there were no incentives, he said. “But the truth of the matter is that we have to sometimes provide incentives, subsidies, abatements, whatever category it falls in, in order to compete and secure the jobs and company that we’re trying to win.”

This is the standard argument, even of politically liberal members of commissions and councils. Jobs, jobs, jobs. We don’t like to use incentives — they all say this, especially conservatives — but we learned that we must use incentives if we want jobs. This embrace of pragmatism is called “maturing in office.”

But I would ask these officials like Unruh this question: What about all the research that says incentives do more harm to jobs than good?

What do Commissioners Unruh, Skelton, and Norton believe phrases like these mean?

No evidence of incentive impact on manufacturing value-added or unemployment”

Small reduction in employment by businesses which received Ohio’s tax incentives”

No evidence of large firm impacts on local economy”

No permanent employment increase across a quasi-experimental panel of all Cabela’s stores”

“Employment impact of large firms is less than gross job creation (by about 70%)”

These research programs illustrate the fallacy of the seen and the unseen. It is easy to see the jobs being created by economic development incentives. I do not deny that jobs are created at firms that receive incentives, at least most of the time. But these jobs are easy to see, and government makes sure we see them. We’re going to endure the groundbreaking and ribbon-cutting ceremonies. It’s easy for news reporters to find the newly-hired and grateful workers, or to show video footage of a new manufacturing plant.

But it’s very difficult to find specific instances of the harm that government intervention produces. It is, generally, dispersed. People who lose their jobs usually don’t know the root cause of why they are now unemployed. Businesses whose sales decline often can’t figure out why.

But uncontroverted evidences tells us this is true: These incentives, along with other forms of government interventionism, do more harm than good.

We can understand the average citizen being susceptible to arguments make by the likes of GWEDC’s Chase and the three Sedgwick county commissioners that voted for this incentive. Citizens generally don’t have the education, the time, and the initiative to evaluate these matters.

But for economic development professionals and elected officials with the power to tax and spend? Not knowing this research is inexcusable, and ignoring it is deplorable.

Could Wichita be the next Detroit?

That Detroit has declared bankruptcy: Does this mean anything for Wichita? From time to time we see news stories wondering if there is a parallel between these two cities — one known as Motor City, and the other as the Air Capital.

wichita-detroit-job-industry-concentration

The similarity is the concentrated nature of the economies of the two cities. Both have, as can be seen in the nearby chart, a greater percentage of jobs in manufacturing than does the United States as a whole.

Furthermore, when considering the dominant manufacturing industry in each city, we see that Wichita is more concentrated in aviation than Detroit is in automobiles. Much more concentrated, 13 percent to six percent.

Joseph Ashby on Wichita and Detroit.

On his radio show, Joseph Ashby talked about the business of making airplanes. He’s an aerospace engineer. The complexity of airplane manufacturing, he says, has protected the domestic industry from foreign competition. But that can change. I would say that change is likely.

Ashby also noted that our economic development programs heavily favor the aviation industry, which makes it more difficult for aspiring companies in other diverse industries to start and thrive. He isn’t the first to wonder about this. In 2010 Alan Cobb wrote:

What can we do to prevent Wichita from falling into the hole that is Detroit?

A simple answer is to continue throwing money and other goodies to keep the aviation companies. A better answer is we need to get rid of the notion that our elected officials and others have so much forethought to know what will or won’t be successful in 20 or 50 years. They don’t. …

While state and local government poured incentives into the Big Three’s trough, the marginal costs of doing business for everyone else crept up. …

It‘s the classic example of the seen vs. the unseen. We see the new factory Pontiac builds. We don’t see the businesses that reduce their size, close or just move. The irony is we will still see the Pontiac factory after it is closed and boarded up.

For each tax dollar given to the auto industry, one is taken one away from entrepreneurs trying to create the next GM, Ford, Google or Apple. This may not be too bad the first time or the second time, but over years and decades, the results can be significant. The “next big thing” will be created in a state with a better tax and regulatory climate. (Detroit, corporate welfare and Wichita’s future)

This week the Sedgwick County Commission will be asked to make a forgivable loan — in essence, a grant of free money — to an aerospace company. The City of Wichita will likely be asked to do the same. The State of Kansas is probably offering additional business welfare, although the state won’t say. These actions increase the cost of business for the firms that we need to diversify our economy, and makes it more difficult for them to survive.

Here’s something else: Wichita has a lot of debt. Not Detroit levels, thankfully. But we can’t borrow even $30 million to build a new library without swelling debt ratios over acceptable limits.

How does Wichita have so much debt? Here’s an example. Recently the city spent $400,000 on a project to analyze aging fire stations with the aim of planning future projects. Fire stations are a long-lived capital asset, which is the type of asset and spending spending that is commonly financed with long-term debt. But an analysis to see if the spending is necessary and what type of spending is needed? This is current consumption and should not be paid for by long-term debt. Yet, the city paid for this with borrowed funds. This type of borrowing is common.

Finally, a big problem that contributed to Detroit’s problems is corruption. Wichita isn’t Detroit when it comes to corruption. But we could be headed that way. We have serious problems like overpriced no-bid contracts for the mayor’s fishing buddy, mysterious campaign contributions from a Michigan company involved in a large contract before the council, and a Methodist minister’s foray into real estate development and politics. We have city ordinances regarding ethics that seem to have a clear meaning, but the city attorney says they don’t apply.

Warren Theater Brewer's Best 2013-07-18

Notwithstanding these serious issues, it’s darkly comical to note this: Wichita Mayor Carl Brewer has voted several times to grant various forms of business welfare to movie theater owner Bill Warren and his partners. Then — and I swear I am not making this up — when Brewer started manufacturing and selling barbeque sauce, it was sold at Warren’s theaters. It still is, as of last week.

Are there no adults in the room?

Where is the downtown Wichita tax base?

There’s been much investment in downtown Wichita, we’re told, but the goal of increasing the tax base is farther away rather than closer.

Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base.

In his State of the City Address for 2013, Wichita Mayor Carl Brewer told the audience (based on his prepared remarks):

As you know, revitalizing downtown has been a key part of growing our community in recent years, recognizing that a healthy and thriving downtown improves our ability to attract new business, keep our young people here, and expand our tax base. With $100 million in completed downtown projects in 2012 and another $115 million starting this year, we’ve made extraordinary progress toward having the downtown that Wichitans have dreamed of. … As development continues downtown, we are closer to reaching our goals of increased pride, an increased tax base, and bringing more businesses and jobs to Wichita.

ssmid-investment-quote-2013

In its report on the economics of downtown Wichita redevelopment, the Wichita Downtown Development Corporation says:

The Downtown SSMID (Self Supported Municipal Improvement District — shown above) has seen a ten-year total amount of $396,850,538 in public investment and $564,776,159 in private investment. SSMID property values have increased over $300 million in the last ten years.

The Wichita Downtown Development Corporation sold the planning process to Wichitans by making the argument that “it will grow existing tax base revenues.”

Wichita downtown self-supporting municipal improvement district (SSMID) boundary map

To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.

Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.

With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little). This process is the success story that Mayor Brewer and boosters of public investment in downtown trumpet, as the mayor did twice in one paragraph in his State of the City Address.

So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?

The answer is that after a period of increasing values, the assessed value of property in downtown has has been declining. The peak was in 2008. The nearby table holds the figures.

This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.

Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars in worth, we are told.

So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?

Wichita downtown self-supporting municipal improvement district (SSMID) assessed property valuation

Data can be viewed here.

WichitaLiberty.TV July 21, 2013

WichitaLiberty.TV logo

In this episode of WichitaLiberty.TV, host Bob Weeks recommends the Crony Chronicals website and explains the harm of cronyism. Westar, our electric utility, is asking for a rate increase, and cronyism is part of the application. Finally, Wichita Mayor Carl Brewer feels he can’t shop for his personal car in Wichita, but dishes out no-bid contracts and millions in subsidies to his cronies. Episode 5, broadcast July 21, 2013.

Concern over state office building decision politics

Speculation that politics might influence a decision over the location of State of Kansas offices is amusing, given that one of the players has a history of awarding campaign contributors and friends. Will he now advocate for keeping politics out of governmental decision-making?

When the State of Kansas said it is going to move offices from its downtown location, a local politician expressed concern to the Wichita Eagle:

“It raises a red flag,” says Rep. Jim Ward (D-Wichita). “I have a concern there is a history of the governor rewarding financial contributors with state contracts. I know he has contributors in Wichita that own (buildings) that fall into that category. … I don’t want that to be the reason we’re moving.”

In another Eagle article, Ward said his second priority is “to find out who owns the building where the departments may move ‘to make sure this isn’t going to help a political contributor.'”

I welcome Rep. Ward’s concern regarding politicians rewarding financial contributors with government contracts. Of course, he might have taken a moment to find out who actually owned the building before making charges of political payback.

It would be interesting to know if Wichita Mayor Carl Brewer shares Ward’s concern about political payback as he intervenes and tries to keep the state offices in their current location.

Will Brewer argue that the state should keep politics out of this decision? If so, this will be the same Carl Brewer who operates in this fashion:

Votes for no-bid overpriced contracts to political contributors: In August 2011 the Wichita City Council voted to award Key Construction a no-bid contract to build the parking garage that is part of the Ambassador Hotel project, now known as Block One. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.

Wichita mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.

The no-bid contract for the garage was just one of many subsidies and grants given to Key Construction and Dave Burk as part of the Ambassador Hotel project. Both of these parties are heavy campaign contributors to nearly all city council members. Brewer and the head of Key Construction are apparently friends, embarking on fishing expeditions. Then Brewer was willing to spend an extra $1.3 million of taxpayer money to reward a politically-connected construction firm that makes heavy campaign contributions to him and many other council members.

Sits in judgment of campaign contributors: In July 2012 Brewer participated in a decision to award the large contract for the construction of the new Wichita airport to Key Construction, despite the fact that Key was not the low bidder. The council was tasked to act in a quasi-judicial manner, to make decisions whether discretion was abused or whether laws were improperly applied. Brewer’s judgment was in favor of Key Construction, even though its bid had the same defect as the lower bid. This decision cost taxpayers and airport users an extra $2 million, to the benefit of a major campaign donor and fishing buddy.

Recommends his cronies, even when they’ve harmed city finances: In a Wichita Eagle story that reported on “city-financed downtown parking garages that spiraled well over budget” we learned this: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.” Despite the city’s experience with this company, Brewer wrote a letter recommending Key Construction (and only Key), observing “Key is known for their consistent quality construction, budget control and on schedule delivery.”

warren-theater-brewers-best-bbq-sauce-small

Entangles business welfare and personal business: In 2008 the Wichita City Council approved a no- and low-interest loan to movie theater owner Bill Warren and his partners. Reported the Wichita Eagle: “Wichita taxpayers will give up as much as $1.2 million if the City Council approves a $6 million loan to bail out the troubled Old Town Warren Theatre this week. That’s because that $6 million, which would pay off the theater’s debt and make it the only fully digital movie theater in Kansas, would otherwise be invested and draw about 3 percent interest a year.”

Warren’s theaters have received other financial benefits from the city under Brewer’s leadership. Then when Brewer started manufacturing and selling barbeque sauce, it was sold at Warren’s theater.

Given this history, it’s difficult to imagine Brewer arguing that the office location decision should be made free from political considerations. His behavior — and that of some other council members as well — shows that making investments in Wichita politicians is highly lucrative.

This decision is being made in Topeka at the state level, not at Wichita City Hall. It’s still amusing, however, to see Rep. Ward express concern over political campaign contributions influencing Wichita government.

WichitaLiberty.TV July 14, 2013

WichitaLiberty.TV logo

In this episode of WichitaLiberty.TV, host Bob Weeks explains the attitude of the Wichita City Council regarding ethical behavior and reports on incidents that illustrate the need for campaign finance reform and pay-to-play laws in Wichita and Kansas. Also, Bob notices a document produced this year titled “Wichita Area Future Water Supply: A Model Program for Other Municipalities” and wonders why the city boasts of expensive water projects and long-term planning at the same time it’s forcing an austerity campaign on its citizens. Episode 4, aired July 14, 2013.

The speck and the logs

car-lot-calls-cops-shopper-wichita-mayor

When Wichita Mayor Carl Brewer recently shopped for a car, it made the front page of the newspaper, and for a reason that doesn’t seem very newsworthy. Buried in the story, however, is a short passage that holds actual news. Carrie Rengers reports in the Wichita Eagle:

[Brewer] says he knows a lot of dealers in Wichita … but he says he has to be careful about trying to get a good deal while shopping in the city.

“I don’t want to be accused of getting any type of special deals or anything else,” he says. “You have that handful of people that’s always searching for some type of conspiracy.”

It’s good to know that this mayor is concerned about ethical behavior when shopping for a car. But I’m surprised, as this concern for virtue doesn’t match the behavior of the mayor and many members of the Wichita City Council.

Do we need to run down the list?

Exhibit 1: In August 2011 the Wichita City Council voted to award Key Construction a no-bid contract to build the parking garage that is part of the Ambassador Hotel project, now known as Block One. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.

Wichita mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.

The no-bid contract for the garage was just one of many subsidies and grants given to Key Construction and Dave Burk as part of the Ambassador Hotel project. Both of these parties are heavy campaign contributors to nearly all city council members. Brewer and the head of Key Construction are apparently friends, embarking on fishing expeditions.

What citizens need to know is that Brewer and the Wichita City Council were willing to spend an extra $1.3 million of taxpayer money to reward a politically-connected construction firm that makes heavy campaign contributions to council members. Only one council member, Michael O’Donnell, voted against this no-bid contract. At the time, no city bureaucrats expressed concern about this waste of taxpayer money.

Exhibit 2: In July 2012 Brewer participated in a decision to award the large contract for the construction of the new Wichita airport to Key Construction, despite the fact that Key was not the low bidder. The council was tasked to act in a quasi-judicial manner, to make decisions whether discretion was abused or whether laws were improperly applied. Brewer’s judgment was in favor of Key Construction, even though its bid had the same defect as the lower bid. This decision cost taxpayers and airport users an extra $2 million, to the benefit of a major campaign donor and fishing buddy.

Exhibit 3: In a Wichita Eagle story that reported on “city-financed downtown parking garages that spiraled well over budget” we learned this: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.”

Despite this personal experience, Brewer wrote a letter recommending Key Construction (and only Key), observing “Key is known for their consistent quality construction, budget control and on schedule delivery.”

Exhibit 4: In 2008 the Wichita City Council approved a no- and low-interest loan to movie theater owner Bill Warren and his partners. Reported the Wichita Eagle: “Wichita taxpayers will give up as much as $1.2 million if the City Council approves a $6 million loan to bail out the troubled Old Town Warren Theatre this week. That’s because that $6 million, which would pay off the theater’s debt and make it the only fully digital movie theater in Kansas, would otherwise be invested and draw about 3 percent interest a year.”

warren-theater-brewers-best-bbq-sauce-small

Warren’s theaters have received other financial benefits from the city under Brewer’s leadership, too. Then — and I swear I am not making this up — when Brewer started manufacturing and selling barbeque sauce, it was sold at Warren’s theaters.

Really. It happened.

What can we say about a mayor who is concerned about the appearance of impropriety when shopping for his personal automobile, but is not able to understand the problems with his own behavior in office?

That he feels he needs to shop for a car outside the city, but at the same time has no problem voting for overpriced no-bid contracts for campaign contributors and friends?

That he’s worried that a car dealer might feel he can gain something by giving the mayor a “special deal,” but votes to give millions to a campaign contributor, and then sells his barbeque sauce in that person’s business?

It’s difficult to understand or reconcile these two behaviors: Hyper-sensitivity to ethics when buying his personal car, as contrasted to total numbness to unethical cronyism that is against the law in some states and cities.

Wichita personal income growth benchmark

When Visioneering Wichita recently presented its annual report to the Wichita City Council, Wichita City Council members received benchmark documents. Whether the mayor and council members actually looked at and considered these measurements is unknown.

We do know that Wichita Mayor Carl Brewer, as memorialized in the official meeting minutes, praised Visioneering: “Mayor Brewer stated this is one of the smartest moves that the City of Wichita has done because it was the primary catalyst that pulled the public and the private together and laid out a vision for our City.”

Other council members also expressed enthusiastic approval for Visioneering.

As shown in Wichita job growth and Visioneering peers, the benchmark data for Wichita as compared to its peer cities shows poor relative performance of the Wichita economy. That article looked at job growth, which is one of the areas Visioneering is benchmarking.

Another area Visioneering benchmarks is per capita income. The chart provided by Visioneering is difficult to read and recognize emerging trends. I’ve prepared an interactive visualization of Wichita and the peer areas that Visioneering uses.

Wichita and peer per capita income, 1969 to 1989

To the left is a chart of Wichita and peer personal income per capita, from 1969 to 1989. (Click for a larger version.) During this time period, Wichita compares well to the peer metropolitan areas that Visioneering uses.

Wichita and peer per capita income, 1990 to 2011

To the left is a chart of of the same data, but from 1990 to 2011. (Click for a larger version.) It’s during this stretch that Wichita starts to fall behind its peers in per capita income, until finally Wichita ranks last in this measure, as it also does in job growth.

Soon Visioneering will make a presentation to members of the Sedgwick County Commission. Perhaps commissioners will ask a few questions about these benchmarks. If I were a commissioner, I might ask these questions:

Is Visioneering satisfied with the performance of Wichita, as measured by these benchmarks?

Is Wichita’s trend in these benchmarks moving in the right direction, or is Wichita falling farther behind?

Are these the correct benchmarks we should be using?

Is it possible that Visioneering is in fact making the Wichita economy better than it would be without Visioneering?

Does Visioneering need additional resources to fulfill its mission?

Visioneering News, captured June 5, 2013

On the Visioneering website, why are no future events listed? Are none planned?

On the Visioneering website, under the “News” section, is it true that there has been no news to post since August 2011 or September 2012 (there are two streams of news)?

Citizens might also wonder why no members of the Wichita City Council asked any questions like these.

Explore the data yourself by using the visualization below, or click here to open it in a new window, which may work better for some people. Use Ctrl+Click to highlight metropolitan areas for comparison. Data is from U.S. Bureau of Economic Analysis. Visualization created by myself using Tableau Public.

Wichita begins rebates and regulation

Instead of relying on market forces, Wichita imposes a new tax and prepares a new regulatory regime.

Equus BedsAt today’s meeting of the Wichita City Council, the city decided to spend up to $1 million this year on rebates to encourage people to buy water-efficient appliances. This will save a vanishingly small amount of water at tremendous cost.

The worst realization from today’s city council meeting is how readily citizens, politicians, and bureaucrats will toss aside economic thinking. The antimarket bias that Bryan Caplan explains in The Myth of the Rational Voter: Why Democracies Choose Bad Policies was in full display — even by the conservative members of the council.

It’s also clear that some council members want to go down the road of austerity rather than abundance.

What did we learn today? Many speakers used the terms “conservation” and “judicious.” Conservation is good. Judicious use is good. But each person applies different meanings to these concepts. A great thing about living in a (relatively) free economy is that each person gets to choose to spend their time and money on the things that are important to them, and in the amounts they want. We make these choices many times each day. Sometimes we’re aware of making them, and sometimes we’re not.

For example: If you’re watching television alone in your home, and you go to the kitchen to get a snack, do you turn off the television for the moment that you’re not watching it? No? Well, isn’t it wasting electricity and contributing to global warming to have a switched-on television that no one is watching, even for just a moment?

Some people may turn off the television in this scenario. But most people probably decide that the effort required to save a minute’s worth of electricity consumption by a television isn’t worth the effort required.

(By the way, the type of television programs you watch each evening: Is it worth burning dirty coal (or running precious water through dams, or splitting our finite supply of uranium atoms, or spoiling landscapes and killing birds with wind turbines) just so you can watch Bill O’Reilly or Rachel Maddow rant? Or prison documentaries? Or celebrity gossip? Reruns of shows you’re already seen? And I’ve seen you fall asleep while watching television! What a monumental waste. We should require sleep sensors on all new televisions and rebates to retrofit old sets.)

But when people leave their homes empty to go to work, almost everyone turns off the television, lights, and other appliances. Many may adjust their thermostats to save energy. People make the choice to do this based on the costs of leaving the lights on all day versus the cost of turning them on and off. No one needs to tell them to do this. The relative prices of things do this.

(You may be noting that children have to be told to turn off televisions and lights. That’s true. It’s true because they generally aren’t aware of the prices of things, as they don’t pay utility bills. But adults do.)

In most areas of life, people use the relative prices of things to make decisions about how to allocate their efforts and consume scarce resources. Wichita could be doing that with water, but it isn’t.

The conservation measures recommended by speakers today all have a cost. Sometimes the cost is money. In some cases the cost is time and convenience. In others the cost is a less attractive city without green lawns and working fountains. In many cases, the cost is shifted to someone else who is unwilling to voluntarily bear the cost, as in the rebate program.

At least we’ll be able to measure the cost of the rebate program. For most of the other costs, we’re pretending they don’t exist.

Instead of relying on economics and markets, Wichita is turning to a regulatory regime. Instead of pricing water rationally and letting each person and family decide how much water to use, politicians and bureaucrats will decide for us.

All city council members and the mayor approved this expansion of regulation and taxation.

(Yes, it’s true that the rebates will be funded from the water department, but that’s a distinction without meaningful difference.)

The motion made by Mayor Carl Brewer contained some provisions that are probably good ideas. But it also contained the appliance rebate measure. Someone on the council could have made a substitute motion that omitted the rebates, and there could have been a vote.

But not a single council member would do this.

It’s strange that we turn over such important functions as our water supply to politicians and bureaucrats, isn’t it?

Wichita job growth and Visioneering peers

Wichita has set ambitious goals in job growth, but it doesn’t seem that the Visioneering program has produced results. But apparently Wichita government officials are satisfied.

In 2004 Wichita leaders created Visioneering Wichita. The self-described goals of Visioneering are “To provide citizen input in developing our future, to facilitate communications so reality and perceptions are aligned, and to create a strategic plan that ensures a quality of life and encourages our young people to live, learn, work and play in our regional community.”

One of the benchmarks of Visioneering is “Exceed the highest of the annual percentage job growth rate of the U.S., Omaha, Tulsa, Kansas City and Oklahoma City.”

In May, Suzie Ahlstrand of the Wichita Chamber of Commerce presented Wichita City Council members with the benchmark documents, but didn’t elaborate on these in her presentation.

I can understand her reluctance to focus on these numbers. They’re not good.

We don’t know what the Wichita economy would look like in the absence of Visioneering. There’s no way to rewind and watch what would have happened had Visioneering not been created.

What we do know, however, is that the Wichita-area economy is not performing well. Consider job growth, since that is the first of Visioneering’s benchmarks. The chart Visioneering presented to council members is available here. It’s a difficult chart to read, and doesn’t lend to ready comparison of how Wichita is doing compared to our peers.

Following are charts I created from similar data. These charts are different from Visioneering’s in that they show the cumulative change in job growth from a starting point. My data goes back to 2001, and since the visualization is interactive, you may adjust the range of years.

Here is a static chart of job growth, considering all jobs. (Click for a larger version.)

Wichita and Peer Job Growth, Total Employment

Here is a static chart of job growth, this time considering only government jobs. (Click for a larger version.)

Wichita and Peer Job Growth, Government Employment

Can we be satisfied with this performance? Considering all jobs types, Wichita is in last place. There are those who might take comfort that when including government jobs, Wichita does better. But as growth in the government sector outpaces growth in the private sector, Wichita becomes less prosperous than if we were creating private sector jobs.

In the light of this, consider the reaction of Wichita Mayor Carl Brewer, as presented in the official minutes: “Mayor Brewer stated this is one of the smartest moves that the City of Wichita has done because it was the primary catalyst that pulled the public and the private together and laid out a vision for our City.”

Other council members also expressed enthusiastic approval for Visioneering. (For coverage of all council members’ reactions, see Wichita city council reacts to Visioneering presentation.)

We need to ask, however, these questions: First, were the mayor and council members aware of these job creation numbers? Second, if they were aware, are they satisfied with this performance?

Explore the data yourself by using the visualization below, or click here to open it in a new window, which may work better for some people. Use Ctrl+Click to highlight metropolitan areas for comparison. Data is from Bureau of Economic Analysis by way of U.S. Department of Labor. Visualization created by myself using Tableau Public.

Wichita mayor said to be ‘under lockdown’

When Wichita ABC affiliate KAKE Television ran a news story critical of Wichita Mayor Carl Brewer, reporter Jared Cerullo wasn’t able to interview Brewer to get his reaction to his critics. The mayor refused to talk to Cerullo.

Jeff Herndon, KAKE Television news anchor, speaking at Wichita Pachyderm Club, May 17, 2013. Herndon is speaking for himself, and not on behalf of KAKE.

Speaking last week at the Wichita Pachyderm Club, KAKE news anchor Jeff Herndon said that KAKE has “repeatedly” tried to get an on-camera interview with Brewer. But the mayor is always busy, Herndon said: “They’ve got him on lockdown. He’s not going to answer that.”

Herndon was speaking for himself, and not for his employer. In his talk to the Pachyderms, he was critical of Wichita news media — both television and print — for not covering city government rigorously, telling the audience: “We need more reporters on that city government beat, and not just on decisions they make. We need to hold them accountable for the decision. We don’t do that.”

Brewer is sometimes mentioned as a candidate for higher office, perhaps challenging Kansas Governor Sam Brownback next year. Brewer’s term as mayor ends in April 2015. He is not eligible for election to another term as mayor because of Wichita’s term limits law.

KAKE Television news story: Controversy over hotel sales tax vote

Notes:

  • The KAKE news story referred to is Wichita Mayor Scrutinized For Controversial Vote. Both text and video are available.
  • On his radio program, Joseph Ashby had an interesting take on Herndon’s remarks and Wichita new media.
  • Video of the city council meeting that was the subject of the KAKE news story is here.
  • Explanation of the public policy angle that drove citizens to testify at the April 16 city council meeting is here.
  • The original article that identified the problem and to solutions is Pay-to-play laws are needed in Wichita and Kansas. In that article I wrote: “When one looks at the candidates these people contribute to, you notice that often there’s no commonality to the political goals and ideals of the candidates. Some people contribute equally to liberal and conservative council members. Then, when these people appear in the news after having received money from the Wichita City Council, it snaps into place: These campaign donors are not donating to those whose ideals they agree with. They’re donating so they can line their own pockets.”

Joseph Ashby on local news media, anti-conservative bias

Wichita city hall logoLast week KAKE Television news anchor Jeff Herndon addressed the Wichita Pachyderm Club. Today, on the Joseph Ashby Show, the host commented on Herndon’s views on Wichita news media, and drew some conclusions about anti-conservative bias in Wichita news media.

Joseph Ashby Show, May 23, 2013 (excerpt).

The KAKE Television news story referred to is Wichita mayor comes under scrutiny for controversial vote.

Starwood calls on Wichita

Office worker using telephone and computer

This Tuesday the Wichita City Council considers economic development incentives to Starwood Hotels & Resorts for a call center to open in Wichita.

Besides the usual problems with cronyism and corporate welfare (see Wichita-area economic development policy changes proposed for explanation of some problems), there are a few issues to consider regarding this item.

First, the site where the Starwood call center will be located is owned by Max Cole. He and his wife are significant campaign contributors to Wichita City Council Member James Clendenin (district 3, southeast and south Wichita). Under the concept of pay-to-play laws that Wichita needs, Clendenin should refrain from voting on this matter.

Second, a table of salaries supplied in the agenda packet makes an implied promise that probably won’t be kept. The table shows numbers of jobs (actually full-time equivalents), the hourly pay rate, and the annual wage. The annual wage, in all cases, is 2,080 times the hourly rate, meaning it is assumed that workers will work 40 hours per week, 52 weeks per year.

Information from the Kansas Department of Commerce offers more detail. Initially, 495 full-time and 55 part-time jobs will be created. In year five, the total will be 860 full-time and 95 part-time total. There is also this notation: “The company will pay at least 50% of employee health insurance benefits.”

As you may be aware, one of the provisions of Obamacare is that if employees work over 30 hours per week, the employer must provide health insurance or be fined. As a result, many companies across the county are scaling back weekly work hours to less than 30.

We ought to ask if Starwood intends to hire employees who will work 40 hours per week, if they want to. Will the liberals on the Wichita City Council — Mayor Carl Brewer, Council Member Lavonta Williams (district 1, northeast Wichita), and Council Member Janet Miller (district 6, north central Wichita) — ask that Starwood operate under the standards of Obamacare? The table presents data as “full-time equivalents,” which provides room for Starwood to go either way.

Starwood is asking for a forgivable loan of $200,000 from Wichita, and another of the same amount from Sedgwick County. I asked the Kansas Department of Commerce if it would reveal the programs and incentives that Starwood will receive from the State of Kansas. It would not supply that information at this time, but I obtained the information by another means. The state describes its offer to Starwood as worth “up to $1,583,272.” Of this, $750,000 would be in the form of direct cash grants.

Here is a link to the relevant pages from the Wichita city council agenda: Starwood Hotels & Resorts Economic Development Incentive Agreement with City of Wichita, Kansas. Also, from the Department of Commerce: Starwood Hotels & Resorts Economic Development Incentives offered by State of Kansas.

Governing by extortion destroys freedom

By Dave Trabert, Kansas Policy Institute.

Government takes and gives

Merriam-Webster defines extortion as the “… exaction of money or property through intimidation or undue exercise of authority.” It’s illegal for individuals or corporations to engage in extortion, but some governments are increasingly using forms of extortion to exact higher taxes, make citizens more dependent upon government and ultimately, strip away economic and political freedom.

Government intimidation may not come with Soprano-like threats of violence. Some government officials may not even realize they are extorting the populous — the practice of presenting the government solution as the only option has become that commonplace. But no matter how politely or subtly phrased, the message is “give us what we want or else …” The “or else” comes in many forms.

The federal government punishes citizens with flight delays and service cuts to senior citizens while continuing to lavish taxpayer money on favored political friends and countless other examples of waste and duplication. The federal government will either get to borrow and spend as much as it wants or innocent citizens will pay the price.

Some state officials in Kansas want to extend a temporary sales tax and/or take away deductions for home mortgage interest and property taxes. They say it’s necessary to avoid massive budget deficits that would de-fund schools and services. The message is that higher taxes are the only alternative, when in fact they could choose to bring down the cost of government services and stop giving out corporate welfare in the name of economic development.

University officials in Kansas say they will raise tuition, eliminate professors, and restrict student admissions if state aid is even slightly reduced. They say nothing of reducing administrative costs that rose three times faster than inflation or using large cash reserves that accumulated from a 137 percent increase in tuition and fees over the last ten years. Give them what they want or students, parents, and staff will suffer.

Local governments routinely tell citizens that taxes must be increased to avoid police and fire layoffs, pool closings and other direct service reductions. Why not consolidate overlapping government programs and bureaucracy instead of raising taxes? Or maybe stop giving taxpayer money away to friendly developers who support the growth of government and help underwrite campaigns for public office?

Our state and nation were founded on the principles of freedom and limited government. Yet those who stand in defense of freedom are often met with ridicule. Carl Brewer, the Mayor of Wichita, recently issued a thinly veiled threat to sue a woman for asking him to recuse himself from a vote to give a $700,000 sales tax exemption to a campaign contributor (and fishing buddy). A columnist for the Hutchinson News falsely blamed those who want less government intrusion in our lives for poverty, high property taxes and other woes as opposed to following his prescription for progressive, big government solutions.

Thomas Jefferson said, “Government exists for the interests of the governed, not for the governors.” Some in our state seems to have forgotten that and are working to prove another of his maxims, “The natural progress of things is for liberty to yield and government to gain ground.”

Citizens must be persistent and vocal in reminding elected officials of the former or we shall continue to suffer the loss of liberty.