Downtown Wichita revitalization

Articles about the redevelopment of downtown Wichita and its impact on the economic freedom of Wichitans.

The government planning process started in south-central Kansas will likely be captured by special interest groups that see ways to benefit from the plan. The public choice school of economics and political science has taught us how special interest groups seek favors from government at enormous costs to society, and we will see this at play again over the next few years.

This week the Sedgwick County Commission voted to participate in a HUD Sustainable Communities Regional Planning Grant. While some justified their votes in favor of the plan because “it’s only a plan,” once the planning process begins, special interests plot how to benefit themselves at the expense of the general public. Then once the plan is formed, it’s nearly impossible to revise it, no matter how evident the need.

An example of how much reverence is given to government plans comes right from the U.S. Supreme Court in the decision Kelo v. New London, in which the Court decided that government could use the power of eminent domain to take one person’s property and transfer it to someone else for the purposes of economic development. In his opinion for the Court, Justice Stevens cited the plan: “The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community.” Here we see the importance of the plan and due reverence given to it.

Stevens followed up, giving even more weight to the plan: “To effectuate this plan, the City has invoked a state statute that specifically authorizes the use of eminent domain to promote economic development. Given the comprehensive character of the plan, the thorough deliberation that preceded its adoption, and the limited scope of our review, it is appropriate for us, as it was in Berman, to resolve the challenges of the individual owners, not on a piecemeal basis, but rather in light of the entire plan. Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the Fifth Amendment.”

To Stevens, the fact that the plan was comprehensive was a factor in favor of its upholding. The sustainable communities plan, likewise, is nothing but comprehensive, as described by county manager Bill Buchanan in a letter to commissioners: “[the plan will] consist of multi-jurisdictional planning efforts that integrate housing, land use, economic and workforce development, transportation, and infrastructure investments in a manner that empowers jurisdictions to consider the interdependent challenges of economic prosperity, social equity, energy use and climate change, and public health and environmental impact.”

That pretty much covers it all. When you’re charged with promoting economic prosperity, defending earth against climate change, and promoting public health, there is no limit to the types of laws you might consider.

Who will plan?

The American Planning Association praised the Court’s notice of the importance of a plan, writing “This decision underscores the importance for a community to have a comprehensive development plan formulated through a democratic planning process with meaningful public participation by everyone.”

But these plans are rarely by and for the public. Almost always the government planning process is taken over and captured by special interests. We see this in public schools, where the planning and campaigning for new facilities is taken over by architectural and construction firms that see school building as a way to profit. It does not matter to them whether the schools are needed.

Our highway planning is hijacked by construction firms that stand to benefit, whether or not new roads are actually needed.

Our planning process for downtown Wichita is run by special interest groups that believe that downtown has a special moral imperative, and another group that sees downtown as just another way to profit at taxpayer expense. Both believe that taxpayers across Wichita, Kansas, and even the entire country must pay to implement their vision. As shown in Kansas and Wichita need pay-to-play laws the special interests that benefit from public spending on downtown make heavy political campaign contributions to nearly all members of the Wichita City Council. They don’t have a political ideology. They contribute only because they know council members will be voting to give them money.

In Wichita’s last school bond election, 72 percent of the contributions, both in-kind and cash, was given by contractors, architects, engineering firms and others who directly stand to benefit from new school construction, no matter whether schools are actually needed. The firm of Schaefer Johnson Cox Frey Architecture led the way in making these contributions. It’s not surprising that this firm was awarded a no-bid contract for plan management services for the bond issue valued at $3.7 million. This firm will undoubtedly earn millions more for those projects on which it serves as architect.

The special interest groups that benefit from highway construction: They formed a group called Economic Lifelines. It says it was formed to “provide the grassroots support for Comprehensive Transportation Programs in Kansas.” Its motto is “Stimulating economic vitality through leadership in infrastructure development.”

A look at the membership role, however, lets us know whose economic roots are being stimulated. Membership is stocked with names like AFL-CIO, Foley Equipment Company, Heavy Constructors Association of Greater Kansas City, Kansas Aggregate & Concrete Associations, Kansas Asphalt Pavement Association, Kansas Contractors Association, Kansas Society of Professional Engineers, and PCA South Central Cement Promotion Association. Groups and companies like these have an economic interest in building more roads and highways, whether or not the state actually needs them.

The planners themselves are a special interest group, too. They need jobs. Like most government bureaucrats, they “profit” from increasing their power and influence, and by expansion of their budgets and staffs. So when Sedgwick County Commissioner Jim Skelton asks a professional planner questions about the desirability of planning, what answer does he think he will get? It’s not that the planners are not honest people. But they have a vested economic and professional interest in seeing that we have more government planning, not less.

And we have evidence that planners watch out for themselves. It is not disputed that this planning grant benefits Regional Economic Area Partnership (REAP). Sedgwick County Commissioner Richard Ranzau says that John Schlegel, Wichita’s Director of Planning, told him that “acceptance of this grant will take REAP to another level, because right now they are struggling, and this will help plot the course for REAP.” He said that REAP, which is housed at the Hugo Wall School of Public Affairs at Wichita State University, needs to expand its role and authority in order to give it “something to do.”

We see that REAP is another special interest group seeking to benefit itself. In this case, our best hope is that REAP engages in merely make-work, that the plan it produces is put on a shelf and ignored, and that the only harm to us is the $1.5 million cost of the plan.

By the way, did you know that Sedgwick County Commissioner Dave Unruh, who voted in favor of the plan that benefits REAP, is a board member of REAP, and may become the next chairman? Special interest groups know how to play the political game, that’s for sure.

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For Wichita, no election news is good politics

by Bob Weeks on March 7, 2012

After last week’s election results in Wichita in which voters canceled an ordinance passed by the city council, I noticed there was no mention of the election results on the city’s website. So I dashed off a note to several responsible authorities, writing this:

“I notice that the city’s website carries no news on the results of the February 28th election. Is this oversight unintentional? Or does the city intend to continue spending its taxpayer-funded news producing efforts on stories with headlines like ‘Valentine’s at Mid-Continent Airport,’ ‘Rain Garden Workshops in February,’ and ‘Firefighter Receives Puppy Rescued at Fire Scene’?”

It’s not as though city staff doesn’t have time to produce a story on the election. The city’s public affairs department employs 15 people with an annual budget of some $1.3 million. While some of these employees are neighborhood assistants, there are still plenty of people who could spend an hour or two writing a story announcing the results of the February 28th election.

Except: That doesn’t fit in with the city’s political strategy. That strategy appears to be to ignore the results of the election, or to characterize the election as a narrowly-focused referendum on one obscure economic development tool.

At one time, however, the attitude of city hall was that the election was over the entire future of downtown Wichita. Mayor Carl Brewer said the election would cause “turmoil inside the community, unrest.” Council member Pete Meitzner (district 2, east Wichita) said we needed to have an early election date so “avoid community discourse and debate.” He later backpedaled from these remarks.

But now that city hall and its allies lost the election, the issue is now cast as having been very narrow, after all. Citizens aren’t against economic development incentives, they say. They’re just against hotel guest tax rebates.

This narrow interpretation illustrates — again — that we have a city council, city hall bureaucracy, and allied economic development machinery that is totally captured by special interests. Furthermore, the revealed purpose of the city’s public affairs department, including its television channel, is now seen as the promotion of Wichita city government, not Wichita and its citizens. These are two very different things.

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A Wichita shocker

by Bob Weeks on March 6, 2012

“Local politicians like to get in bed with local business, and taxpayers are usually the losers. So three cheers for a voter revolt in Wichita, Kansas last week that shows such sweetheart deals can be defeated.” So starts today’s Wall Street Journal Review & Outlook editorial (subscription required), taking notice of the special election last week in Wichita.

The editorial page of the Wall Street Journal is one of the most prominent voices for free markets and limited government in America. Over and over Journal editors expose crony capitalism and corporate welfare schemes, and they waste few words in condemning these harmful practices.

The three Republican members of the Wichita City Council who consider themselves fiscal conservatives but nonetheless voted for the corporate welfare that voters rejected — Pete Meitzner (district 2, east Wichita), James Clendenin (district 3, southeast and south Wichita), and Jeff Longwell (district 5, west and northwest Wichita) — need to consider this a wake up call. These members, it should be noted, routinely vote in concert with the Democrats and liberals on the council.

For good measure, we should note that Sedgwick County Commission Republicans Dave Unruh and Jim Skelton routinely — but not always — vote for these crony capitalist measures.

The Wichita business community, headed by the Wichita Metro Chamber of Commerce endorsed this measure, too.

Hopefully this election will convince Wichita’s political and bureaucratic leaders that our economic development policies are not working. Combined with the startling findings by a Tax Foundation and KMPG study that finds Kansas lags near the bottom of the states in tax costs to business, the need for reform of our spending and taxing practices couldn’t be more evident. It is now up to our leaders to find within themselves the capability to change — or we all shall suffer.

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Wichita Eagle fact checks Ambassador Hotel campaigns

by Bob Weeks on February 23, 2012

As campaign chair for Tax Fairness for All Wichitans, I’m very concerned that the campaign is accurate and truthful in everything it does. I insist on adhering to that standard, starting with myself.

Now that the Wichita Eagle has published its fact checking article (Fact-checking claims on the Ambassador Hotel vote), I can say that this goal has been met. While the Eagle took issue with one of my claims, upon closer examination, there really is no issue at all.

But the same can’t be said for the claims made by the “Vote Yes” side. That side of the issue is championed by a group named “Moving Wichita Forward,” managed by Sheila Tigert. While the Eagle article said there were “three instances where semantic liberties have been taken with the facts surrounding the development,” the article finds four problems.

Specifically, the jobs claim made by Moving Wichita forward “is a stretch,” according to the director of the Wichita State University Center for Economic Development and Business Research. The number claimed is grossly exaggerated.

Second, Moving Wichita Forward’s claim of “No new taxes” is refuted by the two cents per dollar Community Improvement District tax created for the hotel’s exclusive benefit.

Third, Moving Wichita Forward ignores the economic impact of the $7.3 million in tax credits the hotel is receiving. Taxpayers across Kansas ($3.8 million) and the entire country ($3.5 million) have to make up the missing tax revenue that was diverted to the hotel developer.

Fourth, Moving Wichita Forward “incorrectly frames the project’s return on investment for the city of Wichita.”

The Eagle took issue with my claim that Wichita’s Tourism and Convention fund is losing $2 million this year, and therefore needs revenue from hotel guest taxes.

The Eagle consulted Wichita assistant finance director Rob Raine, who disputed the claim of the loss. But to believe what Raine contends, you would have to suspend belief in the economic reality of events. You would also have to come to the realization that Wichita city budget documents can’t be taken at face value.

Dave Trabert, who is president of Kansas Policy Institute and has experience with accounting, left a comment to the Eagle article that explains. He wrote:

A little fact-checking of the city’s claims about its budget might be in order. Page 328 of Wichita’s 2012/2013 Annual Budget shows the following for the Tourism and Convention Fund:

2012 Adopted:
Budgeted Revenues            $5,977,210
Budgeted Expenses            $7,983,130
Budgeted Loss               ($2,005,919)

2012 Beginning Fund Balance  $2,400,664
2012 Budgeted Loss          ($2,005,919)
2012 Ending Fund Balance       $394,745

The City also budgeted for a $379,042 loss in 2013, which would bring the fund balance down to just $15,703.

The Vote No group is not misreading the budget as claimed by the city. If anything, the city is attempting to misguide the Eagle reporter. If the city isn’t going to lose money this year and next as budgeted, they should openly explain what costs are being eliminated or revenues added to make up the difference. Until then, citizens must reasonably conclude that the budget is accurate.

In a later comment Trabert added: “The city is also falsely claiming that reserves are ‘appropriated,’ implying that reserves are part of the $8 million in expenditures. Page 328 of the budget very clearly identifies the $8 million in budgeted expenditures and reserves are not part of that total. The budgeted $2 million net loss is deducted from beginning reserves as explained in my earlier post.”

The tourism and convention budget may be viewed on page 328 of this document: Wichita Adopted Supplemental Budget 2012-2013. An excerpt from the budget of the relevant page may be viewed at Wichita Tourism and Convention Fund Budget 2012 – 2013.

Wichita voters should not be mislead by Moving Wichita Forward, a campaign that is now shown to have little concern for being truthful.

More information about the election and its issues are at Wichita Ambassador Hotel information sheet and Fact checking the Wichita Ambassador Hotel campaign.

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Wichita helps out the Ambassador Hotel campaign

by Bob Weeks on February 20, 2012

A page on the City of Wichita’s official, taxpayer-funded website provides information on the February 28th special election regarding a guest tax rebate for the Ambassador Hotel in downtown Wichita. While the page provides useful information, it makes a claim that is not accurate, and one which may persuade Wichita voters to vote Yes.

Specifically, a page on the city’s website states: “Developers would be allowed to collect the rebate for 15 years for costs associated with redeveloping the hotel.”

An informational sheet also on the city’s website says much the same, claiming that the purpose of the guest tax rebate is to “reimburse them for costs associated with redeveloping the hotel.”

Many city programs, such as TIF and CID, have specified, allowable uses for the funds provided by these incentive programs. But this guest tax rebate program does not. When the city makes these claims regarding the use of the guest tax, it makes it sound almost benign. Voters might feel persuaded to vote in favor of the rebate program using a reason that doesn’t exist in fact or in contract.

The guest tax is mentioned on pages 22, 25, 27, 81, 82, 95, and 98 of the agenda packet for the September 13, 2001 city council meeting. The packet includes the actual agreement between the city and the Ambassador Hotel development team.

None of the references to the guest tax rebate say anything about how the money may be used.

I asked the city about this, as to whether the city was adding extra meaning to the guest tax rebate that was not specified in the contract between the city and the hotel developers.

A response from city attorney Gary Rebenstorf disagreed with my contention. Rebenstorf wrote “The explanation you question is a factual statement and accurately reflects the purpose of the rebated taxes to help with costs associated with redeveloping the hotel. The development agreement, which details the development project, provides for the incentive. The guest tax rebates will provide operating cost relief with added cash flow to increase the developer’s capacity to carry more private debt and/or equity and thus cover costs associated with redevelopment of the hotel.”

But you be the judge. Is the guest tax rebate necessary, and will it be used for the purposes mentioned in city attorney Rebenstorf’s statement?

There’s no contract that requires the hotel developers to do so.

Furthermore, the hotel developers have said the hotel will open even if the guest tax rebate measure does not pass in the February 28th election.

The guest tax measure is more properly viewed as a ninth potential layer of taxpayer-funded government subsidy provided for this hotel. Eight layers are already in place and will not be affected by the outcome of the election.

It is only the ninth layer that is in question — a ninth layer that is unnecessary, and that goes directly to the developer’s pockets, despite the claims of the city’s attorney.

I believe there’s a technical business and legal term for that: gravy.

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Wichita Intrust Bank Arena profit, in perspective

by Bob Weeks on February 15, 2012

Last week the Sedgwick County Commission heard a report from county managers regarding the financial performance of the Intrust Bank Arena. The arena, located in downtown Wichita, is owned by the county.

The main facts are that revenue and profits are down. A Wichita Eagle article holds more details about the numbers.

What citizens need to know is this: The honeymoon is over. The promised boost to downtown that arena backers promised has yet to materialize in any broad sense. When it does poke through — an example being the Ambassador Hotel — it requires many millions of taxpayer subsidy.

But perhaps most important is the realization that county leaders are not being honest with its citizens. The “profit” shown by the arena is not reckoned using anything like businesses use, or even most branches of government, for that matter. As explained in the following article from last August, Sedgwick County doesn’t recognize the large capital investment made by citizens to build the arena. Instead, it treats that sacrifice as having no relevance to the economics underlying the arena.

On top of that, the profit statement presented to commissioners is accompanied by this qualification, which the county does not explain to citizens: “[These statements are] not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

Intrust Bank Arena depreciation expense ignored

By Bob Weeks

Reports that income earned by the Intrust Bank Arena is down sharply has brought the arena’s finances back into the news. The arena, located in downtown Wichita and owned by Sedgwick County, is deemed to be a success by the county and arena boosters based on “profit” figures generated during its first year of operations. But these numbers are not an honest assessment of the arena’s financial performance.

When the numbers were presented to Sedgwick County commissioners this week, commission chair Dave Unruh said that he is “pleased that we we still are showing black ink.”

He then made remarks that show the severe misunderstanding that he and almost everyone labor under regarding the nature of the spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

The contention of Unruh and other arena boosters is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) on the arena is merely a historical artifact, something that happened in the past and that has no bearing today. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds.

Since it is only one year old, presumably the arena could be sold for something near its building cost, less an allowance for wear and tear. If not, then the county has a lot of explaining to do as to why it built an asset that has no market value.

But even if the arena has no market value — and I suspect that in reality it has very little value — it still has an economic cost that must be recognized, that cost being the sales tax collected to pay for it. While arena boosters dismiss this as past history, the county recognizes this cost each year, and will continue to do so for many years.

The county, however, doesn’t go out of its way to present the complete and accurate accounting of the arena’s cost. Instead, the county and arena boosters trumpet the “profit” earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

This agreement specifies a revenue sharing mechanism between the county and SMG. Based on the terms of the agreement, Sedgwick County received payment of $1,116,442 for the 2010 year. While described as profit by many — and there was much crowing over the seemingly large amount — this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

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

Commissioner Karl Peterjohn has warned that these figures — and the monthly “profit” figures presented to commissioners — do not include depreciation expense. That expense is a method of recognizing and accounting for the large capital cost of the arena — the cost that arena boosters dismiss.

In April Sedgwick County released that depreciation number in its 2010 Comprehensive Annual Report. The number is pretty big: $4.4 million, some four times the purported “earnings” of the arena.

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take this number into account. Unruh is correct in that this depreciation expense is not a cash expense that affects cash flow. That cash was spent during the construction phase of the arena.

But depreciation expense provides a way to recognize and account for the cost of long-lived assets like buildings over their lifespan. It recognizes and respects the investment of those who paid the sales tax. When we follow standard practices like recognizing the cost of capital assets through depreciation expense, we’re forced to recognize that there’s a $4.4 million gorilla in the room that arena boosters don’t want to talk about.

Using information about arena operations contained in the operations report, we can construct what an actual income statement for the arena would look like, following generally accepted business principles. According to the statement, total operating income for 2010 was $7,005,224. Operating expenses were $4,994,488. Subtracting gives a figure of $2,010,736. This number, however, is not labeled a profit in the report. Instead, the report calls it “Increase in Net Assets Arising from Operating Activities Managed by SMG.”

An accounting of profit would have to subtract the $4.4 million in depreciation expense. Doing that results in a loss of $2,389,264. This — or something like it — is the number we should be discussing when assessing the financial performance of Intrust Bank Arena.

Fiscal conservatives — and sometimes even liberals — often speak of “running government like a business.” But here’s an example of conservative government leaders ignoring a basic business principle in order to paint a rosy picture of a government spending project.

Without honest discussion of numbers like these, we make decisions based on incomplete and false information. This is especially important as civic leaders agitate for another sales tax or other taxes to pay for more public investment. The sales pitch is that once the tax is collected and the assets paid for, we don’t need to consider the cost. They contend, as is the attitude of Unruh and arena boosters, that we can just sweep it under the rug and pretend it doesn’t exist. This is a false line of reasoning, and citizens ought not to be fooled.

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Wichita convention business

by Bob Weeks on February 15, 2012

One of the reasons Wichita city leaders say we need to provide subsidy to the Ambassador Hotel in downtown Wichita is that the hotel rooms are needed to support the city’s effort in pursuing convention business.

On its face, this pursuit of convention business seems like a noble effort by city leaders. Vast streams of economic development will follow if they are successful, they say. Providing subsidy to hotels in support of this effort, they conclude, should be a simple decision. Especially when supporters tell us that much of the subsidy to the hotel will be paid by visitors to Wichita. But this claim is true for only a narrow part of the Ambassador Hotel’s $15 million subsidy package. Most of the cost is paid for by taxpayers in Wichita, to a lesser extent in the entire state of Kansas, and to a smaller extent, the U.S. federal taxpayer.

But I’ve not seen discussion in Wichita on whether this pursuit of convention business is wise. Heywood T. Sanders, who is professor in the Department of Public Administration at the University of Texas at San Antonio, is a noted critic of public efforts to chase convention business for economic development. His report 2005 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.

Heywood 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.

Then, 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 seeks to expand, 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 Heywood says that are likely to be proposed are a sports arena. Wichita, of course, just 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, he writes, and Wichita downtown planners have indicated their desire for these. Downtown boosters are likely to propose a sales tax to support these efforts.

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.

Listen to an interview with Sanders from 2009. A transcript of an interview with Sanders from 2004 is at “A Lot of Hooey”: Heywood Sanders on Convention Center Economics.

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No-bid contracts a problem in Wichita

by Bob Weeks on February 8, 2012

Wichita Eagle reporting by Bill Wilson uncovers a problem with no-bid contracts for construction projects in Wichita. Fortunately, the city manager recognizes the problem and will propose a partial solution.

Wilson reports on two past Key Construction garage projects that were completed with costs well over their budgets. Key Construction was scheduled to be the no-bid contractor on the upcoming Douglas Place garage, being built largely to provide parking to the Wichita Ambassador Hotel. The no-bid cost of the garage was to be $6 million, according to a letter of intent passed by the Wichita City Council.

But when competitively bid, the cost will be almost $1.3 million less. This is a direct savings to taxpayers of the same amount. All members of the council except for Michael O’Donnell (district 4, south and southwest Wichita) voted for the no-bid contract to Key Construction, although Wichita Mayor Carl Brewer was absent. It is certain that he would have voted with the majority, however.

Because of the perverse economic incentives of tax increment financing (TIF) — one of the two financing sources for the garage — it was actually to the benefit of hotel developers and Key Construction to spend as much as possible on the parking garage. See Wichita TIF: Taxpayer-funded benefits to political players for more on this topic.

By the way, Key Construction is part of the Ambassador Hotel development team. Further, the owners and principle executives of Key Construction are generous campaign financiers for both liberal and conservative members of the Wichita City Council. See Wichita City Council campaign contributions and Douglas Place for details on Key Construction political contributions.

This episode illustrates these things: a Wichita City Council almost totally captured by special interests and opportunists, crony capitalism on steroids, and another example of why Wichita and Kansas need pay-to-play laws.

Wichita city manager proposes eliminating no-bid construction projects

By Bill Wilson

The days of awarding construction projects without taking competitive bids might be numbered at City Hall if City Manager Robert Layton has his way, especially with public projects such as parking garages that are part of private commercial development.

Layton said last week that he intends to ask the City Council for a policy change against those no-bid contracts. The contracts became an issue after council members Michael O’Donnell and Pete Meitzner forced the city to take bids on the city-financed 300-stall parking garage adjacent to the privately financed Ambassador Hotel Wichita at Douglas and Broadway. Bids for the garage came in almost $1.3 million under some project estimates, the first publicly financed downtown parking garage in almost 20 years to come in under budget, according to figures from the city’s office of urban development.

Continue reading at The Wichita Eagle.

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Wichita turns taxation over to private interests

by Bob Weeks on December 4, 2011

In a free society with a limited government, taxation should be restricted to being a way for government to raise funds to pay for services that all people benefit from. But in the city of Wichita, taxation for private gain is overtaking our city.

The Ambassador Hotel, part of a project known as Douglas Place, makes use of several of these private tax policy strategies. By private tax policy, I mean that the proceeds of a tax are used for the exclusive benefit of one person (or business firm), instead of used for the benefit of all. In one example related to this hotel, the Wichita City Council is allowing private parties to determine the city’s tax policy at their discretion, not the city’s.

The tax in question is Wichita’s hotel guest tax. According to a description of the Tourism and Convention Fund in the city’s budget document, the goal of the guest tax is to “support tourism and convention, infrastructure, and promotion of the City.” Its priorities are to be “Fund priorities are: 1) debt service for tourism and convention facilities, 2) operational deficit subsidies and 3) care and maintenance of Century II.”

But in the case of the Ambassador Hotel project, the city passed a charter ordinance that would route 75 percent of this tax directly back to the hotel owners for their own use. That’s not the proclaimed purpose of the guest tax.

Instead, this is public taxation for private enrichment.

Those who benefit from things like this and tax increment financing (TIF) districts say they aren’t really benefiting, as they are, in fact, paying taxes.

But when taxes you must pay are routed back to you for your own exclusive use, what else can you call it except capture of a public function for your own personal use?

Failure of Wichita city leadership

If you need further evidence that Wichita is turning over taxation to private hands, consider this: The charter ordinance is subject to a protest petition. In the normal case, if sufficient signatures are gathered, the city council would have to either a) overturn the ordinance, or b) hold an election to let voters decide whether the ordinance takes effect. An effort that I have been involved with expects to turn in enough signatures this week to force this decision.

Now, if this tax policy regarding the Ambassador Hotel is truly in the public interest, we would expect that the city council would decide whether to hold such an election and bear its costs itself. But that’s not the case. In the agreement between the city and the Douglas Place developers, we see this: “If Developer requests a special election solely for the purpose of passing the charter ordinance in the event a sufficient protest petition is submitted, Developer shall reimburse the City for the actual out of pocket costs and expenses of conducting such election.”

In other words, the city is turning over to private interests the decision as to whether to have such an election, and also the responsibility for paying for it. This is a failure of Wichita city leadership to do the things that government, not private interests, should do.

Private taxation funds political entrepreneurship

In Wichita, especially in downtown, we see the rise of private tax policy, that is, the taxing power of government being used for private purposes. The above example is just one example. This private tax policy is pushed by Wichita’s political entrepreneurs. These are the people who would rather compete in the realm of politics rather than in the market.

Examples of Wichita’s political entrepreneurs include the developers the Ambassador Hotel: David Burk of Marketplace Properties, and the principals of Key Construction.

Competing in the political arena is easier than competing in the market. To win in the political arena, you only have to convince a majority of the legislative body that controls your situation. Once you’ve convinced them the power of government takes over, and the people at large are forced to transfer money to the political entrepreneurs. In other words, they must engage in transactions they would not elect to perform, if left to their own free will.

In the free marketplace, however, entrepreneurs have to compete by offering products or services that people are willing to buy, free of coercion. That’s hard to do. But it’s the only way to gauge whether people really want what the entrepreneurs are selling. It’s also the way that wealth and prosperity are created. Government spending on business does not have this effect.

One of the ways that political entrepreneurs compete is by making campaign contributions, and the developers of Douglas Place have mastered this technique. Key Construction principles contributed $13,500 to Mayor Carl Brewer and four city council members during their most recent campaigns. Council Member Jeff Longwell alone received $4,000 of that sum, and he also accepted another $2,000 from managing member David Burk and his wife.

All told, Burk and his wife contributed at least $7,500 to city council candidates who will be voting whether to give Burk money. Burk and others routinely make the maximum contribution to all — or nearly all — candidates, even those with widely varying political stances. How can someone explain Burk’s (and his wife’s) contributions to liberals like Miller and Williams, and also to conservatives like Longwell, Meitzner, and former council member Sue Schlapp?

The answer is: Burk will be asking these people for money.

Wichitans need to rise against these political entrepreneurs and their usurpation of a public function — taxation — for their own benefit. The politicians and bureaucrats who enable this should realize they should be serving the public interest, not the narrow and private enrichment of the few at the cost of many.

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Wichita petition drive nears end

December 1, 2011

Wichita city leaders ought to take notice that citizens are so opposed to their actions that they will venture out in winter to gather signatures in opposition.

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Wichita economic development: And then what will happen?

October 14, 2011

Critics of the economic development policies in use by the City of Wichita are often portrayed as not being able to see and appreciate the good things these policies are producing, even though they are unfolding right before our very eyes. The difference is that some look beyond the immediate — what is seen — and ask “And then what will happen?” — looking for the unseen.

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The Wichita Eagle on naysayers: a disservice to Wichita

October 10, 2011

While the Wichita Eagle criticizes those it calls “naysayers,” it is the newspaper’s editorial board itself that is harmful to the people of Wichita and their economic freedom.

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Courtyard Hotel up again for tax breaks

October 10, 2011

The request for tax breaks by an Old Town Wichita hotel raises several questions of public policy, and illustrates the need for pay-to-play laws in Wichita.

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At Wichita City Council, facts are in dispute

September 20, 2011

Some Wichita City Council members, including Mayor Carl Brewer, criticize citizens for their use of inaccurate and misleading information. So how do the statements made by council members fare when subjected to scrutiny?

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In Wichita, how tax increment financing can channel tax money

September 6, 2011

The flow of tax dollars Wichita city leaders have planned for Douglas Place, a proposed hotel in Wichita, creates a mechanism where taxpayer funds are routed to a politically-connected construction firm. And unlike the real world, where developers have an incentive to build economically, the city has created incentives for Douglas Place developers to spend lavishly in a parking garage, at no cost to themselves.

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Kansas and Wichita quick takes: Tuesday September 6, 2011

September 6, 2011

Today: Live music example of overcriminilization, regulation in Wichita; Tax reform in Kansas; Downtown Wichita site launched; Juvenile justice system to be topic; Campaign contributions flow to Wichita’s subsidy supporters; Organ events; Urban planning in Wichita: an outside perspective.

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Our Downtown Wichita launched

September 2, 2011

As part of an effort to provide information about the Douglas Place project, a proposed renovation of a downtown Wichita office building into a hotel, Americans for Prosperity, Kansas has created a website. The site’s motto is “Limited government and free markets in Downtown Wichita benefit everyone. Centralized planning and crony capitalism benefit only a few.”

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For Wichita’s Project Downtown, goal keeps slipping

August 25, 2011

In selling a plan for the revitalization of downtown Wichita, promoters started with a promise of much private investment for just a little public investment. But as the plan proceeded, the goal kept slipping, and the first project to be approved under the final plan will probably not come close to meeting even the modest goals set by the Wichita City Council.

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In Wichita, historic preservation tax credits an inefficient form of developer welfare

August 22, 2011

As part of the subsidy plan for Douglas Place, a downtown Wichita hotel being proposed, developers plan to make extensive use of historic preservation tax credits to fund their project. This form of developer welfare, besides being inefficient, is largely hidden from public view.

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Intrust Bank Arena depreciation expense ignored

August 19, 2011

Reports that income earned by the Intrust Bank Arena is down sharply has brought the arena’s finances back into the news. The arena, located in downtown Wichita and owned by Sedgwick County, is deemed to be a success by the county and arena boosters based on “profit” figures generated during its first year of operations. But these numbers are not an honest assessment of the arena’s financial performance.

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Pay-to-play laws are needed in Wichita and Kansas

August 18, 2011

In the wake of scandals, some states and cities have passed “pay-to-play” laws. These laws often prohibit political campaign contributions by those who seek government contracts, or the laws may impose special disclosure requirements. But Wichita and Kansas have no such laws.

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For Wichita’s David Burk, subsidy machine is working again

August 18, 2011

For Wichita real estate developer David Burk of Marketplace Properties, being on the receiving end of sweetheart lease deals with the City of Wichita is becoming a habit.

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Wichita Mayor Carl Brewer to critics: stop grandstanding

August 17, 2011

A meeting of the Wichita City Council provided a window into the attitude of Wichita elected officials, particularly Mayor Carl Brewer. Through their actions, and by their words, we see a government that cares little for the rule of law and good government, and one that is disrespectful to citizens who call attention to this.

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Wichita City Council bows to special interests

August 10, 2011

Yesterday’s meeting of the Wichita City Council revealed a council — except for one member — totally captured by special interests, to the point where the council, aided by city staff, used a narrow legal interpretation in order to circumvent a statutorily required public hearing process.

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Wichita should reject the fads Portland has followed

August 10, 2011

Urban planners say they can make our cities more livable, our downtowns more vibrant, and our traffic calmer. The problem is that urban planners do not understand how cities work, so all of their plans often turn out disastrously wrong.

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Wichita city council to decide between rule of law, or rule by situation

August 8, 2011

Tuesday’s Wichita City Council meeting will provide an opportunity for the mayor, council members, and city hall staff to let Wichitans know if our city is governed by the rule of law and proper respect for it, or if these values will be discarded for the convenience of one person and his business partners.

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Despite allegations, Wichita’s Dave Burk remains favored

July 28, 2011

Wichita developer David Burk remains in favor at city hall despite allegations.

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Downtown Wichita regulations on subsidy to be considered

May 16, 2011

Policies about to be adopted by the City of Wichita means that downtown development is certain to miss out on the benefits of free markets, capitalism, and the dispersed knowledge that only markets can generate and channel.

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Kansas and Wichita quick takes: Monday May 16, 2011

May 16, 2011

Today: Wichita City Council this week; Wichita as art curator; Legislature fails to confront KPERS; Over 30 major news organizations linked to George Soros; Romney seen as candidate of business, not capitalism; Programs for elderly must be cut; Social Security seen as unwise, financially; Market development in Wichita.

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Kansas and Wichita quick takes: Friday May 6, 2011

May 6, 2011

Today: Wichita downtown sites draw little interest; KPERS; more flexibility for school funds; despite “cuts,” spending grows; Sandy Springs a model; states’ war for jobs; shale gas to be topic in Wichita; Economics in one lesson this Monday; voters favor cuts, not tax increases to balance budget; here’s the Kansas data.

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Government can’t be like business

April 15, 2011

Despite the claims of government and business leaders in Wichita, our city’s government can’t be run like a business.

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TIF, a Wichita ‘tool,’ might be on the way out in California

March 13, 2011

Tax increment financing (TIF), a key component for the financing of the revitalization of downtown Wichita, might be on the way out in California.

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Kansas and Wichita quick takes: Wednesday March 2, 2011

March 2, 2011

Today: Duplication in federal programs found; bureaucrats can’t change the way we drive … but they keep trying; Wednesdays in Wiedemann tonight; Americans for Prosperity website attacked; Kansas presidential primary pitched as economic development; Huelskamp joins Tea Party Caucus; how government works.

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Wichita downtown plan to be considered by county commission

February 18, 2011

Next week the Sedgwick County Commission will consider its approval of the Goody Clancy plan for the revitalization of downtown Wichita.

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Tax increment financing: TIF has a cost

February 2, 2011

Supporters of tax increment financing, or TIF, claim that it has no costs. This is true only if one ignores their secondary effects and economic reality.

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Kansas and Wichita quick takes: Monday January 31, 2011

January 31, 2011

Today: Some downtown Wichita properties plummet in value; Kansas Days; Mises University; “Rosa Parks moment” for education; the state against blacks; politics and city managers; Wednesdays in Wiedemann; Professor Cornpone; Government bird chirping.

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Wichita city manager Robert Layton on the air

January 31, 2011

Wichita city manager Robert Layton discusses city issues and takes questions from callers.

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In Wichita, who is to plan?

January 12, 2011

Wichita government planners liken their planning process to that of individuals and businesses. but as Ludwig von Mises explains, the analogy does not hold.

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Wichita’s vision, by the urbanist elites

January 5, 2011

Randal O’Toole explains some of the reasons why urbanist elites seek to impose their vision on others through government.

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Government is not business, and can’t be

December 30, 2010

As Wichita begins its implementation of the plan for the revitalization of downtown Wichita, stakeholders like to delude themselves that the plan is “market-driven,” that the city will make prudent use of public “investment,” and that the plan’s supporters really do believe in free markets after all.

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Economic freedom at decline, across the U.S. and in Wichita

December 22, 2010

As government, both national and local, increases its intervention in markets and more decisions are made by politicians and bureaucrats rather than markets, wealth is lost.

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