There are solutions to the Wichita water shortage (to the extent it exists) that originate outside city hall. Dr. Art Hall of KU explains in this excerpt from WichitaLiberty.TV. View below, or click here to view at YouTube. Originally broadcast September 28, 2014. For more on this topic see:
From Kansas Policy Institute.
Duane Goossen hides from honest scrutiny … again
By Dave Trabert
Former state budget director Duane Goossen published a scathing review of the KPI 5-Year State Budget Plan a few days ago on his blog, so I wrote and asked if he would join Steve Anderson and me for a public discussion of the facts and issues. He ignored our invitation for civil discussion, just as he did when we explained how he distorted the truth about education finance.
Goossen claims we made an $802 million math error and tries to fool unsuspecting readers by saying we didn’t account for all of what is purported to be a $1.3 billion shortfall. We didn’t account for it because there is no $1.3 billion shortfall!
As we explained in How Budget Deficits are Fabricated in Kansas, Kansas Legislative Research Department (KLRD) counts budget changes multiple times in arriving at what they call a $1.3 billion shortfall. Once money is cut from the base budget … it’s gone. It doesn’t have to be cut again every year into the future.
According to KLRD, the spending adjustments needed to maintain a zero ending balance total $482.3 million over five years.
In order to get to $1.3 billion, one must count the FY 2016 change FOUR times … the FY 2017 change is counted THREE times … the FY 2018 change is counted TWICE … and only the FY 2019 change is counted once.
Goossen also mischaracterizes several proposed uses of excess cash reserves as “cuts” to transportation and education. As clearly explained in our Budget Plan, we are proposing that a KDOT surplus of $150 million be returned to the General Fund and that sales tax transfers to KDOT be reduced so that future surpluses are not created. We suggest that school districts and universities be required to use a portion of excess cash reserves, allowing education funding to reduced one time while excess funds are spent down.
He also falsely claims we are recommending a $100 million cut to the Kansas Bioscience Authority, when our plan merely suggests funding KBA at the same amount it received in 2014. The budget savings comes about by removing a statutory set-aside of $25 million per year that isn’t planned to be spent.
These are just some of the outlandish claims made by Goossen, which probably explains why he ignores invitations to have a civil public discussion of the facts. He has nothing to gain and everything to lose.
Our budget plan shows multiple options to balance the budget without service reductions or tax increases…healthy ending balances…increased funding for education and Medicaid…and record-setting spending overall. But media won’t even look at the plan and others are spreading false claims about it.
Kansans are being inundated with the false choice of tax increases or service reductions … all for political gain.
Kansas school fund balances declined this year, but fund balances are still large.
As Kansas voters consider school funding, as the Kansas Supreme Court considers ordering more school spending, and as school spending boosters insisting that school spending has been slashed, an inconvenient fact remains constant: Kansas schools don’t spend all the money they’ve been given. Fund balances have been growing until leveling off and dipping slightly this year.
I’ve gathered data about unspent Kansas school funds and presented it as an interactive visualization. You may explore the data yourself by using the visualization. Click here to open the visualization in a new window. Data is from Kansas State Department of Education. Visualization created using Tableau Public.
“Yes Wichita” is a group that wants you to vote “Yes” on the proposed Wichita sales tax. But this group will not answer questions. Instead they delete the inconvenient questions.
I’ve asked the “Yes Wichita” group several questions about the proposed one cent per dollar Wichita sales tax. They’re reasonable questions that many Wichita voters might like answered. But instead of answering the questions, “Yes Wichita” has deleted them from its Facebook page. Upon my inquiry as to why, there has been no answer.
I realize these questions are inconvenient for the “Yes Wichita” group, and for the City of Wichita too. So I understand why these people did not answer my questions. Wichita voters may want to consider this indifferent attitude as they make their decision on this issue. Voter might also consider that there are questions the sales tax supporters don’t want asked, much less answered.
Here are questions that I’ve asked that were never answered, and finally deleted. Perhaps you might want to submit them to “Yes Wichita” to see if you can get answers.
October 7, 6:07am
I have a question. The city’s documents regarding the sales tax state: “The State of Kansas estimates that 13% of sales taxes paid in the Wichita area are paid by non-residents based on a report at www.ksrevenue.org/pullfactor.html. This means that the City would collect an estimated $51.7 million in sales taxes (of the total $397.6 million)from non-residents.”
But at the “Yes Wichita” website, there is a different claim: “If we fund a new water source through a sales tax instead of water bills or property taxes, visitors and tourists will pay the sales tax, reducing the burden of this cost to Wichitans by about one-third.”
So which is it? 13 percent, or 33.3 percent? Why does “Yes Wichita” use a figure 2.5 times the city’s?
October 3, 7:48pm
I have a question regarding the proposed sales tax. Earlier this year the steering committee for the Wichita/Sedgwick County Community Investments Plan delivered a report to the Wichita City Council. The report says the city is delinquent in maintaining infrastructure. The report said the “cost to bring existing deficient infrastructure up to standards” is an additional $45 to $55 million per year. Does the proposed sales tax do anything to address this maintenance gap other than the portion earmarked for street repairs? Do you think the city will be asking for additional tax revenue to address the maintenance shortfall? If not, what is the city’s plan for catching up on infrastructure maintenance?
October 2, 8:53pm
I have a question. Can anyone tell me what the cost of the sales tax for an average family might be?
September 22, 9:48pm
I have a question. Jon Rolph disputed Jennifer Baysinger’s figures on the cost of the proposed sales tax for Wichita households. Is he or “Yes Wichita” willing to provide any figures or calculations as to what the cost might be, and the basis for Rolph’s disagreement?
In this episode of WichitaLiberty.TV: Considering the proposed Wichita sales tax, looking at unmet maintenance needs, claims that we have few economic development incentives, the cost of the sales tax to families, the taxes already going to the transit system, and the bad choice the city gives us for water. View below, or click here to view at YouTube. Episode 61, broadcast October 5, 2014.
The proposed Wichita sales tax does little to close the city’s delinquent infrastructure maintenance gap. Despite this, there are rumors of another sales tax next year for quality of life items.
Earlier this year the steering committee for the Wichita/Sedgwick County Community Investments Plan delivered a report to the Wichita City Council. The report contains facts that are very relevant to the proposed Wichita one cent per dollar sales tax. Voters will decide on this in November.
The most important thing Wichita voters need to know that the city is delinquent in maintaining the assets that taxpayers have purchased. The cost to remedy this lack of maintenance is substantial. On an annual basis, Wichita needs to spend $180 million on infrastructure depreciation/replacement costs. Currently the city spends $78 million on this, the presentation indicates.
The “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.
How does this relate to the proposed sales tax? Of the funds the sales tax is projected to raise over five years, $27.8 million is allocated for street maintenance and repairs. That’s $5.6 million per year.
Subtract that from what the Community Investments Plan says we need to spend on deficient infrastructure, and we’re left with (roughly) $40 to $50 million per year in additional spending on deficient infrastructure. Remember, that’s on top of ongoing infrastructure depreciation/replacement costs.
Does the proposed sales tax do anything to address those needs? No, it doesn’t.
So what about the deficiency? Is it likely that Wichitans will be asked to provide additional tax revenue to address the city’s deficient infrastructure? So far, city hall hasn’t asked for that, except for recommending that Wichita voters approve $5.6 million per year for streets from a sales tax.
But if we believe the numbers in the Community Investments Plan, we should be prepared for city hall to ask for a lot more tax revenue. That is, if the city is to adequately maintain the things that taxpayers have paid to provide.
It gets even worse.
Earlier this year the city council considered various proposals for spending a new source of tax money. Four survived the discussion and will be the recipient of sales tax funds, if Wichita voters approve. Those needs are a new water supply, jobs and economic development, transit, and street maintenance and repair.
There were proposals that did not make the cut for the proposed sales tax, generally in the category of “quality of life” facilities. These include a new convention center, new performing arts center, new central library, newly renovated Lawrence-Dumont Stadium, renovation of the Dunbar Theater, renovation of O.J. Watson Park, and help for the homeless.
Evidently there are many who are not happy that these proposals will not receive sales tax money. Rumors afloat that groups — including city officials — are plotting for another sales tax increase to fund these items.
People are rightly concerned that even though the proposed Wichita sales tax ordinance specifies an end to the tax in five years, these taxes have a way of continuing. The State of Kansas recently had a temporary sales tax. It went away, but only partly. The Kansas state sales tax rate we pay today is higher than it was before the start of the “temporary” sales tax.
But the people who want to spend your tax dollars on these “quality of life” items aren’t content to wait five years for the proposed sales tax to end. They are plotting to have it start perhaps one year from now.
These are things that Wichita voters need to consider: There is a backlog of maintenance, and there is appetite for more tax revenue for more spending. Even if the sales tax passes, these remain unfulfilled.
Do you get the feeling that Wichita’s promises and projections regarding water are quite, well, fluid?
Six years ago a Wichita city news release stated “Through the ASR project, Wichita will receive the water it needs through the year 2050 …” (“Wichita’s Future Water-Supply Plan Moves Ahead,” July 3, 2008)
But now, Wichitans are told there is a water crises, and the way to solve it is by voting for a sales tax of one cent per dollar. Either that, or the city will meet the crisis by borrowing money and having water users pay an extra $221 million in interest on a $250 million project.
Perhaps the city’s 2008 news release was based on overly-optimistic engineering. Perhaps the claim of being able to meet our water needs through 2050 is based on all four phases of ASR being completed.
Now, the most recent city documents promise much less: “A new water supply is expected to delay the year (with no conservation) in which drought protection for a 1% drought is provided. This date is projected to be 2030.”
Do you get the feeling that the city’s promises and projections regarding water are quite, well, fluid? Do you remember that eleven years ago then-Mayor Bob Knight was told we had sufficient water for the next 50 years?
An adequate water supply is vitally important. But we are not in a crisis. We had plenty of water this year. Cheney Reservoir has been full most of the year, although currently a little less than full as it’s been dry the last month or so.
Wichita’s water crisis — to the extent it exists — does not need to be solved in a rush. The risks of making big-dollar mistakes are too high to hurry.
Speaking of the ASR project: At a time of heightened interest in ASR, the project’s website has been abandoned. Readers will find language like Phase II “will be complete by the end of 2011.” The last newsletter was for December 2011.
The first years of operation of Phase II of ASR have not been a total success. Maybe that’s why there’s been no news.
To pay for a new water supply, Wichita gives voters two choices and portrays one as bad. But the purportedly bad choice is the same choice the city made over the last decade to pay for the last big water project. We need out-of-the-box thinking here.
In November Wichita voters will decide whether to create a sales tax of one cent per dollar. By far the largest intended purpose of the funds is to create a new water supply.
Set aside for a moment the question whether Wichita needs a new water source. Set aside the question of whether ASR is the best way to provide a new water source. What’s left is how to pay for it.
To pay for a new water source, the city gives us two choices: Either (a) raise funds through the sales tax, or (b) borrow funds that Wichitans will pay back on their water bills, along with a pile of interest.
As you can see in the nearby chart prepared by the city, the costs are either $250 million (sales tax) or $471 million (borrow and pay interest). The preference of the city is evident: sales tax. The “Yes Wichita ” group agrees.
Here’s what is happening. City hall gives us two choices. It’s either (a) do what we want (sales tax), or (b) we’ll do something that’s really bad (borrow and pay interest). Wichitans shouldn’t settle for this array of choices.
Are there other alternatives for raising $250 million for a new water source? Of course there are. The best way would be to raise water bills by $250 million over five years. In this way, water users pay for the new water supply, and we avoid the long-term debt that city council members and “Yes Wichita” seem determined to avoid.
Water bills would have to rise by quite a bit in order to raise $50 million per year. But it’s important to have water users pay for water. The benefit of having water users pay for a new water source is that water users will become acutely aware of the costs of a new water supply. That awareness is difficult to achieve. Many citizens are surprised to learn that the city has spent $247 million over the past decade on a water project, the ASR program.
It will be easier to let people know how much a new water supply costs and how it affects them personally when its cost appears on their water bills. The money that is collected through water bills can be placed in a dedicated fund instead of flowing to the city’s general fund. Then, after the necessary amount is raised, water bills can be immediately adjusted downwards. That’s more difficult to do with a sales tax.
If we pay for a new water supply through a general retail sales tax, the linkage between cost and benefit is less obvious. There is less transparency, and ultimately, less accountability. And we need more accountability. Eleven years ago former mayor Bob Knight was assured that the city had adequate water for the next 50 years. Since then we’ve spent $247 million on the ASR project. Yet, the city says there is a water crisis that demands passage of a sales tax.
Speaking of accountability: Last week the city issued $147,391,828 in long-term bonds to permanently finance short-term bonds used to pay for phase II of the ASR project. That’s right. The ASR project, which by any account has been under-performing, was largely paid for with borrowed funds.
If borrowing to pay for a new water supply is bad, was it also bad to borrow to pay for ASR? Who do we hold accountable for that decision?
Kansas schools could receive $21 million annually in federal funds if the state had adequate information systems in place.
One of the nuggets buried in a policy brief released last week by Kansas Policy Institute is that the state is not capturing all federal funds to which it is entitled. That is, would be able to capture if the state had adequate information systems in place. Here’s a section of the policy brief:
Capture federal reimbursement of K-12 KPERS costs
States are entitled to be reimbursed by the federal government for the pension costs of school employees engaged in the delivery of federally-funded services, such as Special Education and Food Service. Kansas, however, foregoes federal reimbursement because many school districts’ payroll systems lack the ability to properly capture the necessary information. (Estimates are not permitted; the information must flow through payroll systems.) The State should require that school districts utilize a single state-provided or outsourced payroll system to capture annual federal reimbursement of $21 million.
Here is a sum of money that Kansas schools could receive if only Kansas had the necessary information systems infrastructure in place. A side benefit would likely be better management of school systems’ payroll if such a system was in place.
Is $21 million a significant sum when the state spends several billions on schools each year? The Kansas school spending establishment contends that a tax credit scholarship that might divert $10 million from the state to private schools is something that schools can’t afford. But here’s an example of twice that amount being available if Kansas school leadership had to will to obtain it.
The Kansas Policy Institute policy brief “A Five-Year Budget Plan for the State of Kansas: How to balance the budget and have healthy ending balances without tax increases or service reductions” is just ten pages in length. It may be downloaded from KPI here or alternatively from Scribd here (may work better on mobile devices). A press release from KPI announcing the policy brief is at 5 Year Budget Plan Outlines Path To Protect Essential Services and Tax Refom.
A policy brief from a Kansas think tank illustrates that balancing the Kansas budget while maintaining services and lower tax rates is not only possible, but realistic.
The State of Kansas has implemented tax reform that reduces the tax burden for Kansans. A remaining challenge that has not yet been tackled is spending reform, that is, aligning Kansas state government spending with a smaller stream of tax revenue. Critics of tax reform say the Kansas budget is a mess or a train wreck, pointing to projections of large deficits before long. Tax increases or service cuts will be required to balance the budget, contend critics.
In a policy brief released today, Kansas Policy Institute presented a plan for bringing the budget in balance while retaining low tax rates (and future reductions) and accommodating projected future spending needs for Medicare and schools.
KPI’s analysis and proposed budgets are based on revenue and expenditure data from Kansas Legislative Research Department as of August. Because of some uncertainty of future revenue estimates, KPI used three different levels of starting revenue going to create three different scenarios. KPI then applied the same growth rate that KLRD uses.
Even with the changes proposed by KPI, spending will still increase in most cases. Baked into KPI’s tables are projections by KLRD of increases of $299 million for Medicaid caseloads and $215 million for additional K-12 school spending.
The changes that KPI recommends are primarily structural in nature. For example, one recommendation is to reform KPERS, the state employee retirement system, so that newly hired employees are covered by a defined contribution program. Another is reducing sales tax transfers to Kansas Department of Transportation to the level used in fiscal year 2013.
Another change is to improve accounting systems. The report illustrates one instance where inadequate payroll systems mean that the state can’t claim some payments that it is due:
States are entitled to be reimbursed by the federal government for the pension costs of school employees engaged in the delivery of federally-funded services, such as Special Education and Food Service. Kansas, however, foregoes federal reimbursement because many school districts’ payroll systems lack the ability to properly capture the necessary information. (Estimates are not permitted; the information must flow through payroll systems.)
KPI president Dave Trabert said: “We do have to have some structural changes that should have occurred in 2012 when tax reform was first implemented. We can do that now by making more effective use of existing resources.” Except in a few instances, the budget plan advanced by KPI doesn’t depend on government eliminating waste or becoming more efficient. While these goals are important, Trabert said, they take time to accomplish.
The policy brief is just ten pages in length. It may be downloaded from KPI here or alternatively from Scribd here (may work better on mobile devices). A press release from KPI announcing the policy brief is at 5 Year Budget Plan Outlines Path To Protect Essential Services and Tax Refom.
Heritage Foundation Chief Economist Stephen Moore spoke to a luncheon gathering at the Wichita Pachyderm Club about his new book, “An Inquiry into the Nature and Causes of the Wealth of States.” September 5, 2014. Video production by Paul Soutar. View below, or click here to view at YouTube.
As the City of Wichita asks for more tax money for infrastructure, Wichita voters need to be aware of the projected costs of the city’s deferred maintenance.
When the Wichita City Council voted to increase water rates in November 2013, meeting minutes reported these remarks from the city manager explaining that Wichita has not adequately maintained its infrastructure:
Bob Layton City Manager stated the Council told staff last year that they wanted staff to continue to look at operation efficiencies to reduce the operating costs, which they are doing. Stated the rate recommendation does reflect the three percent efficiency increase. Stated over the last several years 80% of those rate increases have gone to infrastructure improvements and a lot of it is because of deferred maintenance that occurred over a long period of time. Stated they recognize even with these increases that it will difficult to keep up with the maintenance requirements of our system but are also aware of concerns residents have about significant rate increases.
This was not the first time, nor the last time, that Wichitans might have heard about problems with deferred maintenance of city infrastructure. In his 2013 State of the City address Mayor Carl Brewer told the city that over the next 30 years, “Wichita’s aging water, sewer, and storm drainage systems will require significant maintenance or replacement. Total replacement of these systems is estimated to cost $2.1 BILLION.” (emphasis in original)
Earlier this year a report presented to the Community Investments Plan Steering Committee held language like “Decades of under-investment in infrastructure maintenance … 38% of Wichita’s infrastructure is in ‘deficient/fair’ condition.”
The report also told the committee that the “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.
It’s important to note that these costs are not for building new infrastructure. Also, these costs are not for routine, ongoing maintenance. Instead, these numbers are what it costs to catch up with what the city should have been doing. As the report says: To bring existing deficient infrastructure up to standards.
This is important for Wichita voters to know as they consider their decision on a proposed one cent per dollar sales tax that will appear on the November ballot. Almost two-thirds of the tax proceeds would be spent on water.
But it’s important to note that the purpose of the $250 million allocated for water is not for catching up on the maintenance backlog. Instead, it’s earmarked for building additional water supply capability.
Whether the sales tax passes or not, the deferred maintenance needs of our existing infrastructure will remain. There will be pressure for water rates to rise, or for some other source of revenue to catch up on maintenance.
It won’t do us much good to have a new water source (the purpose of which is to allow for the watering of lawns and washing of cars during droughts) if the water pipes are broken. Perhaps Wichita voters should ask that the city present a plan for maintaining the assets we have before sending more tax dollars to city hall.
And let’s also ask this: Why hasn’t the city maintained the infrastructure that taxpayers and water users have already paid for?
It was a cloudy day, and while the sidewalk bench lights were on, at least the tall street lights were off. Other good news: The outdoor lights at the Wichita Transit Center were also turned off. So Wichita’s making some progress in controlling the blatant waste of electricity. Either that, or the lights at the Transit Center finally burned out from being on all day.
The lights illustrated in these photographs are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in As Wichita asks for more taxes, it continues to waste what it has, Before asking for more taxes, Wichita should stop wasting what it has, Waste in Wichita, the seen and probably unseen, Wichita’s monsters on display, again, Forget the vampires. Let’s tackle the real monsters, Wichita advances in the field of cost savings, Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.
This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.
Claims by boosters of a proposed Wichita sales tax that the city will be transparent in how money is spent must be examined in light of the city’s attitude towards citizens’ right to know.
When a city council member apologizes to bureaucrats because they have to defend why their agencies won’t disclose how taxpayer money is spent, we have a problem. When the mayor and most other council members agree, the problem is compounded. Carl Brewer won’t be mayor past April, but the city council member that apologized to bureaucrats — Pete Meitzner (district 2, east Wichita) — may continue serving in city government beyond next year’s elections. Wichita City Manager Robert Layton will likely continue serving for the foreseeable future.
Why is this important? Supporters of the proposed Wichita sales tax promise transparency in operations and spending. But requests for spending records by the city’s quasi-governmental agencies are routinely rebuffed. The city supports their refusal to comply with the Kansas Open Records Act. Many of the people presently in charge at city hall and at agencies like Greater Wichita Economic Development Coalition will still be in charge if the proposed sales tax passes. What assurances do we have that they will change their attitude towards citizens’ right to know how taxpayer funds are spent?
Following, from December 2012, an illustration of the city’s attitude towards citizens’ right to know.
Wichita, again, fails at open government
The Wichita City Council, when presented with an opportunity to increase the ability of citizens to observe the workings of the government they pay for, decided against the cause of open government, preferring to keep the spending of taxpayer money a secret.
The occasion was consideration of renewing its contract with Go Wichita Convention and Visitors Bureau. I asked, as I have in the past for this agency and also for Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition, that they consider themselves to be what they are: public agencies as defined in the Kansas Open Records Act.
In the past I’ve argued that Go Wichita is a public agency as defined in the Kansas Open Records Act. But the city disagreed. And astonishingly, the Sedgwick County District Attorney agrees with the city’s interpretation of the law.
So I asked that we put aside the law for now, and instead talk about good public policy. Let’s recognize that even if the law does not require Go Wichita, WDDC, and GWEDC to disclose records, the law does not prohibit them from fulfilling records requests.
Once we understand this, we’re left with these questions:
Why does Go Wichita, an agency funded almost totally by tax revenue, want to keep secret how it spends that money, over $2 million per year?
Why is this city council satisfied with this lack of disclosure of how taxpayer funds are spent?
Why isn’t Go Wichita’s check register readily available online, as it is for Sedgwick County?
For that matter, why isn’t Wichita’s check register online?
It would be a simple matter for the council to declare that the city and its taxpayer-funded partner agencies believe in open government. All the city has to have is the will to do this. It takes nothing more.
Only Wichita City Council Member Michael O’Donnell (district 4, south and southwest Wichita) gets it, and yesterday was his last meeting as a member of the council. No other council members would speak up in favor of citizens’ right to open government.
But it’s much worse than a simple failure to recognize the importance of open government. Now we have additional confirmation of what we already suspected: Many members of the Wichita City Council are openly hostile towards citizens’ right to know.
In his remarks, Wichita City Council Member Pete Meitzner (district 2, east Wichita) apologized to the Go Wichita President that she had become “a pawn in the policy game.” He said it was “incredibly unfair that you get drawn into something like this.”
He added that this is a matter for the Attorney General and the District Attorney, and that not being a lawyer, she shouldn’t be expected to understand these issues. He repeated the pawn theme, saying “Unfortunately there are occasions where some people want to use great people like yourself and [Wichita Downtown Development Corporation President] Jeff Fluhr as pawns in a very tumultuous environment. Please don’t be deterred by that.”
Mayor Brewer added “I would have to say Pete pretty much said it all.”
We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”
But by framing open government as a legal issue — one that only lawyers can understand and decide — Wichita city government attempts to avoid criticism for their attitude towards citizens.
It’s especially absurd for this reason: Even if we accept the city’s legal position that the city and its quasi-governmental taxpayer-funded are not required to fulfill records request, there’s nothing preventing from doing that — if they wanted to.
In some ways, I understand the mayor, council members, and bureaucrats. Who wants to operate under increased oversight?
What I don’t understand is the Wichita news media’s lack of interest in this matter. Representatives of all major outlets were present at the meeting.
I also don’t understand what Council Member Lavonta Williams (district 1, northeast Wichita) suggested I do: “schmooze” with staff before asking for records. (That’s not my word, but a characterization of Williams’ suggestion made by another observer.)
I and others who have made records requests of these quasi-governmental taxpayer-funded organizations have alleged no wrongdoing by them. But at some point, citizens will be justified in wondering whether there is something that needs to be kept secret.
The actions of this city have been noticed by the Kansas Legislature. The city’s refusal to ask its tax-funded partners to recognize they are public agencies as defined in the Kansas Open Records Act is the impetus for corrective legislation that may be considered this year.
Don’t let this new law be known as the “Wichita law.” Let’s not make Wichita an example for government secrecy over citizens’ right to know.
Unfortunately, that bad example has already been set, led by the city’s mayor and city council.
Claims of valuing and promoting government transparency by the City of Wichita are contradicted by its taxpayer-funded surrogates.
As boosters of a proposed Wichita sales tax promise accountability and transparency in how money will be spent, especially the portion designated for jobs and economic development, voters may want to consider the city’s past and present attitude towards government transparency and open records.
The city has three surrogate quasi-governmental agencies that are almost totally taxpayer-funded, specifically Go Wichita Convention and Visitors Bureau, Wichita Downtown Development Corporation, and Greater Wichita Economic Development Coalition. Each agency contends it is not a “public agency” as defined in Kansas law, and therefore does not have to fulfill records requests.
These agencies spend considerable sums of tax money. In December the city approved funding Go Wichita with $2,322,021 for 2014, along with a supplemental appropriation of $150,000. Earlier this year the council voted to increase the city’s hotel tax by 2.75 cents per dollar, with the proceeds going to Go Wichita. That tax is thought to raise $2.5 million per year.
That’s a lot of tax money. It’s also a very high portion of the agency’s total funding. According to the 2012 IRS form 990 for Go Wichita, the organization had total revenue of $2,609,545. Of that, $2,270,288 was tax money from the city. That’s 87 percent taxpayer-funded. When the surge of higher hotel tax money starts flowing in, that percent will undoubtedly rise, perhaps to 93 percent or more.
Despite being nearly totally funded by taxes, Go Wichita refuses to supply spending records. Many believe that the Kansas Open Records Act requires that it comply with such requests. If the same money was being spent directly by the city, the records would be supplied.
I’ve appeared before the council several times to ask that Go Wichita and similar organizations comply with the Kansas Open Records Act. See Go Wichita gets budget approved amid controversy over public accountability, City of Wichita Spends $2 million, Rebuffs Citizen’s Transparency Request, and articles at Open Records in Kansas.
This week Go Wichita refused to provide to me its contract with a California firm retained to help with the re-branding of Wichita. If the city had entered into such a contract, it would be public record. But Go Wichita feels it does not have to comply with simple transparency principles.
Supporters of the proposed one cent per dollar Wichita city sales tax promise transparency in the way decisions are made and money is spent. Below, Mike Shatz explains how this promise is hollow.
City of Wichita wants to increase sales tax by 14%
The City of Wichita funnels your tax dollars into “non-profit” development groups that refuse to show us how that money is spent, and now the City wants you to vote in favor of a sales tax increase so they can give these organizations even more of your money.
These groups, Go Wichita, The Downtown Development Corporation, and the Greater Wichita Economic Development Coalition, get roughly 90% of their overall funding from Wichita tax dollars, but claim that they are exempt from the Kansas Open Records Act, because they are “private” organizations.
The City of Wichita could easily place conditions on the money it gives to these groups, requiring them to show taxpayers how their tax dollars are being spent, but the City refuses to do so. This is not transparency.
Continue reading at Kansas Exposed.
When Wichita voters weigh the plausibility of the city’s plans for spending proposed new sales tax revenue, they should remember this is not the first time the city has promised results and accountability.
Do you remember Transforming Wichita? According to the city, “Transforming Wichita is the journey by which we are fundamentally changing the way we measure, report and perform the work of delivering services to the citizens of Wichita.”
In more detail, the city website proclaimed: “TW is the journey by which we will be fundamentally changing the way we deliver services to the citizens of Wichita. Our vision is for Wichita to be a premiere Midwestern city where people want to visit, live and play and for the city government to be a model of world class city governance where citizens receive the best possible value for their tax dollars and have confidence in their city government.”
At the end of this article I present the complete page from the city’s website as captured on November 10, 2007. That’s just seven years ago. There are officeholders (Wichita Mayor Carl Brewer, City Council member Jeff Longwell, City Council member Lavonta Williams) and many bureaucrats still in office from that year. It’s not ancient history.
Some of the most frequently-mentioned concepts in this document are:
- measure and report
The document mentions “supported by modernized information systems that facilitate collaboration with our partners.” That promise was made seven years ago. Today, do you know what you get when you ask the City of Wichita for spending records? The city can supply data of only limited utility. When I asked for spending records, what was supplied to me was data in pdf form, and as images, not text. It would be difficult — beyond the capability of most citizens — to translate the data to useful format. Even if someone translated the reports to computer-readable format, I don’t think the data would be very useful. This is a serious defect in the city’s transparency efforts.
How does Wichita compare to other jurisdictions in this regard? Many governmental agencies post their checkbooks on their websites, having mastered this aspect of accountability and trust years ago. Not so the City of Wichita.
Speaking of websites: The new and “improved” wichita.gov website is actually less useful than the city’s website in 2007. For more on this see A transparency agenda for Wichita.
Regarding performance: One of the most important functions city leaders say they perform is economic development, specifically the creation of jobs. Last year when the Wichita Eagle asked for job creation figures, it reported this:
“It will take us some time to pull together all the agenda reports on the five-year reviews going back to 2003. That same research will also reveal any abatements that were ‘retooled’ as a result of the five-year reviews,” city urban development director Allen Bell said.
One might have thought that the city was keeping records on the number of jobs created on at least an annual basis for management purposes, and would have these figures ready for immediate review. If the city had these figures available, it would be evidence of trustworthiness, performance, accountability, and measuring and reporting. But the city isn’t doing this.
Regarding values for dollars spent: During the past decade Wichita spent $247 million on the Aquifer Storage and Recovery Program, or ASR. As that project was contemplated, Wichita was told there was sufficient water for the next 50 years. We should ask: What value did we receive for those dollars?
Speaking of accountability: Much of the money used to pay for the ASR project was borrowed in the form of long-term debt. Now we are told that long-term borrowing to pay for a new water supply would be bad fiscal management. So was it was prudent and advisable to borrow over $200 million for water projects during the last decade? Who do we hold accountable for that decision, if what city leaders now say is correct?
Here’s a page from the city’s website as captured on November 10, 2007:
Transforming Wichita is the journey by which we are fundamentally changing the way we measure, report and perform the work of delivering services to the citizens of Wichita. Our Vision:
- For Wichita to be a premiere Midwestern city where people want to visit, live and play (as envisioned in Visioneering Wichita).
- For Wichita City government to be a model of world class city governance — where citizens are getting the best possible value for their dollars and the City has the public’s confidence and trust. For this vision to be attained, we have to adapt to change!
While we are doing a lot of things right, we can’t be complacent, resting on our laurels from past successes. The paradox is that we must retain faith that the future is bright, while being willing to face challenges of our current situation. We must be willing to challenge every aspect of how we’re doing things today. We must position ourselves for the future.
We will do this by transforming City government into a high performance organization that:
- Focuses on results
- Understands what results matter most to their customers
- Makes performance matter
- Moves decision-making down and out to the front-line, closest to customers; and
- Fosters an environment of excellence, inclusiveness, accountability, learning and innovation.
Through Transformation Wichita:
- We deliver outstanding results that matter to our customers and are trustworthy stewards of the funds with which citizens have entrusted us;
- We utilize team work and the best business processes, supported by modernized information systems that facilitate collaboration with our partners;
- We measure and report on our work, using a balanced scorecard that shows progress and results in how we carry out programs and activities, so that performance matters; and
- We engage in work that produces results that matter for our customers; we will work with colleagues in an environment where learning enriches us and innovation expands our potential.
More about TW
TW is the journey by which we will be fundamentally changing the way we deliver services to the citizens of Wichita. Our vision is for Wichita to be a premiere Midwestern city where people want to visit, live and play and for the city government to be a model of world class city governance where citizens receive the best possible value for their tax dollars and have confidence in their city government.
While the City is doing a lot of things right, we can’t be complacent. We must be willing to challenge every aspect of how we’re doing things today and position ourselves for the future.
We will accomplish this by transforming City government into a high performance organization that:
- Delivers outstanding results that matter to our customers and is a trustworthy steward of the funds with which citizens have entrusted us;
- We utilize team work and the best business processes, supported by modernized information systems that facilitate collaboration with our partners;
- We measure and report on our work, using processes that show progress and results in how we carry out programs and activities; and
- We engage in work that produces results that matter for our customers.
Wichita plans an ambitious road project that turns out to be too expensive, resulting in continued delays for Wichita drivers and purchases of land that may not be needed.
A major road construction project in east Wichita is deferred after the design is too expensive, reports the Wichita Eagle. (East Kellogg interchange plan getting major reboot, August 30, 2014)
It’s bad news that Wichita drivers will suffer through more years of delay as they travel through east Wichita. The value of the lost hours sitting in traffic? It’s impossible to say.
But here’s something that will probably be easy to appraise: The waste of taxpayer dollars due to the actions of government planners. From the Eagle story:
It’s unclear how the redesign would affect the ongoing lawsuit between the city of Wichita and 10 property owners whose land was taken by eminent domain for the project. The city also has acquired another 30 parcels in the area.
A court-appointed panel of three appraisers awarded the owners of the 10 parcels a collective $19.6 million for their properties in November.
The Wichita City Council approved the award, as required by the court, but the amount far exceeded an internal estimate in the $4 million to $5 million range.
In December, the city sued the landowners to see if a court would reduce the valuations.
Some of that land probably would not be needed if the interchange is redesigned.
Did you catch that? The city spent nearly five times as much as original estimates to seize property through eminent domain, and also purchased other property. Buildings with remaining useful life have been razed. Now, we learn that this land may not be needed.
As Wichita city hall asks citizens to trust the plans for the proceeds of a new sales tax, remember lessons like this.
Supporters of a new sales tax in Wichita use the Intrust Bank Arena as an example of successful application of a sales tax.
As Wichita debates the desirability of a sales tax, a former sales tax is used as a model of success. Let’s take a look at a few of the issues.
Ongoing vs. capital expenses
A portion of the proposed sales tax will be used for operational expenses, and the demand for this spending will not end when the sales tax ends.
The sales tax for the Intrust Bank Arena was used to build a capital asset and establish a small reserve fund. Spending on capital assets is characterized by a large expense in a short period of time as the asset is constructed. Then, the spending is over — sort of.
For the proposed Wichita sales tax, 63 percent is scheduled for capital asset spending on an enhanced water supply. The remainder, 37 percent, is for operation of the bus transit system, street repair, and economic development. These three items are operational in nature, meaning they are ongoing expenses. It’s not likely that after five years the bus system will be self-sustaining, or that streets will no longer need repair, or that there will be no more clamoring for economic development.
There is a large difference, then, between the arena sales tax and the proposed Wichita sales tax. While sales tax boosters say the tax will end in five years, the likelihood is that because much of it will have been paying for operational expenses, there will be great pressure to continue the tax and the spending it supports. That’s because the appetite for tax revenue by government and its cronies is insatiable. An example: As the arena sales tax was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)
Intrust Bank Arena economics
Having promoted a false and incomplete picture of the economics of the Intrust Bank Arena, civic leaders now use it as a model of success.
The building of a new arena in downtown Wichita was promoted as an economic driver. So far, that hasn’t happened. There have been spurts of development near the arena. But the arena is also surrounded by empty lots and empty retail space, and there have been months where no events took place at the arena.
Regarding the accounting of the profits earned by the arena, we need to realize that civic leaders are not telling citizens the entire truth. If proper attention was given to the depreciation expense of Intrust Bank Arena, that would recognize and account for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena. This would be a business-like way of managing government — something we’re promised. But that hasn’t happened.
Civic leaders and arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and it hides the true economics of the arena. An example of the incomplete editorializing comes from Rhonda Holman of the Wichita Eagle, who earlier this year wrote “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.”
There are at least two ways of looking at the finances of the arena. Most attention is given to the “profit” (or loss) 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. For 2103, the accounting method used in this agreement produced a profit of $705,678, to be split (not equally) between SMG and the county. The county’s share, as Holman touted, was $255,678. (Presumably that’s after deducting the cost of producing an oversize check for television cameras.)
While described as “profit” by many, 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, and how the county participates.
A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2013 Comprehensive Annual Financial Report for Sedgwick County. The CAFR, as described by the county, “… is a review of what occurred financially at Sedgwick County in 2013. In that respect, it is a report card of our ability to manage our financial resources.” Regarding the arena, the CAFR states:
The Arena Fund represents the activity of the INTRUST Bank Arena that opened on January 9, 2010. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any. The Arena had an operating loss of $4.7 million. The loss can be attributed to $5.3 million in depreciation expense.
Financial statements in the same document show that $5,295,414 was charged for depreciation in 2013, bringing accumulated depreciation to a total of $21,190,280.
Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,295,414 in depreciation expense. Instead, depreciation accounting provides a way to recognize the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.
Any honest reckoning of the economic performance of Intrust Bank Arena must include depreciation expense. We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.
Effect on sales and jobs
Taxes have an impact. Definitely.
Boosters of the proposed Wichita sales tax say that since it is so small — “just one cent,” they say — its effect won’t be noticed. I wonder: If increasing prices by one percent has no effect, why don’t merchants raise their prices by one percent right now and pocket the profit?
Taxes have an impact. The problem with assessing the impact is that the results of the tax are usually concentrated and easy to see — a new arena, water supply, repaved streets, more buses, etc. But the consequences of the tax are usually spread out over a large number of people and collected in small amounts. The costs are dispersed, and therefore more difficult to detect. But there has been an analysis performed of a situation parallel to the Intrust bank Arena tax.
A paper titled “An Assessment of the Economic Impact of a Multipurpose Arena” by Ronald John Hy and R. Lawson Veasey, both of the University of Central Arkansas, (Public Administration & Management: An Interactive Journal 5, 2, 2000, pp. 86-98) looked at the effect of jobs and economic activity during the construction of the Alltel Arena in Pulaski County, Arkansas. This arena cost $50 million. It was funded in part by a one percent increase in the county sales tax for one year (1998). The sales tax generated $20 million.
In the net, considering both jobs lost and jobs gained due to sales tax and construction effects, workers in the wholesale and retail trades lost 60 jobs, and service workers lost 52 jobs. There was a net increase of 198 jobs in construction.
The fact that jobs were lost in retail should not be a surprise. When a sales tax makes nearly everything sold at retail more expensive, less is demanded. It may be difficult to estimate the magnitude of the change in demand, but it is certain that it does change.
The population of Pulaski County in 2000 was 361,474, while Sedgwick County’s population at the same time was 452,869, so Sedgwick County is somewhat larger. The sales tax for the arena lasted 2.5 times as long, and our arena was about three times as expensive. How these factors affected the number of jobs is unknown, but it’s likely that the number of jobs lost in Sedgwick County in retail and services was larger that what Pulaski County experienced.
By Jennifer Baysinger
Monday’s decision by the Chamber of Commerce to support Wichita’s sales tax initiative was disappointing, though not a surprise. Even without a clear plan from City Hall, the Chamber has been vocally supportive of the referendum for months.
However, there is more than one business voice in Wichita. I believe the Chamber’s decision is unrepresentative of our city’s business community as a whole.
It was business leaders who first approached me with concerns regarding the potential tax hike when the Coalition for a Better Wichita began to take shape. Making it more expensive to be a business owner and consumer in Wichita simply seemed counterintuitive to us.
As a small business owner, I know it is not a simple task to be successful. There are dozens of complicated decisions that have to be made every day in order to realize a profit. There are rarely easy answers on the road to success. As a result, it is puzzling that the Wichita Chamber decided a so-called select committee can simply pick what companies, in a myriad of markets, deserve public money to be bestowed upon them. Highly-compensated mutual fund managers rarely beat the S&P averages. Why do we think this committee will do any better?
Rather than creating a level playing field for the businesses in our city that will allow all entrepreneurs to thrive on their own merits, this select committee will direct taxpayer funds to the chosen few. This government spending of additional tax dollars raises the cost of government for everyone — including the business startups struggling to succeed.
Whether we are talking about private dollars, or public money, $400 million is a lot of money. That $400 million could do so much more for our wonderful city than what has been proposed.
There truly is no need to rush such an important decision that will cost us all. Voters should reject this haphazard proposal. Let’s start over and make a real effort to engage our community’s citizens to find out what we all can do to make this great City even better. Let’s invest in ourselves, not some committee whose job is to give away our tax money.
Your smartphone is a valuable tool for activism. Here are two ways to get involved.
Many people wonder how they can be involved in helping to improve government as a citizen activist. It may be that you have a valuable tool that’s in your pocket, and that you take everywhere you go: Your smartphone.
You may have seen me showing photographs of street lights burning in downtown Wichita during the middle of sunny afternoons. Have you ever spotted government waste like that? I’m sure that you have. I think people forget they have a fairly high-quality camera with them at all times in their smartphones. So here’s something that you can do: Take a photograph or shoot some video. Send it to me or to your local government watchdog. People like me need information. I need tips. Put your smartphone to work for something beside selfies.
Another thing you can do with your smartphone that is very helpful is to capture documents. Here’s an example. At election time, campaigns and political groups send a lot of mail pieces to voters. Some of these will contain falsehoods or distortions that need to be exposed so that the guilty parties can be held accountable. But much of the time, these political mailings go unnoticed. That’s because a Kansas House of Representatives campaign, for example, covers a relatively small population. Then, campaigns may send mail to only the people they consider active voters, and may narrow down the list using other criteria like political party. Or campaigns may send certain mail pieces to small subsets of voters. So any single campaign mail piece may go to a relatively small number of households.
What can you do to help? Use your smartphone or regular camera to capture documents like campaign mailers. You can do this by simply take a regular photograph with the built-in camera app. That usually works well enough if you follow a few guidelines, and with a little practice you can create documents are are very usable.
Probably the three most important things to remember are to avoid glare, maintain perspective, and crop. If your light source or flash creates glare on the document, the document may not be usable. By perspective, I mean having your camera square and perpendicular relative to the document so that its dimensions are not distorted. (I find that placing the document on the floor and then getting right over it helps.) Finally, cropping removes unneeded parts of the image. Remember, what we’re trying to do here is to create usable documents that can be read. We don’t have to worry about creating archival-quality documents like you would be if you’re digitizing and preserving family photographs.
As I said, you can do this with the regular camera app in your smartphone. But there are specialized document scanning apps. I’ve used several, and one I can recommend is called Scanbot. Another is CamScanner.
Scanbot is free for both Apple and Android smartphones and tablets, although there is a paid version with extra features like optical character recognition. What I like about Scanbot is that as you’re taking a photo, the app coaches you on the screen with tips like “too dark,” “get closer,” or “perspective.” Finally, it will command “don’t move” and it will snap the photo. You can then add more pages.
When finished, it creates a pdf from the scan. That’s really handy, as you then have one pdf document that holds all pages of the campaign mailer or other document. Then, you can have the app send the pdf by email or upload it to cloud-based storage systems like DropBox or Google Drive. (I recommend both of these systems.)
I should warn you: If you plan on sending something that you received in the mail that has your address or any other personal information on it, be aware and be careful. You could erase it using an editing app on your smartphone or computer, but in many cases the easiest thing to do is to obliterate your address with a marker pen before you capture the document. Or, you might cover it with paper, or excise it with scissors.
This type of intelligence-gathering is extremely valuable. Now, you may be thinking “Wait a minute. Don’t political campaigns post their mailers on their websites or Facebook?” The answer is some do, and some don’t. For the negative mail pieces — the ones that often contain the type of distortions that need to be exposed — it’s rare for a political campaign to make these mailers available to the public.
So this is a way you can be involved in gathering information. It could be campaign mailers, political campaign handouts, meeting agendas, material distributed at meetings, things you see on your computer screen, anything. It could be material distributed
I can’t tell you how many times people have complained to me about something they received in the mail or at a meeting. I ask “can you scan it and send it to me?” Well, not many people have scanners in their home. But now many people have smartphones. With a little practice, you can capture these documents in electronic form.
Then, what do you do with these documents? The campaigns of candidates that you support need intelligence like this. News reporters need documents for tips and substantiation of stories. You can share documents on social media like Facebook and Twitter. You can send them to me or your local government watchdog person or organization. There’s a lot you can do.
Government officials at all levels count on the average citizen not being interested or informed about government. We can hold government more closely accountable if we have information, and this a way that anyone can help.
As Wichita prepares to debate the desirability of a sales tax increase, a public opinion poll finds little support for the tax and the city’s plans.
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 summary:
- Only 28% say the city has been spending efficiently.
- Only 34% agree with the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development.
- When asked whether they would personally pay a higher sales tax to pay for certain things, there was majority support for securing a long term water source, maintaining existing infrastructure, and building new infrastructure, but one-third or less would pay a higher sales tax for business incentives, developing downtown Wichita, and expanding or renovating convention spaces.
- 78% said that to fund existing infrastructure, build new infrastructure, and secure a long-term water source Wichita should fund those items by adjusting spending and being more efficient rather than raising taxes.
More detail on these results follows.
Is city spending efficiently?
The first question the survey asked was “In the past few years, have Wichita city officials used taxpayer money efficiently? Or inefficiently?” Following are the results for everyone, and then divided by political party and political ideology.
Overall, 58 percent believe city spending was inefficient, compared to 28 percent believing spending was efficient.
The results are surprisingly consistent. An exception is that political independents strongly believed that city spending was inefficient. Those identifying as liberal were more likely to say that city spending was inefficient.
Taxes for subsidies for economic development
About one-third of voters polled support local governments using taxpayer money to provide subsidies to certain businesses for economic development.
The second question the survey asked was “In general, do you agree? Or disagree? With the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development?” Following are the results for everyone, and then divided by political party and political ideology.
Overall, 55 percent disagreed with using taxpayer money to provide subsidies to certain businesses for economic development. 34 percent agreed.
The results are fairly consistent across political party and ideology, although Republicans are somewhat more likely to agree with using taxpayer funds for economic development incentives, as are those who self-identify as political moderates.
Voters willing to pay for fundamentals
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 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.
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?
How to pay for infrastructure
Wichita voters prefer adjusting spending, becoming more efficient, using public-private partnerships, and privatization to raising taxes.
Question nine asked how Wichita voters preferred paying for new government spending: “To fund existing infrastructure, build new infrastructure, and secure a long-term water source should Wichita fund those items by adjusting spending and being more efficient rather than raising taxes?”
Overall, 78 percent of Wichita voters answered “Yes,” meaning they prefer that Wichita adjust spending and become more efficient. 12 percent answered “No,” meaning they were in favor of raising taxes instead.
A related question was “Should Wichita fund those items through public-private partnerships, or privatization, rather than raising taxes?”
Overall, 65 percent answered “Yes,” meaning they prefer public-private partnerships, or privatization. 25 percent answered “No,” indicating a preference for raising taxes.
Former Wichita mayor Bob Knight explains that when he left office in 2003, we were assured we had water for 50 years. What has happened?
Knight also reminded the audience that there is a Sedgwick County sales tax, part of which is divided among cities like Wichita. He also took the Visioneering planning process to task. In the past ten years, he wondered why no one asked about a city without water.
From a forum at Wichita Pachyderm Club on July 22, 2014. View below, or click here to view at YouTube.
In this excerpt from WichitaLiberty.TV: Government leaders tell us they want to run government like a business. But does government actually do this, even when accounting for its money? View below, or click here to view at YouTube.
For more on this issue, see Accounting for government like business.
Voters should ask that Wichita stop blatant and avoidable waste before approving additional taxes.
At 6:13 pm on August 11, 2014, a full two hours and nine minutes before sunset, with Wichita bathed in golden sunshine, the outside lights are on at the Wichita Transit Center. I wasn’t surprised to see this. These lights were probably burning and wasting electricity all day long.
While waste like this is unacceptable, it is all the more intolerable considering that Wichita’s transit system is out of money. The city council has recommended that Wichitans vote for higher sales taxes, part of which would fund the transit system. That would include, I suppose, funding the wasteful spending on burning street lights on sunny days. This is indicative of the attitude of the city as explained in Forget the vampires. Let’s tackle the real monsters.
You have to wonder: If the city’s transit department is, apparently, not concerned about blatant waste like this — waste that anyone can easily observe — what is it doing about waste that can’t easily be seen?
So before considering any extra funding for Wichita transit, let’s ask that it stop wasteful spending like these lights. Even better, before sending any funding, let’s stop this waste.
Using base state aid per pupil as the only measure of school funding leads to an incomplete understanding of school spending in Kansas.
Much of the discussion surrounding school funding in Kansas has centered around base state aid per pupil. It’s the starting point for the Kansas school finance formula, and therefore an important number.
Base state aid per pupil has fallen in recent years. Public school spending advocates want Kansans to be aware of only this fact. For them, only this number is important.
But Kansas schools have much more to spend than just base state aid.
In the last school year base state aid per pupil was $3,838. But in that year total spending funded by Kansas state sources was $6,984 per pupil, or 1.82 times base state aid. Adding local and federal sources, spending was $12,781 per student, or 3.33 times base state aid.
As shown in the nearby chart, there has been a steady increase in measures of school spending when compared to base state aid.
Considering Kansas state spending only, the ratio of state spending to base state aid was 1.10 in 1998. By 2013 that ratio had risen to 1.82, an increase of 65 percent for the ratio.
For total spending, the ratio rose from 1.86 to 3.33 over the same period, an increase of 79 percent.
What’s important to realize is that the nature of Kansas school funding has changed in a way that makes base state aid per pupil less important as a measure of school spending.
Wichita government leaders complain that Wichita can’t compete in economic development with other cities and states because the budget for incentives is too small. But when making this argument, these officials don’t include all incentives that are available.
In making the case for an economic development fund paid for by a sales tax, the argument goes like this: “Wichita and Sedgwick County compete conservatively with incentives. The City of Wichita and Sedgwick County have a total of $1.65 million in new uncommitted funds for cash incentives this year with any unused money going back to the general fund.” (Will Wichita Accelerate Competition for Primary Jobs?, presentation made to Wichita city council.)
This statement is true only if we use a very narrow definition of the word “incentive.” By any reasonable definition, Wichita has many incentives worth much more than what is claimed by Wichita economic development officials and politicians.
In fact, the report cited above contains contradictory information about the amounts that are available for economic development incentives in Wichita. Here is an example: “The $4.5 million PEAK program incentive from the Kansas Department of Commerce was an important factor in keeping NetApp in Wichita. Locally we were able to provide $836,000 in incentives.”
So with an incentives budget of $1.65 million, a Wichita company received $5.3 million in incentives. Some of that, like the PEAK incentive, is paid over a period of years. But that amount doesn’t begin to describe the benefits NetApp received.
Available incentive programs
A letter to NetApp from the Kansas Department of Commerce laid out the potential benefits from the state. As detailed in the letter, the programs with potential dollar amounts are:
- Promoting Employment Across Kansas (PEAK), up to $7,705,535
- Kansas Industrial Training with PEAK, up to $160,800
- sales tax savings of $6,880,000
- personal property tax exemption, $11,913,682
- High Performance Incentive Program (HPIP), $8,500,000
The total of these is $35,160,017. Some of these benefits are paid over a period of years. The PEAK benefits are payable over seven years, according to the letter, so that’s about $1.1 million per year. These are potential benefits; the company may not actually qualify for and receive this entire amount. But it’s what the state offered.
It’s true that some of these programs are not cash incentives of the type Wichita complains of lacking. But if a company is going to make purchases, and the state says you can skip paying sales tax on the purchases — well, that’s as good as cash. $6,880,000 in the case of NetApp, according to the Kansas Department of Commerce.
Local tax exemptions
Besides sales tax exemptions, the city has other types of tax exemptions it regularly offers. These exemptions can have substantial value. In 2008 as Drury contemplated purchasing the Broadview Hotel, the city allowed the hotel to escape paying much of the taxes that the rest of us have to pay. According to city information, Drury planned to spend $22,797,750 on the hotel. If we use this as the appraised value for the property when it is complete, the annual property taxes due for this property would be $22,797,750 times .25 times 126.323 divided by 1000, or $719,970. This calculation may be rough, but it gives us an approximation of the annual operating subsidy being given to this hotel for the next ten years.
When Boeing announced in 2012 that it was closing its Wichita operations, city leaders complained that Boeing was leaving Wichita even though it had received many incentives. From 1979 to 2007, Boeing received tax abatements through the industrial revenue bond process worth $658 million, according to a compilation provided by the City of Wichita. (This is not money the city lent or gave to Boeing. IRBs provide a vehicle for granting tax abatements or exemptions.) At the time, city officials said the average amount of bonds was $120 million per year. With Wichita commercial property tax rates at 3.008 percent ($30.08 per $1,000 of appraised value), according to GWEDC, that’s a tax savings of around $3.6 million per year. To Boeing, that’s as good as receiving cash year after year.
Tax increment financing
In 2013 Wichita approved a package benefiting Exchange Place in downtown. Here’s what the city council agenda packet gives as the sources of financing for this project.
HUD Loan Amount $29,087,700 Private Equity 5,652,254 Tax Credit Equity 19,370,395 TIF Proceeds 12,500,000 Total Sources of Funds $66,610,349
TIF, or tax increment financing, diverts future increased tax revenues away from their normal uses and diverts them back to the project. In this case, the city will borrow $12,500,000 by selling bonds. It will give this money to the developer. Then, TIF proceeds will be used to repay these bonds.
Some will argue that TIF isn’t really an incentive. The owners of the property will have to pay their property taxes, just like any other property owner. But for this project, the property taxes are used for the project’s own benefit instead of funding the costs of city government. This project gets to spend $12.5 million of its property tax payments on itself, rather than funding the costs of Wichita city government.
Note that the sources of financing for the Exchange Place project includes “Tax Credit Equity.” Here’s an example of another downtown project, the Ambassador Hotel, and the incentive package the city prepared:
- $3,325,000 in tax increment financing.
- $4,245,000 in city funding under the capital improvement plan (CIP), to build parking for the hotel.
- $3,800,000 in tax credits from the State of Kansas.
- $3,500,000 in tax credits from the U.S. government.
- $537,075 in sales tax exemptions on purchases during the construction and furnishing of the hotel.
- $60,000 per year in community improvement district (CID) sales tax. The hotel charges an extra two cents per dollar sales tax, which the state returns to the hotel.
- $127,499 per year (estimated) in rental revenue to the developers from a sweetheart lease deal.
- Participation in Wichita’s facade improvement program, which provides special assessment financing that is repaid.
All told, this project was slated to receive $15,407,075 in taxpayer funds to get started, with additional funds provided annually.
The tax credits for this project are historic preservation tax credits. They have the same economic impact as a cash payment. The federal tax credits are available across the country, while the Kansas tax credits, of course, are a state program. In this case the hotel developers received an upfront payment of $3.8 million from the state in a form that’s as good as cash.
Last year a STAR bonds district in northeast Wichita was approved to receive $31,570,785 from these bonds. The STAR bonds are paid off with sales tax revenue that would otherwise go to the state and overlapping jurisdictions. This is sales tax collected from the business’s customers, and doesn’t cost the business anything.
Adding it up
This list is not complete. There are other programs and other beneficiaries of economic development subsidies. With this in mind, it is disingenuous for city and other officials to use the $1.65 million figure as though it was all Wichita had to offer. It’s important for citizens to know that contrary to the claims of officials, Wichita has many economic development incentive programs available, and some have substantial value to the recipients, with corresponding cost to the city and other jurisdictions.
From Kansas Policy Institute.
Kansas Policy Institute presents the 2014-15 student weighted funding formula
By David Dorsey
The updated version of the formula that will be used by the Kansas State Department of Education to determine student weighting in the coming school year is presented below. This complex formula is the basis to adjust (increase) the number of “students” in a school district for state funding purposes.
Dissecting this complicated formula reveals those factors the state recognizes that require additional money.
- Up to 13 different factors decide what the “real” student count will be for a particular district*.
- Seven factors (at-risk, vocational ed, bilingual ed, high-density at-risk, new facilities, high enrollment, and virtual students weighting) are calculated using percentages of student enrollment.
- Four factors apply to all 286 districts. They include:
- at-risk students (those who qualify for free lunch)
- low or high student enrollment
- special education weighting
- The others vary in applicability from the vocational education weighting (267 districts in 2013-14) to declining enrollment weighting (2 districts in 2013-14).
Once all applicable factors are determined, the total weighted number of students is multiplied by the Base State Aid Per Pupil (BSAPP — $3,838 in 2013-14 and $3,852 in 2014-15) to calculate that part of the amount of state aid a district receives.
These weightings are no small affair. For example, in the Elkhart School District (USD218) last year, the weighting factors increased the student count from 502.6 (actual enrollment) to 1,668. 2, a 231.9% increase. In dollar terms, that increased Elkhart’s BSAPP funding by $4,473,573 from $1,928,979 to $6,402,552. That’s an effective BSAPP of $12,739! And that’s not an isolated case. Nearly half of Kansas’s 286 school districts realized at least a doubling of the effective BSAPP due to weighting.
People in the education establishment are quick to lament that BSAPP is down from the pre-recession figure of $4,400 in 2008-09 to the current $3,852 for the 2015 fiscal year. However, you never hear them speak of the all the weightings that significantly add to the dollars actually received. In fact, when all students statewide are included, the real BSAPP for 2013-14 was $6,640. In a recent Lawrence Journal-World article it was reported that Lawrence Superintendent Rick Doll said the district is still suffering from cuts in base state aid. According to Doll, “We are operating basically at about 1999 school funding levels.” That’s not even close to being accurate. According to KSDE, state funding per pupil in 1999 was $4,533. That figure rose to an estimated $7,052 per pupil for last school year. Local support has more than doubled since ’99 (from $2,238 to $4,809 per pupil). Likewise for federal support.
It is important to understand what a difference in the level of funding the weighting of students adds. Last school year, the weightings provided $1.3 billion over and above BSAPP to the state’s 286 districts. But some Kansas politicians, particularly those more interested in protecting institutions than serving children, and the education establishment don’t like to talk about that part of state aid to education. Instead, they like to focus only on the BSAPP figure. That’s why we hear statements made like Superintendent Doll’s.
If I were still a math teacher and they were my students, their homework assignment would be learn and understand this formula. And yes, it would be on the test.
*There is one change in the formula from the 2013-14 school year. The low-proficient, non-at-risk factor was removed during the 2014 legislative session.
Click here to use this interactive visualization. Source is Kansas Fiscal Facts.
From Kansas Policy Institute.
Budget “Off The Tops” Bad Policy
By Steve Anderson
Direct transfers of taxpayer money sent to a specific business or industry is always a tough sell to politicians, let alone the voting public. But, that is why some corporations pay lots of money to lobbyists. If we can’t get a company more revenue (via a taxpayer-funded payment) why don’t we lower their expenses via a tax loophole that lowers how much they pay in taxes?
These sort of special interest tax breaks come in a variety of different forms but the net effect of each is the same — revenues are diverted from the appropriation process and instead sent to some “special” group. A shrewd lobbyist will often make sure the program is funded in a way that their client(s) will receive their funding even if the statute is changed in the future. However, that should not preclude bringing these special interest deals to an end. This is especially important given that the reduction in tax rates will increase the impact of these programs on the revenue stream even as the state continues along the path to eliminating the individual income tax.
These transfer schemes are funded in a number of different ways that obscure the transaction from both the public and the appropriation process. For example, there are a number of these special deals that are funded by payroll withholding taxes. The payroll withholding exemptions are programs where the state abates collection of state income tax withheld on employee’s wages. The state then provides either a program or directly funds some benefit for the employer. These programs come in many forms and often are nearly impossible to find within the very complex tax and revenue reporting statements. In general these programs require relatively long commitments by the state of taxpayer funds. The discontinuance of these type of programs will not generally eliminate the programs immediately but it will create savings going forward that could be substantial to the maintenance of a stable fiscal environment and a more transparent tax code. It would also be a breach of trust, on some level, to yank away a promise made by the state to an entity or individual. But, that doesn’t mean we have to let these program exist into perpetuity.
Investments in Major Projects and Comprehensive Training (IMPACT)
IMPACT provides for major project investment to provide financial assistance to defray business costs. IMPACT uses withholding revenue for a direct funding source to pay for bonds issued by the state for projects. In fiscal year 2013 that percentage was 2% and the program expended $25,420,654 of funds that otherwise would have gone to the state coffers. The good news is that Kansas stopped issuing bonds in the IMPACT program effective Dec. 31, 2011. The bad news was it was replaced with other programs that are very similar. The IMPACT payments will extend on for a number of years in to the future because of the bond’s that funded those projects. This ability to bind future legislators and taxpayers to these sort of “deals” is, in and of itself, problematic but there is more damage done to the state of Kansas than just the direct cost of these bonds.
Bad policy like the type of special interest payment that IMPACT represents often have negative impacts in the future that are not foreseen at the time of their passage. For example, the IMPACT bonds were at the heart of the recent Moody’s down grade of the Kansas state bond rating. The IMPACT bond’s ratings were reviewed by Moody’s rating agency because the funding source to pay off the bonds — withholding taxes — was being reduced by a cut in the tax on wage earners in the state income tax rates. The media, which generally is not comprised of individuals with a financial background, reported that the change in the IMPACT bond ratings were caused by the broad tax cuts, which is only partially true. What the media in general did not report, at least not with the same enthusiasm as their portrayal of the impact of the income tax cuts, was that Moody’s noted the long running unfunded liabilities of the Kansas Public Employees Retirement System (KPERS) and the lack of spending cuts as key elements of their downgrade.
However, analysis of the IMPACT bond rating issues bring to light another important problem with these type of giveaways. Future legislators have their hands tied because their predecessors have committed future tax revenues in a manner that precludes the ability to bring an immediate cessation, or even partial reduction, in the special interest funding source without repercussions such as the recent bond rating issue.
Promoting Employment Across Kansas (PEAK)
The PEAK program allows companies that create 100 new jobs within a specified two-year period to retain 95% of employee withholding taxes for up to 10 years. Not surprisingly with such a generous incentive companies have grown its use rapidly going from $2.7 million in expenditures in 2010 to an estimated $12.5 million in 2012 years. The “cap” on this program going forward is: In FY 2014, the cap is $12 million. In FY 2015, the cap is $18 million, $24 million in FY 2016, $30 million in FY 2017, $36 million in FY 2018, and $42 million 2019. Immediately freezing the cap at the current level and eliminating the program going forward to prevent new obligations generates significant savings going forward for the state. This is giveaway is even more troubling when considering that a recent analysis from Kansas City’s Kauffman Foundation found that, “PEAK incentives recipients are statistically not more likely to generate new jobs than similar firms not receiving incentives.”
Kansas Bioscience Authority (KBA)
The KBA’s short lifespan is a microcosm of what can go wrong with the concept of dedicated directed funding. The lack of transparency created by bypassing the scrutiny of the appropriation process often leads to expenditures that generate headlines but don’t create economic growth.
The legislation that created the KBA produced a number of programs and funding streams. It also set the total funding limit to the authority over 15 years at almost $582 million. The funding was to be for a period of 15 years from the effective date of the establishment of the KBA and required the State Treasurer to annually pay 95% of withholding above the certified base, as certified by the Secretary of Revenue, on Kansas wages paid by bioscience employees to the bioscience development (code categories from NAISC) and investment fund of the KBA.
The amount of funding transferred to the KBA grew from almost $20 million in 2006 to nearly $36 million by 2008 before the creation of the annual funding cap of $35 million in 2009. Issues with operations and management emerged in 2011 which led to a forensic audit by an outside CPA firm. The audit pointed to a number of issues that led subsequent legislatures to reduce the Authority’s funding to $11.3 million in 2012, $6.3 million in 2013, and $4.0 million in 2014 (KBA funding history here). It is doubtful that the current Administration or legislatures would increase funding above current levels but the $35 million is still the statutory cap leaving open that possibility.
There is a secondary issue with KBA’s statutory cap caused by the treatment of these type of dedicated directed funding in the budgeting process. These statutory caps for entities like KBA are considered to be at their cap amount when forecasting future budgets. The $35 million of KBA statutory cap, for example, creates an illusion in fiscal impact statements issued by the Kansas Legislative Research Department (KLRD) because those statements show the full statutory amount of $35 million being spent every year for the five years they project. Based on the current trend line of KBA funding this will not happen and, instead, creates a significant overstatement of expenditures and helps create fiscal deficits where none may exist. These projections are used by legislators and the media and should strive to present as accurate a picture as possible of current and possible future realities. A more proper and accurate display of these type of funded programs for five year projections like KLRD produces would consider whether spending could be altered or removed completely. This should be reflected in either the actual amount shown, if there was a history of partial funding, or, at the very least, in a separate line item with a notation that the sum could be arbitrarily reduced or eliminated.
Job Creation Fund
Another of those dedicated directed funds is the Job Creation Fund (JCF). The Job Creation Program Fund or the “deal closing” fund, its more press-friendly moniker, lets the state, led by the Office of the Governor, make investments and extend incentives aimed at attracting or retaining businesses within a range of statutory guidelines. The funding for the JCF was from the elimination of three other credits: Kansas Enterprise Zone, Job Expansion and Investment Credit Act and a refundable credit for property taxes paid on machinery and equipment. This sort of reallocation of funding sources carry the coveted title of “revenue neutral” and hence have no fiscal impact statement for legislators to worry about when the funding was created. This allowed elected officials to be able to say on one hand they eliminated special interest funding while creating another special interest fund out of the “elimination” of those entities. The annual cap on JCF funds is $10 million which is how much could be immediately saved by letting JCF join its now-defunct predecessors in state history.
Transfers Out of the State General Fund
There is another area where what would be State General Funds are diverted from the appropriation process. There are a number of transfers out of the State General Fund with the largest and most notorious being the $135 million School District Improvements Fund. Not only does this amount not get counted in the school formula, the recent Gannon ruling on school funding pointed directly to this fund as an example of inequity in funding. This “inducement” to issue bonds for new buildings was a bad idea both from a policy and process aspect. Policy-wise the Kansas Supreme Court’s Gannon ruling was correct in pointing out that only the growing school districts could use this fund with a few big school districts garnering most of the monies. Process-wise the choice to use a transfer as the funding mechanism not only bypassed the school finance formula but also ensured that these funds are not counted by the National Center for Education Statistics; NCES is the “go to” place for comparing education-related data from across the country and is run by the U.S. Dept. of Education.
There is also another series of transfers that have their own particular issues.The adjacent list shows the recipient and the amount for FY-2015 (available at link above).The picking of winners and losers by government is never a good idea and the direct transfer of taxpayer funding to companies is a suspect type of economic development.
|Transfers out of the State General Fund|
|Spirit Aerosystems Incentive||($3,500,000)|
|Eaton MDH Spec. Qual. Indus. Mfg. Fund||($30,000)|
|Siemens Manufacturing Incentive||($650,000)|
|TIF Replacement Fund||($900,000)|
|Learning Quest Match||($500,000)|
It is also troubling when local communities enter into Tax Increment Finance (TIF) arrangements, not to mention other subsidy giveaways, which are basically an agreement between a company or individual and the city to suspend property tax payments for that company or individual. State taxpayers as a whole have to make up for lost revenues to the governing body of each such city from the TIF arrangement. This means that a TIF issued in Johnson County is, at least in part, paid for by residents of Bourbon County and Elkhart. This distribution of funds from taxpayers across the state to individual “redevelopment areas” that were created by local governments in a manner that is basically hidden from the citizens is another great example of why these “off the tops” are bad policy. Requiring these TIF subsidies to be debated in the light of the full appropriation process would no doubt lead to questions by legislators whose districts did not include cities who receive this subsidy.
A general thought for legislators, citizens and industry on these economic subsidies. The reduction in income tax rates by the state on withholding rates has already provided a huge incentive for these companies in addition to the direct largess they receive from these dedicated funds. The rate cut on withholding taxes increased the take home pay of their employees without those companies having to give a pay raise to their employees out of company funds. Note that the “incentive” of lower withholding taxes is applied to EVERY wage earner in the state and does not go about picking favored businesses, industries, or individuals. This type of transparent, rules-based, and equally-applied policy is the correct way to encourage economic growth and allow the free market to dictate outcomes not politicians or bureaucrats.
A complete review of every agreement entered into by the state to ascertain if that agreement is contractual in nature or are not legally binding going forward should proceed this next legislative session. The state should review those that are not legally binding and current renewals that can be foregone and put this “off the top” funding back in the appropriation process going forward. How much could the state expect to realize would be determined by that review. Even a preliminary, informed estimate would be in the neighborhood of $50 million annually without breaking any contractual arrangements. The following chart gives an estimate of just three programs with statutory flexibility.
|Total Dollars Returned to the State Coffers|
|$s in Millions||FY16||FY17||FY18||FY18|
|Freeze PEAK at Current Levels||$6||$12||$18||$24|
|Kansas Bioscience Authority||$25||$25||$25||$35|
|Cease Job Creation Fund||$10||$10||$10||$10|
Why do Kansans pay taxes, including sales tax on food, to fund millions in subsidy to a company that is experiencing a sustained streak of record profits?
As the Wichita City Council prepares to authorize funding for Southwest Airlines, it’s worth taking a look at updated statistics regarding the airport. The agenda item the council will consider is available here.
The city has pointed to the arrival of Southwest last June as a game-changer for the airport. It’s true that passenger counts have increased. In the nearby chart I present monthly passenger counts, enplanements only, at the Wichita airport for all carriers and for Southwest separately. I’ve treated Southwest as a continuation of AirTran, as Southwest started service at the same time AirTran stopped, and Southwest is receiving a similar subsidy. I show monthly traffic, and also a 12-month moving average to smooth out the extreme monthly variations in passenger traffic. (Click on charts for larger versions.)
Of note is that while the Southwest passenger count is rising, it started from a low position. Also, the count has not risen to the level that AirTran experienced in the middle of the last decade and as recently as 2011.
Considering the number of flights leaving the Wichita airport, the recent trend is up. This is a departure from recent trends. Although the number of available flights nationally has been slowly falling, it was falling faster for Wichita. That trend, for now, is reversed, although the number of flights in Wichita is far below the level of a decade ago.
The number of flights is an important statistic. Greater attention is given to fares, but for many travelers, especially business travelers, an available flight at any price is paramount. Last year at this time I wrote “A program designed to bring low air fares to Wichita appears to meet that goal, but the unintended and inevitable consequences of the program are not being recognized. In particular, the number of flights available at the Wichita airport continues to decline.” So it is good news that the number of flights has risen.
Wichita compared to the nation
Looking at passengers through the end of 2013, Wichita has now experienced an uptick. Passenger traffic in Wichita had been relatively level at a time that national traffic was rising. The number of available seats on flights has started to rise in Wichita, while nationally the trend has been level the past several years.
Load factor — the percent of available seats that were sold — is rising in Wichita, as it is nationally.
The last set of four charts is from an interactive visualization I prepared using data from the Bureau of Transportation Statistics. Click here to open the visualization in a new window. You may select any number of airports for display on the charts.
Recently Southwest reported record high profits for the quarter ending in June. The company said that net income was $485 million, which it said represented the fifth consecutive quarter of record profits.
We might ask this question: Why do Kansans across the state pay taxes, including sales tax on food, to fund millions in subsidy to a company that is experiencing a sustained streak of record profits?
This week the Wichita City Council holds the public hearing for the budget. Following are several observations.
(To view the budget, click here to go to wichita.gov. The best document to read is Volume I. The most important parts to read are the City Manager’s Policy Message (eleven pages) and the Budget Issues section (seven pages). Don’t worry; there are lots of pictures to skip over.)
The mill levy
The city says — many times — that the mill levy has not risen for a long time: “The 2015 Proposed Budget is based on City Council policy direction. It will not require a mill levy rate increase, for the 21st consecutive year.” (page 21)
In 2002 the City of Wichita mill levy rate was 31.845. In 2013 it was 32.509, based on the city’s Comprehensive Annual Financial Report. That’s an increase of 0.664 mills, or 2.09 percent, since 2002. In one year the mill levy rate increased .038 mills, or 0.12 percent. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)
The Wichita City Council did not take explicit action to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.
While the city doesn’t have direct control over the assessed value of property, it does have control over the amount it decides to spend.
The city may dismiss small changes in the mill levy as the result of errors in estimating assessed value. If there are errors in estimation, we would expect the errors to be random. That is, in some years we would expect the city to have estimated that assessed values would be lower than the actual value. In those years, the mill levy could go down. But that happened for only one year since 2002.
No matter what the cause, the Wichita city mill levy today is 2.09 percent higher than in 2002. The city should recognize this in its budget documents.
Stewardship of assets
While the city boasts that the mill levy has not risen, part of the reason why it is (relatively) low is the city has not been taking care of the assets that citizens purchased and trusted the city to maintain. For example: “Pavement condition has slowly deteriorated over the last decade in Wichita. New pavement strategies will enhance the effectiveness of City efforts; however, additional funds would expedite improvements to streets in poor condition and help to more rapidly stabilize overall pavement conditions in Wichita.” (page 33)
Earlier this year the council received a document from the Community Investments Plan Steering Committee. It measured the amount by which the city is behind in maintaining its assets: “Decades of under-investment in infrastructure maintenance … 38% of Wichita’s infrastructure is in ‘deficient/fair’ condition.”
The cost to remedy this lack of maintenance is substantial. The document says that on an annual basis, Wichita needs to spend $180 million on infrastructure depreciation/replacement costs. Currently the city spends $78 million on this, the presentation indicates. The “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.
This is spending that the city has deferred to future years. The city knows this, too. The Wichita Eagle recently quoted Wichita Mayor Carl Brewer: “We’ve put them off for too long. We didn’t want the challenges. We didn’t want the tax bills. But now, to maintain our quality of life, we’ve got to catch up.”
The question is this: Does this budget make plans for correcting this maintenance deficit? The answer is: Yes, it does something, as described by the city: “In 2012, staff developed a new model to determine the impact of street treatment options. This model focuses on maximizing the return on investment of each treatment option. This method attempts to match the timing and method of treatment with the projected remaining service life (RSL) and value of the street network to ensure treatments maximize Wichita’s return on investment (ROI).” (page 34)
But this change is tiny compared to the magnitude of the problem. The budget talks about the proposed one cent per dollar sales tax that voters may be asked to approve. Of the nearly $80 million per year the sales tax might raise, only $5.5 million per year is allocated towards maintenance of infrastructure, in this case additional street maintenance. Remember, the city believes it needs to spend an additional $45 to $55 million per year “to bring existing deficient infrastructure up to standards.”
The budget lists the areas in which Wichita has made use of outsourcing, which are the mowing of parks and security screening at city hall. The budget says that in 2015 the intergovernmental relations function will be outsourced. Also, the city will contract with private firms to supplement snow removal, and the removal of dead trees. The city is also soliciting proposals for some street maintenance activities.
But if this is all the city is doing regarding outsourcing, Wichita is missing out on many opportunities to improve service to citizens and reduce costs.
There’s a difference between government and business. As an example, consider city golf courses. Recently an advisory board recommended that the city improve customer service and salesmanship through training of golf staff and management. Successful businesses know that customer service and salesmanship are what business is all about, especially in a service-oriented product like golf. Businesses seek to provide good customer service because that is how they earn profit. But too often government sees customers as a burden, not an asset.
Outsourcing changes city services from being a burden placed on government employees, to something that a company actually wants to do.
I’ve illustrated many instances where the city is using electricity to light streetlights during the day. If the city seems unconcerned about such blatant and visible waste that surely must be easy to avoid, what does that tell us about waste that is not easily seen?
A 2011 Kansas bill could have increased the accountability of state government, but committee chair Carolyn McGinn wasn’t in favor.
In the 2011 session of the Kansas Legislature, several bills were proposed that would streamline government and investigate opportunities for privatization.
Another proposed bill in 2011 was HB 2158, which would have created performance measures for state agencies and reported that information to the public. The supplemental note says that the bill “as amended, would institute a new process for modifying current performance measures and establishing new standardized performance measures to be used by all state agencies in support of the annual budget requests. State agencies would be required to consult with representatives of the Director of the Budget and the Legislative Research Department to modify each agency’s current performance measures, to standardize such performance measures, and to utilize best practices in all state agencies.” Results of the performance measures would be posted on a public website.
This bill passed the House of Representatives by a nearly unanimous vote of 119 to 2. But in the Senate, this bill was victim of a “gut-and-go” maneuver in a committee chaired by Carolyn McGinn. In effect, the bill died and was not considered by the entire Senate.
This bill proposed to spend modest amounts increasing the manageability of government, not the actual range and scope of government itself. It, along with the other two, would have started Kansas on a path towards spending responsibly.
As it turns out, many in the legislature — this includes Senate Republicans who initiated or went along with the legislative maneuvers that killed these bills — are happy with the operations of state government remaining in the shadows.
When the Obama Administration needed additional funds for the Cash for Clunkers program, Todd Tiahrt was agreeable to funding this wasteful program.
As summarized by the Congressional Research Service: “Makes emergency supplemental appropriations of $2 billion for FY2009 and FY2010 to the National Highway Traffic Safety Administration (NHTSA) of the Department of Transportation (DOT) for the Consumer Assistance to Recycle and Save Program (Cash for Clunkers Program).”
This bill passed the House of Representatives by a vote of 316 to 109. Among House Republicans, the vote was 78 to 95 in favor of passage. Todd Tiahrt was one of the minority of Republicans that voted for Cash for Clunkers.
(When this bill was voted on in the Senate, then-Senator and present Kansas Governor Sam Brownback voted in favor, and Pat Roberts voted against.)
You may remember the Cash for Clunkers program from 2009. An initiative of President Barack Obama, it paid subsidies to those who traded in their “clunker” for a new fuel-efficient car. The clunkers were destroyed and recycled. This is an example of a program that seems like a benefit for everyone. Take old fuel-wasting cars off the road and replace them with new cars. Save the environment and stimulate the economy, all at the same time. Some writers advocate programs like this as a way to reduce inequality of incomes.
But the Cash for Clunkers program has been widely and roundly criticized. Did it work as advertised? It all depends on the meaning of the word “work,” I suppose. To evaluate the program, we need to look at the marginal activity that was induced by the program. When we do, we find that the cost of moving the additional cars is astonishingly high.
An Edmunds.com article calculated the cost per car for the clunkers program in a different way than the government, and found this:
Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as the Car Allowance Rebate System (CARS), but Edmunds.com analysts indicate that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway. Analysts divided three billion dollars by 125,000 vehicles to arrive at the average $24,000 per vehicle sold. The average transaction price in August was $26,915 minus an average cash rebate of $1,667.
This is just the latest evidence that the clunkers program didn’t really increase the well-being of our country. Writing at the Foundation for Economic Education, Bruce Yandle doubts the glowing assessment of effectiveness of the program:
The doubt arises for at least three reasons. First, the program was supported politically primarily for its much touted environmental benefits. Carbon emissions would be reduced. But the reduction costs are at least ten times higher than alternate ways of removing carbon. Second, there is Bastiat’s parable of the broken window to consider. And third, there is a serious matter of eroding social norms for conserving wealth. A crushed clunker with a frozen engine is lost capital. … The cost per ton of carbon reduced could reach $500 under a set of normal values for critical variables. The cost estimate was $237 per ton under best case conditions. The much celebrated Waxman-Markey cap-and-trade carbon-emission control legislation estimates the cost of reducing a ton of carbon to be $28 when done across U.S. industries. Yes, we are getting carbon-emission reductions by way of clunker reduction, but we are paying a pretty penny for it. … Before touting the total benefits of clunkers, we must take account of the destroyed vehicles and engines that represented part of the wealth of the nation. As Tony Liller, vice president for Goodwill, put it: “They’re crushing these cars, and they’re perfectly good. These are cars the poor need to buy.”
It’s very difficult for the government to intervene in the economy and produce a net positive result. Even if it could, the harmful effects of taking one person’s money and giving it to another so they can get a discount on a new car far outweigh the small economic benefit that might be realized.
In this episode of WichitaLiberty.TV: Wichitans ought to ask city hall to stop blatant waste before it asks for more taxes. Then, a few questions about economic development incentives. Finally, how should we pay for a new water source, and is city hall open to outside ideas? View below, or click here to view at YouTube. Episode 53, broadcast July 27, 2014.
In this excerpt from WichitaLiberty.TV: The City of Wichita urges citizens to take steps to stop “vampire” power waste. But before hectoring people to introduce inconvenience to their lives in order to save small amounts of electricity, the city should tackle the real monsters of its own creation. Originally broadcast June 29, 2014. View below, or click here to view at YouTube.
For more on this issue, see “Forget the vampires. Let’s tackle the real monsters.”
In this excerpt from WichitaLiberty.TV: When thinking about water issues, Wichita city council members and city hall bureaucrats seem to throw economic thinking out the window. Originally broadcast July 6, 2014. View below, or click here to view at YouTube.
Wichita city leaders are telling us we need to spend a lot of money for a new water source. For some reason, debt has now become a dirty word.
Details are not firm (that’s a problem right there), but the amount needed is $250 million, city officials say. It could be less, they now speculate, maybe only $200 million.
To raise these funds, here’s the choice we’re given: Either (a) endure a sales tax for five years, or (b) borrow money, raise water bills for 20 years, and pay a lot of interest.
It’s a similar argument made in favor of a sales tax to pay for the Intrust Bank Arena in downtown Wichita. By paying higher sales tax for a short while, we avoid long-term debt.
There’s also the argument made that by using a sales tax, visitors to Wichita help pay for the water project. Of course, the sales tax is largely paid by local residents. My estimates indicate that raising the sales tax by one cent per dollar costs the average household $223 per year. That’s based on U.S. Census data of household spending in various categories, some subject to sales tax, and some not.
But even if we can get visitors to Wichita to pay part of the project’s cost through a sales tax, that’s not necessarily a wise course of action. By making it more expensive to visit Wichita, we make it a less desirable destination.
The motivation of those who argue for raising funds by getting outsiders to pay for our water project through a sales tax may be missing a subtle point. That is, much of what is “sold” in Wichita is not subject to sales tax, as the output of many manufacturers in Wichita isn’t taxed. The fuselages of Boeing 737 jetliners is an example. But these manufacturers use a lot of water and pay water bills. The cost of that they’ll probably pass on to their customers.
All these arguments link the project with its funding too closely. They ought to be independent decisions.
What’s really curious is the city’s sudden aversion to debt. Almost all the money used to pay for the ASR to this point was borrowed. So far, the total cost of ASR is $247 million. It’s common to pay for long-lived capital assets with borrowed funds. So it’s strange for city council members to suddenly decide that debt is not good, and that we have to pay for this project with cash, which is what the sales tax does.
Here’s another alternative: If the project costs $250 million, let’s raise water bills by that amount over five years. In this way, water users pay for the new water supply, and we avoid the debt that city council members seem determined to avoid.
This might be a bitter pill to swallow. In 2013, the Wichita water utility collected about $65 million in revenue. That doesn’t represent the total that people pay on their water bills, as the sewer utility collected $50 million. Adding $50 million per year to water bills might seem like a large increase, and it would be.
But it’s important to have water users pay for water. Also, we need to be aware of the costs of a new water supply. That’s easier to accomplish when people pay this cost through their water bills. When paying through a general sales tax, this linkage is less obvious. There is less transparency, and ultimately, less accountability.
When the city of Wichita is not concerned about waste that is easily observed, how careful is it about avoiding waste not easily seen by citizens?
Last Friday afternoon the parking lot lights Wichita Transit Center where switched on, as they often are during the day.
So at lunchtime today as I drove by the Transit Center and saw that the lights were off, I was relieved that the city wasn’t wasting electricity lighting the noonday sky.
But I didn’t have to travel much farther before I saw street lights turned on for several blocks on Douglas, Broadway, and Topeka. This is not unusual.
Waste like this is unacceptable. The city council is likely to recommend that Wichitans vote for higher sales taxes as the city can’t afford to run the buses or adequately maintain streets. Before asking for higher taxes, the city should stop wasteful spending on burning street lights in the middle of the day.
You have to wonder: If the city is, apparently, not concerned about blatant waste like this — waste that anyone can easily observe — what is it doing about waste that can’t easily be seen?
This is indicative of the attitude of the city as explained in Forget the vampires. Let’s tackle the real monsters. The city has an advertising campaign to persuade residents to do things like unplugging phone chargers and televisions when not in use. You see, these devices may use small amounts of electricity even when not in use. That’s the “vampire” power waste. The city says we need to avoid this waste in order to keep our air clean.
But street lights burning in the middle the day: This wastes a lot of power.
Before considering any extra funding for the city, let’s ask that it stop wasteful spending like these lights. Even better, before sending any funding, let’s stop this waste.
I realize that the lights illustrated in these photographs are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in Waste in Wichita, the seen and probably unseen, Wichita’s monsters on display, again, Forget the vampires. Let’s tackle the real monsters, Wichita advances in the field of cost savings, Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.
This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.
Wichita justifies its use of targeted economic development incentives by citing benefit-cost ratios that are computed for the city, county, school district, and state. If the ratio exceeds a threshold, the project is deemed worthy of investment.
1. The benefits in the calculation are not really benefits. Instead, they’re in the form of projected higher tax revenues collected by governments. This is very different from the profits that private sector companies earn from their customers in voluntary market transactions.
2. Even if government collects more tax by offering incentives, it should not be the goal of government to grow just for the sake of growing.
3. Government claims that in order to get these “benefits,” incentives are necessary. But often the new economic activity (relocation, expansion, etc.) would have happened without the incentives.
4. Why is it that most companies are able to grow without incentives, but only a few companies require incentives? What is special about these companies? Why do some companies receive incentives year after year?
5. If the relatively small investment the city makes in incentives is responsible for such wonderful outcomes in terms of jobs, why doesn’t the city do this more often? If the city has such power to create economic growth, why is anyone unemployed?
The case of a Kansas Congressman benefiting from earmark spending once out of office should make us glad the practice has ended, and we should be wary of those who call for its return.
The case of United States House of Representatives Appropriations Committee Member Todd Tiahrt and Neumann Systems is an illustration of the revolving door between government and the private sector. It started with an earmark. An Air Force budgetary document indicates that the earmark spending was at the direction of Congress: “In FY 2006, Congress added $1.2 million for the High Power Fiber Laser Program, and $0.5 million for Oxygen Laser Optical Source.”
Later in the same document we see “CONGRESSIONAL ADD.” So it’s not like the Air Force asked for this money. Instead, it was added by appropriators in the House of Representatives, of which Todd Tiahrt was a member and appropriator. The oxygen laser spending was an earmark, in other words. It went to a company called Direct Energy Solutions, located in Colorado Springs. Its CEO was David Neumann, who also heads a related company named Neumann Systems Group, Inc.
While this may seem like a small amount of federal money spent on a defense research project, the earmark spending appears to have paid off for Tiahrt. Not only did Tiahrt receive contributions from Neumann for his campaigns both past and present, he also received a client for his consulting firm and, ultimately, a job. When Neumann needed to recover from an illness, Tiahrt worked for Neumann’s company and was paid some $380,000 over two years, according to financial disclosures.
Neumann System Groups had received a contract to build an exhaust gas scrubber for an electrical power plant owned by the City of Colorado Springs. The scubber is controversial. In this article from January 2013, Tiahrt said the scubber would removs sulfur dioxide and nitrogen oxides, but the scubber that is being built will remove only the sulfur compound. Costs seem to have soared over original estimates. The contract is “cost plus” and according to reporting, was awarded without competitive bid. (Costs, doubts rise at Colorado Springs power plant, Colorado Springs Gazette)
None of this was illegal or contrary to ethics codes. It’s just the way the way Washington has worked, with earmarks forging and cementing relationships between Members of Congress and their benefactors.
Earmarks have been banned in Congress since 2010. But not everyone is happy, with progressive lawmakers like Sen. Richard Durbin of Illinois calling for the return of the “glue” that used to hold bills together. But the Wall Street Journal recently commented that Congress is working better without earmarks, resulting in more oversight of, and accountability for, spending.
As he campaigns for a return to Congress, Tiahrt has unabashedly called for a return of earmark spending, telling audiences that the practice did not increase the level of spending. There’s plenty of evidence, along with common sense, that tells us that earmarks do increase spending.
But some people think it’s fun to spend other peoples’ money, and as shown by the post-Congress career path of Todd Tiahrt, it can be lucrative, too.