Tag Archives: Downtown Wichita revitalization

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

For Wichita, policies are made to be waived and ignored

The City of Wichita says it wants policies to be predictable and reliable, but finds it difficult to live up to that goal.

From 2009, an example of how the City of Wichita makes policy on the fly to suit the current situation. The policy change benefited a building developed by “The Minnesota Guys,” who, since the time of this article, fell into disfavor with pretty much everyone in Wichita, including the city council.

When the Lofts at St. Francis needed routine repairs, the city waived policies to use special assessment financing.
When the Lofts at St. Francis needed routine repairs, the city waived policies to use special assessment financing.
Regarding public policy, this episode illustrated the city broadening the application of special assessment financing. Traditionally special assessment financing has been limited to instances such as the city building streets and sewers in new areas of town, allowing commercial and residential property owners to repay the costs over 15 years. But the item approved by the council at this meeting was for repair of existing buildings, not construction of new infrastructure. Additionally, the work financed by the special assessment taxes will be owned by the private property owners. When the city uses special assessment financing to build streets and sewers in new neighborhoods the city owns this infrastructure, even though it is paid for by nearby property owners.

To approve this financing, the city had to bend or waive two policies. That’s problematic, as the city tells citizens it wants policies and council behavior to be consistent and predictable. Although this incident is from five years ago, not much has changed since then. See Wichita: No such document for an example from last year. Following is Wichita special assessments for repairs is bad policy. Other articles on this topic are In Wichita, waiving guidelines makes for bad policy and At Wichita city council, special pleading of selfish interests.

——
At Tuesday’s meeting (August 18, 2009) of the Wichita City Council, a privately-owned condominium association is seeking special assessment financing to make repairs to its building. In order for the association to succeed in its request, the council will have to waive two guidelines of Wichita’s facade improvement program.

Special assessment financing means that the cost of the repairs, up to $112,620 in this case, will be added to the building’s property taxes. Actually, in this case, to each of the condominium owners’ taxes. They’ll pay it off over the course of 15 years. (A conversation with the president of the homeowners association brought out the possibility that the actual assessment may be in the neighborhood of $75,000.)

So the city is not giving this money to the building’s owners. They’ll have to pay it back. The city is, however, setting new precedent in this action.

Special assessment financing has traditionally been used to fund infrastructure such as streets and sewers, and new infrastructure at that. The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if the building is located in one of the politically-favored areas of town.

By using special assessment financing in this way, the city seeks to direct investment towards parts of town that it feels doesn’t have enough investment. This form of centralized government planning is bad public policy. The city should stop doing this, and let people freely choose where to invest.

Besides this, two guidelines in the city’s facade improvement program must be waived for this project to obtain special assessment financing.

The first is the private investment match. This is designed to ensure that the property owners have “skin in the game” and that the taxes will be paid back.

Here, the city is proposing that since the building’s owners have made a past investment in this property, there’s no need to require a concurrent investment. It hardly needs to be noted that anyone who has purchased property has made a past investment in that property.

Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the city’s report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”

So the city proposes to waive this requirement as well.

There seems to me to be a defect in the manner of ownership of this building. While the homeowners association and the condominium owners might not have anticipated that repairs would be needed so soon after the building’s opening, they must have contemplated that repairs and maintenance — to either exterior or interior common areas — would be needed at some time. How does the association plan to pay for these?

So what will happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”

Isn’t that what private property owners do: fund the cost of repairs to their property?

According to the Sedgwick County Treasurer’s office, the appraised values of these condos range from $103,000 to $310,200, with an average value of $201,943. The maximum amount being added to each condo’s assessment is $4,022, although the actual amount may be closer to $3,000.

That’s along the lines of what it might cost to perform a few repairs and paint a house that’s worth what these condos are worth.

Let’s ask that these owners do just what thousands of homeowners in Wichita do every year: take responsibility for the maintenance of their own property without looking to city hall for help.

Lofts at St. Francis Agenda Report 2009-08-18 by Bob Weeks

In Wichita, a public hearing with missing information

The Wichita City Council is holding a public hearing, but citizens don’t have information that would be useful if they’re interested in conducting oversight.

Wichita City Library, 1965Wichita’s facade improvement program provides for the financing of the exterior faces of buildings in certain areas of the city. The money that is advanced to the developers, along with interest charges, are added to the property tax bills for the property, spread over 15 years. In this respect the program is similar to when the city builds streets and sewers in new areas of town and allows homeowners to pay these costs over 15 years. Except, the facade improvement program is for repair of existing buildings, not construction of new infrastructure. Additionally, the work financed by the facade improvement program is owned by the private property owner. When the city constructs streets and sewers in new neighborhoods, the city owns them.

There’s another difference. In the item to be considered today, there is a grant of $20,000. This is a gift of cash with few strings attached, except that it be spent on something the owner must spend anyway.

City documents indicate this is a project with a cost of $2,500.000.

Here’s the public policy angle. City documents state, regarding this item:

In 2009, the Facade Improvement Program was revised to require that private funding for overall project costs be at least equal to public funding and that applicants show a financial need for public assistance in order to complete the project, based on the owner’s ability to finance the project and assuming a market-based return on investment.

Later on, the same document states

The Office of Urban Development has reviewed the economic (“gap”) analysis of the project and determined a financial need for incentives based on the current market.

In other words, without the benefit of the facade improvement loan and grant, the project would not be economically feasible. Which, to me, seems curious. A $20,000 grant for a $2,500,000 Economists use a decimal pointproject is 0.8 percent of the project. The lower interest rate for the $156,034 being financed under the program provides some small additional benefit. These values are small compared to the scope of the project. It is not possible to forecast future revenues and expenses with the precision necessary to conclude that the facade improvement program boosts this project over the bar of economic feasibility, whatever that is.

We’ll probably not know what that bar is. I asked for the “gap” analysis. It doesn’t appear that it will be available before today’s meeting. I asked for it Thursday evening, and the city’s public information officer has followed up with me to see if I received the document, but I do not have it. The public doesn’t have it. I doubt if city council members have it.

The item today is a public hearing. The law requires it to be held so that the council can receive input from the public. Whether the public is informed — that’s a different matter.

Who reads the agenda

The agenda packet for the previous week contained a mistake. It was a mistake that is easy to make and not of any serious consequence. The wrong pages appeared for an item, and the correct pages were not in the packet. When I inquired about this late Monday afternoon — not long before the Tuesday meeting — the city’s public information office thanked me for bringing this to the city’s attention. A correction was promptly published.

Which leads me to wonder: Had anyone else read the agenda with sufficient attention to notice that mistake?

Would you rent space from this landlord?

Located across the street from the Transit Center, the city-owned garage on William Street suffers from maintenance issues that diminish its value for its intended use: retail space.
Located across the street from the Transit Center, the city-owned garage on William Street suffers from maintenance issues that diminish its value for its intended use: retail space.

Commercial retail space owned by the City of Wichita in a desirable downtown location was built to be rented. But most is vacant, and maintenance issues go unresolved.

At one time it was thought that the Wichita city-owned parking structure in the 400 block of East William Street would house retail shops along the street. But the present state of the property should cause us to be wary of government economic development efforts.

As reported by the Wichita Eagle twenty years ago on Wednesday, October 20, 1993:

The council also approved a plan to spend about $76 a square foot to construct roughly 6,000 square feet of retail space on the first floor of the parking garage. The space would lease for an estimated $8.70 a square foot.

Council member Sheldon Kamen questioned that part of the plan. ”I just can’t visualize spending $76 a square foot,” he said. “If I was a developer I wouldn’t spend $76 a square foot for retail space on William street.”

Council member Joan Cole disagreed with Kamen, calling $8.70 a “very good price” that would attract tenants. ”It is my feeling there are small operations that would find this kind of small space very attractive,” she said.

(Adjusted for inflation, these prices would be $122 and $14 today)

What has been the results of the city’s venture into commercial real estate? As can be seen in this video from September, a Wichita city government office occupied some of the space, but the office had moved to another location. Now, Wichita Festivals occupies some of the space, but much is still empty.

Rusted awnings near retail space in the city-owned garage on William Street in Wichita,
Rusted awnings near retail space in the city-owned garage on William Street in Wichita,

Inspecting the building last September, I found that this city-owned property had maintenance issues that might, in some circumstances, be considered as contributing to blight. Based on a recent walk-by, maintenance hasn’t improved in the ten months since then. Maybe that’s why there’s apparently little demand to rent this space.

At the city-owned garage on William Street in Wichita, a duct tape repair is still in use after ten months.
At the city-owned garage on William Street in Wichita, a duct tape repair is still in use after ten months.

It’s not as though the building has many of advantages that city planners tell us are needed for a vital downtown Wichita. It’s adjacent to the block with the Eaton Hotel and the Wichita Downtown Development Corporation, the agency charged with promoting downtown. This retail space is right across the street from the city’s bus transit center. It’s also one block away from the Intrust Bank Arena, which was promoted as a driver of commerce and activity for the surrounding area. Its Walk Score — a measure promoted by city planners — is 71, which is deemed “Very Walkable. Most errands can be accomplished on foot.”

Considering all the advantages this government-owned property has, it’s failing. It’s becoming blighted. The best thing the city could do is sell this property so that the benefits of markets and the profit-and-loss system can replace management by Wichita city hall bureaucrats.

Is Wichita chasing class politics to its detriment?

From The Daily Beast, Richard Florida Concedes the Limits of the Creative Class:

Urbanists, journalists, and academics — not to mention big-city developers — were easily persuaded that shelling out to court “the hip and cool” would benefit everyone else, too. … Florida himself, in his role as an editor at The Atlantic, admitted last month what his critics, including myself, have said for a decade: that the benefits of appealing to the creative class accrue largely to its members — and do little to make anyone else any better off. The rewards of the “creative class” strategy, he notes, “flow disproportionately to more highly-skilled knowledge, professional and creative workers,” since the wage increases that blue-collar and lower-skilled workers see “disappear when their higher housing costs are taken into account.” His reasonable and fairly brave, if belated, takeaway: “On close inspection, talent clustering provides little in the way of trickle-down benefits.”

WichitaLiberty.TV: Examining surveys about the future of Wichita

In this episode of WichitaLiberty.TV: What do Wichitans want for their city’s future? Surveys from the City of Wichita and Kansas Policy Institute are examined. Episode 42, broadcast May 11, 2014. View below, or click here to view at YouTube.

Wichitans willing to fund basics

Wichita City Hall SignIn Wichita, voters are willing to pay a higher sales tax for fundamentals like infrastructure and water supply, and less willing for business incentives, downtown development, and convention centers.

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

In a series of questions asking if Wichita voters would be willing to pay a higher sales tax to provide certain services, a pattern appeared: Voters are willing to pay for things that are fundamental in nature, and less willing to pay for others.

As can be seen in the nearby chart, voters are willing to pay for infrastructure, and more willing to pay for maintenance of existing infrastructure than for new infrastructure. Voters are most willing to pay for securing a long-term water source.

kansas-policy-institute-2014-04-willing-to-fund

For business incentives, downtown development, and convention centers, Wichita voters express less willingness to pay higher sales tax to fund these items.

For the first three items, the average was 68 percent of voters willing to pay a higher sales tax. For the last three, the average is 30 percent.

Following is the complete text of the questions:

Would you personally be willing to pay a higher sales tax in the city of Wichita to fund incentives to businesses expanding in Wichita or moving here from other states?

Would you personally be willing to pay a higher sales tax in the city of Wichita to fund maintenance work on existing infrastructure, such as sewers and roads?

Would you personally be willing to pay a higher sales tax in the city of Wichita to fund new infrastructure, such as new highways and passenger rail connections?

Would you personally be willing to pay a higher sales tax in the city of Wichita to continue developing downtown Wichita with apartments, businesses, and entertainment destinations?

Would you personally be willing to pay a higher sales tax in the city of Wichita to expand or renovate convention spaces, such as the Hyatt Hotel and Century II?

Would you personally be willing to pay a higher sales tax in the city of Wichita to secure a long-term water source?

In Wichita, if you don’t like it, just don’t go there

As Wichita city officials prepare a campaign to raise the sales tax in Wichita, let’s recall some council members’ attitude towards citizens.

At a Wichita City Council meeting in August 2012, Council Member Lavonta Williams (district 1, northeast Wichita) advised taxpayers on what to do if they disagree with action taken by the council: Just don’t go there.

If you don't like this statue, just don't go there, says Wichita City Council member Lavonta Williams. But, you must pay for it.
If you don’t like this statue, just don’t go there, says Wichita City Council member Lavonta Williams. But, you must pay for it.
The topic that day was whether the council should decide to add fluoride to the city’s water, or should it let citizens vote on the matter. Williams expressed concern that if the council were to decide to fluoridate Wichita’s water, citizens would not be able to avoid ingesting the added fluoride. They wouldn’t have a choice.

By way of analogy, Williams counseled the concerned citizens: “Did you like the art that went down to WaterWalk? Maybe you didn’t. But you don’t have to go there.”

She also said we don’t have to go to the apartments that were built at WaterWalk, and we don’t have to stay at the Ambassador Hotel.

True, we can avoid these government-sponsored and subsidized places if we want to. But what Williams may have forgotten is that we can’t avoid being forced to pay for them.

Besides that, what does it say about a government where if we disagree with its actions, we’re told “you don’t have to go there”?

WichitaLiberty.TV: Government planning, taxes, and carbon

In this episode of WichitaLiberty.TV: The City of Wichita held a workshop where the Community Investments Plan Steering Committee delivered a progress report to the city council. The document holds some facts that ought to make Wichitans think, and think hard. Then: What is the purpose of high tax rates on high income earners? Finally: Advances in producing oil and natural gas make for a more competitive and carbon-efficient economy. Episode 33, broadcast March 2, 2014. View below, or click here to view on YouTube.

As landlord, Wichita has a few issues

Located across the street from the Transit Center, the city-owned garage on William Street suffers from maintenance issues that diminish its value for its intended use: retail space.
Located across the street from the Transit Center, the city-owned garage on William Street suffers from maintenance issues that diminish its value for its intended use: retail space.

Commercial retail space owned by the City of Wichita in a desirable downtown location was built to be rented. But most is vacant, and maintenance issues go unresolved.

At one time it was thought that the Wichita city-owned parking structure in the 400 block of East William Street would house retail shops along the street. But the present state of the property should cause us to be wary of government economic development efforts.

As reported by the Wichita Eagle twenty years ago on Wednesday, October 20, 1993:

The council also approved a plan to spend about $76 a square foot to construct roughly 6,000 square feet of retail space on the first floor of the parking garage. The space would lease for an estimated $8.70 a square foot.

Council member Sheldon Kamen questioned that part of the plan. ”I just can’t visualize spending $76 a square foot,” he said. “If I was a developer I wouldn’t spend $76 a square foot for retail space on William street.”

Council member Joan Cole disagreed with Kamen, calling $8.70 a “very good price” that would attract tenants. ”It is my feeling there are small operations that would find this kind of small space very attractive,” she said.

(Adjusted for inflation, these prices would be $122 and $14 today)

What has been the results of the city’s venture into commercial real estate? As can be seen in this video from September, a Wichita city government office occupied some of the space, but the office had moved to another location. Now, Wichita Festivals occupies some of the space, but much is still empty.

Rusted awnings near retail space in the city-owned garage on William Street in Wichita,
Rusted awnings near retail space in the city-owned garage on William Street in Wichita,

Inspecting the building last September, I found that this city-owned property had maintenance issues that might, in some circumstances, be considered as contributing to blight. As can be seen in the nearby photos taken this week (click them for larger versions), maintenance hasn’t improved in the nearly six months since then. Maybe that’s why there’s apparently little demand to rent this space.

At the city-owned garage on William Street in Wichita, a duct tape repair is still in use after six months.
At the city-owned garage on William Street in Wichita, a duct tape repair is still in use after six months.

It’s not as though the building has many of advantages that city planners tell us are needed for a vital downtown Wichita. There are hundreds of state employees parking in the garage each workday. It’s adjacent to the block with the Eaton Hotel and the Wichita Downtown Development Corporation, the agency charged with promoting downtown. This retail space is right across the street from the city’s bus transit center. It’s also one block away from the Intrust Bank Arena, which was promoted as a driver of commerce and activity for the surrounding area. Its Walk Score — a measure promoted by city planners — is 71, which is deemed “Very Walkable.”

Considering all the advantages this government-owned property has, it’s failing. It’s becoming blighted. The best thing the city could do is sell this property so that the benefits of markets and the profit-and-loss system can replace city bureaucrats.

Economic development in Wichita, steps one and two

presentation-512Critics 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.

Thomas Sowell explains the problem in a passage from the first chapter of Applied economics: thinking beyond stage one:

When we are talking about applied economic policies, we are no longer talking about pure economic principles, but about the interactions of politics and economics. The principles of economics remain the same, but the likelihood of those principles being applied unchanged is considerably reduced, because politics has its own principles and imperatives. It is not just that politicians’ top priority is getting elected and re-elected, or that their time horizon seldom extends beyond the next election. The general public as well behaves differently when making political decisions rather than economic decisions. Virtually no one puts as much time and close attention into deciding whether to vote for one candidate rather than another as is usually put into deciding whether to buy one house rather than another — or perhaps even one car rather than another.

The voter’s political decisions involve having a minute influence on policies which affect many other people, while economic decision-making is about having a major effect on one’s own personal well-being. It should not be surprising that the quantity and quality of thinking going into these very different kinds of decisions differ correspondingly. One of the ways in which these decisions differ is in not thinking through political decisions beyond the immediate consequences. When most voters do not think beyond stage one, many elected officials have no incentive to weigh what the consequences will be in later stages — and considerable incentives to avoid getting beyond what their constituents think and understand, for fear that rival politicians can drive a wedge between them and their constituents by catering to public misconceptions.

The economic decisions made by governing bodies like the Wichita City Council have a large impact on the lives of Wichitans. But as Sowell explains, these decisions are made by politicians for political reasons.

Sowell goes on to explain the danger of stopping the thinking process at stage one:

When I was an undergraduate studying economics under Professor Arthur Smithies of Harvard, he asked me in class one day what policy I favored on a particular issue of the times. Since I had strong feelings on that issue, I proceeded to answer him with enthusiasm, explaining what beneficial consequences I expected from the policy I advocated.

“And then what will happen?” he asked.

The question caught me off guard. However, as I thought about it, it became clear that the situation I described would lead to other economic consequences, which I then began to consider and to spell out.

“And what will happen after that?” Professor Smithies asked.

As I analyzed how the further economic reactions to the policy would unfold, I began to realize that these reactions would lead to consequences much less desirable than those at the first stage, and I began to waver somewhat.

“And then what will happen?” Smithies persisted.

By now I was beginning to see that the economic reverberations of the policy I advocated were likely to be pretty disastrous — and, in fact, much worse than the initial situation that it was designed to improve.

Simple as this little exercise may sound, it goes further than most economic discussions about policies on a wide range of issues. Most thinking stops at stage one.

We see stage one thinking all the time when looking at government. In Wichita, for example, a favorite question of city council members seeking to justify their support for government intervention such as a tax increment financing (TIF) district or some other form of subsidy is “How much more tax does the building pay now?” Or perhaps “How many jobs will (or did) the project create?”

These questions, and the answers to them, are examples of stage one thinking. The answers are easily obtained and cited as evidence of the success of the government program.

But driving by a store or hotel in a TIF district and noticing a building or people working at jobs does not tell the entire story. Using the existence of a building, or the payment of taxes, or jobs created, is stage one thinking, and no more than that.

Fortunately, there are people who have thought beyond stage one, and some concerning local economic development and TIF districts. And what they’ve found should spur politicians and bureaucrats to find ways to move beyond stage one in their thinking.

An example are economists Richard F. Dye and David F. Merriman, who have studied tax increment financing extensively. Their article Tax Increment Financing: A Tool for Local Economic Development states in its conclusion:

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

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

If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

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

In a different paper (The Effects of Tax Increment Financing on Economic Development), the same economists wrote “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not. … These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

Here we have an example of thinking beyond stage one. The results are opposite of what one-stage thinking produces.

Some city council members are concerned about creating jobs, and are swayed by the promises of developers that their establishments will employ a certain number of workers. Again, this thinking stops at stage one. But others have looked farther, as has Paul F. Byrne of Washburn University. The title of his recent report is Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth, and in its abstract we find this conclusion regarding the impact of TIF on jobs:

Increasingly, municipal leaders justify their use of tax increment financing (TIF) by touting its role in improving municipal employment. However, empirical studies on TIF have primarily examined TIF’s impact on property values, ignoring the claim that serves as the primary justification for its use. This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district.

While this research might be used to support a TIF district for industrial development, TIF in Wichita is primarily used for retail development. And, when thinking beyond stage one, the effect on employment — considering the entire city — is negative.

It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. But over and over we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

Downtown Wichita tax base: Growing?

IMG_1956There’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.

Should Wichita expand its convention facilities?

Bar char statisticsWichita city leaders seem prepared to seek economic development through convention business.

On its face, 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. But is this pursuit of convention business 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 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.

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 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 logoFor 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.

Touring a Wichita-owned downtown retail development

I have often wondered why economists, with these absurdities all around them, so easily adopt the view that men act rationally. This may be because they study an economic system in which the discipline of the market ensures that, in a business setting, decisions are more or less rational. The employee of a corporation who buys something for $10 and sells it for $8 is not likely to do so for long. … A politician who wastes his country’s resources on a grand scale may have a successful career.
— Ronald Coase

william-street-parking-garage-2013-09-02-01

At one time it was thought that the Wichita city-owned parking structure in the 400 block of East William Street would house retail shops along the street. But the results should give us reason to be wary of government economic development efforts.

As reported by the Wichita Eagle almost twenty years ago on Wednesday, October 20, 1993:

The council also approved a plan to spend about $76 a square foot to construct roughly 6,000 square feet of retail space on the first floor of the parking garage. The space would lease for an estimated $8.70 a square foot.

Council member Sheldon Kamen questioned that part of the plan. ”I just can’t visualize spending $76 a square foot,” he said. “If I was a developer I wouldn’t spend $76 a square foot for retail space on William street.”

Council member Joan Cole disagreed with Kamen, calling $8.70 a “very good price” that would attract tenants. ”It is my feeling there are small operations that would find this kind of small space very attractive,” she said.

(Adjusted for inflation, these prices would be $122 and $14.)

But it hasn’t happened. As can be seen in this video, a Wichita city government office occupied some of the space, but the office has moved to another location.

It’s not as though the building has some advantages. There are hundreds of state employees parking in the garage each workday. It’s adjacent to the block with the Eaton Hotel and the Wichita Downtown Development Corporation, the agency charged with promoting downtown. This retail space is right across the street from the city’s bus transit center. It’s also one block away from the Intrust Bank Arena, which was promoted as a driver of commerce and activity for the surrounding area.

william-street-parking-garage-2013-09-02-02

As can be seen in the nearby photos (click them for larger versions), a walk down this block also reveals maintenance issues that might, in some circumstances, be considered as contributing to blight. Maybe that’s why there’s evidently no demand to rent this space — except by a government office, and even it has left.

The difference

What is the difference between private ownership of assets and government ownership? A big factor is the accountability provided by markets, along with the profit motive. Private owners of rental property like this have a big incentive to keep it filled with tenants. If the private owners are able to attract tenants and control their costs, they can earn a profit. Markets impose a discipline on these costs, because landlords can charge only what the market will bear for rent. If landlords can’t attract tenants, or can’t control costs, they go out of business. That makes the property available to someone else, perhaps someone who can manage the property successfully.

Markets and the profit motive are not perfect. But when private landlords are inefficient, no one is harmed except the landlords.

Government, however, can’t earn a profit or suffer a loss. It can’t even calculate profit and loss in any meaningful sense. Usually government doesn’t account for its capital investment. That’s certainly the case with this empty retail space. A private landlord would realize that this empty space that can’t be rented has an opportunity cost that is very real. That doesn’t appear to be the case with Wichita city management.

This illustrates the weak accountability that government faces. Despite situations like this, the Wichita city manager received effusive praise from the Wichita City Council this year, along with a large raise in pay. Two years ago the incumbent Wichita mayor didn’t inspire a strong opponent, and only about 12 percent of the people bothered to vote.

Considering all the advantages this government property has, it’s failing. It has no tenants, and it’s becoming blighted. The best thing the city could do is sell this property so that the benefits of markets and the profit-and-loss system can replace city bureaucrats.

Wichita economic development: And then what will happen?

magnifying-glass-2

The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
— Henry Hazlitt

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.

Thomas Sowell explains the problem in a passage from the first chapter of Applied economics: thinking beyond stage one:

When we are talking about applied economic policies, we are no longer talking about pure economic principles, but about the interactions of politics and economics. The principles of economics remain the same, but the likelihood of those principles being applied unchanged is considerably reduced, because politics has its own principles and imperatives. It is not just that politicians’ top priority is getting elected and re-elected, or that their time horizon seldom extends beyond the next election. The general public as well behaves differently when making political decisions rather than economic decisions. Virtually no one puts as much time and close attention into deciding whether to vote for one candidate rather than another as is usually put into deciding whether to buy one house rather than another — or perhaps even one car rather than another.

The voter’s political decisions involve having a minute influence on policies which affect many other people, while economic decision-making is about having a major effect on one’s own personal well-being. It should not be surprising that the quantity and quality of thinking going into these very different kinds of decisions differ correspondingly. One of the ways in which these decisions differ is in not thinking through political decisions beyond the immediate consequences. When most voters do not think beyond stage one, many elected officials have no incentive to weigh what the consequences will be in later stages — and considerable incentives to avoid getting beyond what their constituents think and understand, for fear that rival politicians can drive a wedge between them and their constituents by catering to public misconceptions.

The economic decisions made by governing bodies like the Wichita City Council have a large impact on the lives of Wichitans. But as Sowell explains, these decisions are made by politicians for political reasons.

Sowell goes on to explain the danger of stopping the thinking process at stage one:

When I was an undergraduate studying economics under Professor Arthur Smithies of Harvard, he asked me in class one day what policy I favored on a particular issue of the times. Since I had strong feelings on that issue, I proceeded to answer him with enthusiasm, explaining what beneficial consequences I expected from the policy I advocated.

“And then what will happen?” he asked.

The question caught me off guard. However, as I thought about it, it became clear that the situation I described would lead to other economic consequences, which I then began to consider and to spell out.

“And what will happen after that?” Professor Smithies asked.

As I analyzed how the further economic reactions to the policy would unfold, I began to realize that these reactions would lead to consequences much less desirable than those at the first stage, and I began to waver somewhat.

“And then what will happen?” Smithies persisted.

By now I was beginning to see that the economic reverberations of the policy I advocated were likely to be pretty disastrous — and, in fact, much worse than the initial situation that it was designed to improve.

Simple as this little exercise may sound, it goes further than most economic discussions about policies on a wide range of issues. Most thinking stops at stage one.

We see stage one thinking all the time when looking at government. In Wichita, for example, a favorite question of city council members seeking to justify their support for government intervention such as a tax increment financing (TIF) district or some other form of subsidy is “How much more tax does the building pay now?” Or perhaps “How many jobs will (or did) the project create?”

These questions, and the answers to them, are examples of stage one thinking. The answers are easily obtained and cited as evidence of the success of the government program.

But driving by a store or hotel in a TIF district and noticing a building or people working at jobs does not tell the entire story. Using the existence of a building, or the payment of taxes, or jobs created, is stage one thinking, and no more than that.

Fortunately, there are people who have thought beyond stage one, and some concerning local economic development and TIF districts. And what they’ve found should spur politicians and bureaucrats to find ways to move beyond stage one in their thinking.

An example are economists Richard F. Dye and David F. Merriman, who have studied tax increment financing extensively. Their article Tax Increment Financing: A Tool for Local Economic Development states in its conclusion:

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

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

If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

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

In a different paper (The Effects of Tax Increment Financing on Economic Development), the same economists wrote “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not. … These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

Here we have an example of thinking beyond stage one. The results are opposite of what one-stage thinking produces.

Some city council members are concerned about creating jobs, and are swayed by the promises of developers that their establishments will employ a certain number of workers. Again, this thinking stops at stage one. But others have looked farther, as has Paul F. Byrne of Washburn University. The title of his recent report is Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth, and in its abstract we find this conclusion regarding the impact of TIF on jobs:

Increasingly, municipal leaders justify their use of tax increment financing (TIF) by touting its role in improving municipal employment. However, empirical studies on TIF have primarily examined TIF’s impact on property values, ignoring the claim that serves as the primary justification for its use. This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district.

While this research might be used to support a TIF district for industrial development, TIF in Wichita is primarily used for retail development. And, when thinking beyond stage one, the effect on employment — considering the entire city — is negative.

It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. But over and over we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

A vision for Wichita

Wichita city hall logoWhy are some in Wichita so insistent on pushing their vision of what our city should look like, and why are they willing and eager to use the coercive force of government to achieve their vision? In the article below, Randal O’Toole, using a work by Thomas Sowell, provides much insight into understanding why.

Reading this post, I couldn’t help think of Wichita: the “manufactured crisis” of too much driving and too little walking; the desire by many, including several Wichita City Council members — even self-styled conservative members — to expand the power and reach of government; and the denial of responsibility for obvious failures like Waterwalk.

project-downtown-logoWe should remember that the plan for downtown Wichita developed by Boston planning firm Goody Clancy is a plan developed by and for self-styled elites. We only need to remember when David Dixon, Goody Clancy’s principal, told Wichitans that in the future, Wichitans will be able to “enjoy the kind of social and cultural richness” that is only found at the core. That’s an insult to the vast majority of Wichitans, but the elites in Wichita evidently believe it, or are willing to tolerate this insult in order to achieve their vision.

O’Toole visited Wichita in 2010 and presented a fascinating lecture.

The Vision of the Urbanites

By Randal O’Toole

As the Antiplanner has traveled and visited people all over the country, I’ve noticed an interesting phenomenon. Though I’ve met thousands of suburban and rural residents who are very happy with their homes and lifestyles, I’ve never met one who thinks the power of government should be used to force others to live in the same lifestyle. Yet I’ve met lots of urban residents who openly admit that they believe their lifestyle is so perfect that government should force more if not most people to live in dense, “walkable” cities.

Do cities turn people into liberal fascists? Or do liberal fascists naturally congregate into cities, and if so, why?

A general description of the phenomenon I’ve observed can be found in Thomas Sowell’s 1995 book, The Vision of the Anointed. Sowell says that America’s liberal elites view themselves as smarter or more insightful than everyone else, and thus qualified to impose their ideas on everyone else. The process of doing so, says Sowell, follows four steps (p. 8):

First, the anointed identify or, more usually, manufacture a crisis. Sowell’s book reviews three such crises: poverty, crime, and teen pregnancy, all of which were declining in the 1960s when the liberals turned them into crises. The crises relevant to this blog include such things as urban sprawl (totally manufactured as in fact it is not a problem at all) and auto driving (while some of the effects of driving are negative, these are easily corrected while the overall benefits of driving are positive).

Second, the anointed propose a solution that inevitably involves government action. Sowell makes it clear that the the leadership of the elites go out of their way to define or manufacture the crises in ways that make it appear the government action are the only solutions. In other words, their real goal is to make government bigger, not to solve problems. I don’t know if that is true or not, but it doesn’t really matter; what matters is they propose the wrong solutions to problems that often don’t really exist.

Third, once the solution is implemented, the results turn out to be very different, and often far worse, than predicted by the anointed. Crime, poverty, and teen pregnancy went up, not down, when government stepped in to “fix” these problems in the 1960s. In the case of urban planning, anti-sprawl policies made housing unaffordable and led to the recent mortgage crisis. Anti-automobile policies make congestion worse and therefore waste even more energy and produce more pollution.

The final stage is one of denial, in which the elites claim that their policies had nothing to do with the worsening results. Other factors were at work, they claim; in fact, the results might have been even worse if their enlightened policies had not been put into effect.

Sowell notes that the anointed use several tactics to promote their ideas. For example, “empirical evidence itself may be viewed as suspect, insofar as it is inconsistent with that vision” (p. 2). Whenever the Antiplanner uses data to show that there is no urban sprawl crisis or rail transit doesn’t work in a debate with an urban anointed, the inevitable response is some version of “figures don’t lie but liars figure.” “Statistics can be used to show anything you want,” is another version. These comforting words leave the anointed free to dismiss any data and all that conflict with their vision.

A second fundamental tactic is to presume that they have the moral high ground. “Those who accept this vision are deemed to be not merely factually correct but morally on a higher plane,” says Sowell. “Put differently, those who disagree with the prevailing vision are seen as being not merely in error, but in sin” (pp. 2-3). The term “smart growth” is a classic example of this tactic, used solely to bludgeon any dissenters with the claim that they must favor “dumb growth.”

Relying on tactics like these, the anointed avoid confronting the fraudulent nature of their crises and the failures of their solutions. “What is remarkable is how few arguments are really engaged in, and how many substitutes for arguments there are,” says Sowell (p. 6).

While The Vision of the Anointed describes the situation, it doesn’t answer the fundamental question of why people think that way. A partial answer is provided by Sowell’s 1987 book, A Conflict of Visions, in which Sowell traces two different world views back to the late eighteenth century. One view, expressed by Adam Smith, is that humans are imperfect and so we should design institutions that work even if the face of these imperfections. The other view, proposed by William Godwin, is that humans are perfectable, which suggests that the benign hand of government authority should be used to guide people to that perfection.

Today, the Tea Party represents the descendants of Adam Smith, while urban planners are descendants of Godwin. As University of California planners Mel Webber and Fred Collignon wrote more than a decade ago, urban planners were “heir to the postulates of the Enlightenment with its faith in perfectibility.”

The question still remains: why are urbanites more susceptible to the vision of the anointed? Perhaps part of the answer is that the constant friction between strangers that cities impose on their residents leads to a desire for government authority to protect people from those frictions. But a larger part of the answer may be that the role of government is far more visible in cities than elsewhere, and far larger in cities today than in the past, so residents of those cities cannot imagine living without it — and those who want more government are attracted to those cities. In any case, everyone in general and urbanites in particular should be wary of any ideas that make government bigger, as they are probably just part of some elitist scheme to coercively impose their vision on everyone else.

The link to this article at O’Toole’s site is The Vision of the Urbanites.