Tag Archives: Greater Wichita Economic Development Coalition

Wichita not good for small business

The Wichita Business Journal reports today:

When it comes to having good conditions to support small businesses, well, Wichita isn’t exactly at the top of the list, according to a new ranking from The Business Journals.

In fact, the Wichita metro area’s small-business vitality score is nearly at the bottom — 99th out of the 101 U.S. metro areas included in the study. (Wichita near bottom for small-business vitality score, April 2, 2014)

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

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

wichita-peer-job-growth-2007-2014-01

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

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

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

Then, we come to Wichita.

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

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

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

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

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

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

Wichita City Budget Cover, 1960

During Sunshine Week, here are a few things Wichita could do

Wichita City Budget Cover, 1960The City of Wichita says it values open and transparent government, but the city could improve several areas of providing information and records to citizens.

The City of Wichita is proud to be an open and transparent governmental agency, its officials say. Wichita Mayor Carl Brewer often speaks in favor of government transparency. For example, in his State of the City address for 2011, he listed as an important goal for the city this: “And we must provide transparency in all that we do.” When the city received an award for transparency in 2013, a city news release quoted Wichita City Manager Robert Layton:

“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”

Attitude

Despite the proclamations of the mayor and manager, the city needs a change of attitude towards government transparency. Here’s perhaps the most glaring example of how the city goes out of its way to conduct public business in secret.

Citizen watchdogs need access to records and data. The City of Wichita, however, has created several not-for-profit organizations that are controlled by the city and largely funded by tax money. The three I am concerned with are the Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Coalition. Each of these agencies refuses to comply with the Kansas Open Records Act, using the reasoning that they are not “public agencies” as defined in the Kansas law that’s designed to provide citizen access to records.

The city backs this interpretation. When legislation was introduced to bring these agencies under the umbrella of the Kansas Open Records Act, cities — including Wichita — protested vigorously, and the legislation went nowhere. Now, just this week the City of Wichita added a new tax to hotel bills that may generate $3 million per year for the convention and visitors bureau to spend. Unless the city changes its attitude towards citizens’ right to know, this money will be spent in secret.

Another example of the City of Wichita’s attitude towards citizens and open government took place at a Kansas Legislature committee hearing last year. I had asked for email to or from a certain official for a certain period of time. The response from the city was that my request would encompass some 19,000 email messages, and the city denied the request as too burdensome. Fair enough.

But the city’s lobbyist told legislators that my request for 19,000 emails was an example of abuse of the Kansas Open Records Act, and cited it as evidence as to why reform was not needed. But I did not request 19,000 email messages. I made a request for messages meeting a certain criteria, and I had no way of knowing in advance how many email messages this would entail. The City of Wichita denied this request as burdensome, so there was either no cost or very little cost for the city. No harm, no foul.

But the City of Wichita used this incident and a similar incident involving the Kansas Policy Institute as reasons that the Kansas Open Records Act needs no reform. This illustrates a problem with the attitude of Wichita city government towards citizens’ right to know.

This attitude may be noticed by the citizenry at large. Survey respondents were asked to rate “the job Wichita does at welcoming citizen involvement.” The results are shown in the nearby chart created from data in the most recent version of the Wichita Performance Measure Report. The numbers are the percent of respondents giving “excellent” or “good” as their response to the question.

Citizens rate “the job Wichita does at welcoming citizen involvement."

Citizens rate “the job Wichita does at welcoming citizen involvement.”

The report says this performance is “much below” a benchmark set by the National Research Center National Citizen Survey.

Website

An important way governments can communicate with their subjects is through their websites. Wichita moved to a new website early in 2013. With the launching of the new City of Wichita website, the city has actually taken a step backwards in providing information to citizens.

From the former version of the City of Wichita website, showing budgets available for many years.

From the former version of the City of Wichita website, showing budgets available for many years.

Here’s an example. The old city website had budgets going back a long way, back to the budget for 1960 — 1961. The oldest budget I can find on the present website is for 2006.

Looking for minutes of important boards such as the Metropolitan Area Planning Commission, we find similar results. On the old website, minutes of MAPC were available back to 1999. The new version of the website seems to have minutes back to only 2012.

Also, something that had been very useful is missing, and hasn’t been replaced: MyWichita.

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As described here, MyWichita was a useful service. By using it, you could receive by email notices of new press releases, city council agendas and minutes, district advisory board agenda and minutes, agendas and minutes of other boards, and other items. Using MyWichita was much easier than having to check multiple sections of the city’s website looking for newly-released agendas, minutes, etc.

This email reminder service was very valuable. It’s a basic customer service feature of many commercial and governmental websites. But MyWichita didn’t survive the conversion to the new website, and there’s nothing that replaces its function. When I asked about this missing functionality, the city said it was working on a replacement that should be available in a month or two. It’s been almost a year since I asked.

Spending data

Many governmental agencies post their checkbooks on their websites. Sedgwick County does, and also the Wichita school district. Not so the City of Wichita.

Wichita spending data.

Wichita spending data.

Even after asking for checkbook spending data, Wichita can supply data of only limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult and 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 it would be very useful. This is a serious defect in the city’s transparency efforts.

Legal notices

Kansas law requires that local government agencies publish legal notices for a variety of topics. Presently these are published in the Wichita Eagle at great cost to taxpayers. These notices could also be published on the city’s website, where they could be searched and archived. This would increase the usability of these documents at very little cost to the city.

Publish requests

When governmental agencies like the City of Wichita fulfill records requests, they could also publish the records on their websites. Most of the time the records are supplied electronically, so this is an additional simple (and low cost) step that would leverage the value of the city’s effort.

Leveraging our lobbyists

What do lobbyists, including taxpayer-funded lobbyists, do in Topeka? One thing they do is testify before committees, in both verbal and written form. Another thing they do is to prepare reports for the clients, advising them on upcoming legislation, analyzing how it affects them, and what the prospects for the bill might be. They also meet with legislators and their clients, which are your elected officials.

Here’s a proposal that will help citizens make best use of their taxpayer-funded lobbyists:

I see nothing in the Kansas Open Records Act that allows local governmental units in Kansas to refuse to disclose these documents: testimony, reports by lobbyists to their government clients, and the lobbyists’ calendars (or billing records for contract lobbyists). Instead of making citizens ask for these records, possibly paying fees to obtain what they’re already paying for, why don’t local governments post these documents immediately on their websites?

Citizens could then benefit from the activities of the lobbyists they’re paying for. They could learn more about legislation as it works its way through the process. Citizens could judge whether the positions taken by the government lobbyists they’re paying for are aligned with their policy preferences.

If the actions taken by taxpayer-funded lobbyists are truly in the public interest, you’d think that cities, counties, and school boards would already be making this information easily available. In any case, there should be no resistance to starting this program.

File folder and documents

Kansas Open Records Act and the ‘public agency’ definition

Update: The bill has been referred to another committee, and the February 19 hearing is canceled.

File folder and documents

Despite the City of Wichita’s support for government transparency, citizens have to ask the legislature to add new law forcing the city and its agencies to comply with the Kansas Open Records Act.

Open records laws allow citizens to ask government agencies for records. While these laws are valuable, we find that in practice governmental agencies find many ways to avoid filling records requests. Because the City of Wichita does not live up to the standards of open government — even through it proclaims its support for government transparency — citizens are working to have the law changed.

Locally, the City of Wichita is proud to be an open and transparent governmental agency, its officials say. Wichita Mayor Carl Brewer often speaks in favor of government transparency. For example, in his State of the City address for 2011, he listed as an important goal for the city this: “And we must provide transparency in all that we do.” When the city received an award for transparency in 2013, a city news release quoted Wichita City Manager Robert Layton:

“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”

Contrary to what the mayor and manager say, when we look at some specific areas of government transparency, we find that the city’s efforts are deficient. That’s a problem, because citizen watchdogs and journalists need access to records and data.

The City of Wichita has created several not-for-profit organizations that are controlled by the city and largely funded by tax money. The three I am concerned with are the Go Wichita Convention and Visitors Bureau, Wichita Downtown Development Corporation, and Greater Wichita Economic Development Coalition.

I have asked each organization for checkbook-level spending data. Each has refused to comply, using the reasoning that they are not “public agencies” as defined in the Kansas Open Records Act. But consider the WDDC: At the time I made my records request, its percent of revenue derived from taxes was well over 90 percent in every year but one. In many years the only income WDDC received was from taxes and a small amount of interest earned.

The Wichita city attorney backs these organizations and their interpretation of the law. So do almost all city council members. After 14 months investigating this matter at my request, the Sedgwick County District Attorney agreed with the city’s position.

So what is the next step? The Kansas Attorney General is of no help in this matter. His office refers all cases to the local District Attorney. That’s a problem right there, and there is some talk that the AG may open a small bureau to work with records requests problems.

One course of action open to me as a citizen watchdog is to raise thousands of dollars to fund a lawsuit. The irony of this is that citizens will find their own tax dollars being used against them as the city and other agencies defend secrecy.

Another course of action is persuading the city and these agencies to release the records. While these agencies believe the law doesn’t require them to release the records, the law does not prohibit or restrict releasing the records. They could fulfill requests if they wanted to. That would be in line with what the mayor and city manager say they want for Wichita. I and others have tried that.

But that didn’t work. The true attitude of the city was expressed eloquently by Wichita Vice Mayor Pete Meitzner last month in a television news story about the inability of citizens to see how their money is being spent by these organizations. Meitzner said “The public doesn’t need to know about day-to-day spending.”

The vice mayor also told the reporter that these organization have review boards. Therefore, citizen oversight is not necessary. These boards, however, are usually filled with insiders whose interests may not be aligned with the interests of citizens and promoting good government.

Another course of action is to change the law, and that’s what I and others are trying to do. This week a committee of the Kansas House of Representatives will hear testimony on HB 2567, which will expand the definition of public agency.

The current law says this in defining what agencies are subject to the open records law: “‘Public agency’ means the state or any political or taxing subdivision of the state or any office, officer, agency or instrumentality thereof, or any other entity receiving or expending and supported in whole or in part by the public funds appropriated by the state or by public funds of any political or taxing subdivision of the state.”

The proposed law contains this additional definition: “Further, on and after July 1, 2014, ‘public agency’ shall include any nonprofit organization supported in whole or in part by public funds, which organizations are engaged in economic development, tourism or general marketing activities for the state or any political or taxing subdivision of the state or any office, officer, agency or instrumentality thereof.”

This language, if passed into law, would appear to bring the three problematic agencies under the Kansas Open Records Act. That doesn’t mean that they’ll have to turn over all and any records that are asked for, as the Kansas Open Records Act contains many exclusions. But we should be able to get spending data and other records that will help citizens oversee the operation of their government and the spending of tax dollars.

It’s a little distressing that citizens have to pass new legislation in order to get government to behave well. Citizens have to resort to these measures even though city leaders say they value open and transparent government.

Following is the testimony I will deliver this week.

Testimony to house of Representatives Committee on Judiciary as proponent of HB 2567, concerning public records.
Bob Weeks, February 19, 2014

Chairman Kinzer and members of the Committee:

Thank you for this opportunity to present testimony in support of HB 2567, regarding the Kansas Open Records Act.

Cities and other local governmental bodies have set up non-profit organizations to conduct business such as economic development. These agencies, as in the case of the Wichita Downtown Development Corporation, may in some years receive as much as 98 percent of their revenue from taxation. They often have only one client, that being the governmental agency that provides their tax revenue. They perform functions that are governmental in nature. Yet the Sedgwick County District Attorney says they are not public agencies for purposes of the Kansas Open Records Act. Based on that, these agencies, particularly the WDDC, have refused to fulfill my records requests. This flies in the face of the Legislature’s declared intent in the preamble of the Act: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.”

There can be large amounts of money involved. The City of Wichita may soon add a 2.75 percent tax to hotel bills as a “City Tourism Fee.” These new taxpayer-provided funds, estimated at $2.5 million per year, would be spent by Go Wichita Convention and Tourism Bureau. This agency, despite receiving nearly all its revenue from taxation, maintains that it is not a public agency as defined by the Kansas Open Records Act. It refused to fulfill my records request.

Citizen watchdogs and journalists need the ability to examine the spending of tax money. When government creates quasi-governmental bodies that are almost totally funded through taxes and then refuses to disclose how that money is spent, we have to wonder why the city doesn’t want citizens to know how this money is spent.

Recently the vice mayor of Wichita told a television news reporter that these organization have review boards. Therefore, citizen oversight is not necessary. These boards, however, are usually filled with insiders whose interests may not be aligned with the interests of citizens and promoting good government.

There is much that Kansas can, and should do, to strengthen its Open Records Law to give citizen watchdogs and journalists better access to records and documents. Restricting the ability of local governments to erect a protective wall under the guise of non-profit corporations that are almost totally funded by taxation is an important step.

I have additional information about the Kansas Open Records Act and its problems at wichitaliberty.org/open-records.

Respectfully submitted,
Bob Weeks

WichitaLiberty.TV February 2, 2014

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

The state of Wichita, 2014

Wichita city hall

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

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

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

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

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

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

Greater Wichita Economic Development Coalition

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

activate-wichita-rate-this-idea

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

wichita-citizen-involvement-2012

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

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

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

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

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

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

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

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

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

Council members shall refrain 01

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

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

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

Transparency groups want to know where Wichita tax money is going to promote Wichita

By Craig Andres, KSN News. View video below, or click here. For more on this issue, see Open government in Kansas.

WICHITA, Kansas — Public or private? GoWichita, Wichita Downtown Development Corporation and the Greater Wichita Economic Development Coalition get more than three million dollars a year. Some of that is taxpayer money.

“Why are their records not public?” asks Randy Brown with the Sunshine Coalition. “It’s ridiculous because we ought to know. These are largely tax supported entities. It’s our money that’s being used. There’s no reason in the world these things shouldn’t be open.”

The Sunshine Coalition is not alone. Bob Weeks with the Voice For Liberty is asking the same questions.

“I have asked several times for complete open records on these three entities,” says Weeks.” But the mayor and city council have not been interested.”

Vice Mayor Pete Meitzner talked with KSN. We asked if the ledgers not being 100% public could be a problem.

“Okay, it could smell like that. But it’s not because we get boards. They have review boards,” says Meitzner. “They have review boards that are members of this community that would not allow it.”

Meitzner says the public doesn’t need to know about day-to-day spending.

“The people that would be looking at that on a daily basis would be our peer city competitors,” explains Meitzner. “Oklahoma, Tulsa, Kansas City and Omaha, they would want to know everything that we are doing to get people downtown.”

Still, watchdog groups say they want to know more.

“The Mayor and the City Manager say all the time that we must be transparent, that we value giving records and information to the citizen,” says Bob Weeks with the Voice For Liberty. “But when it comes down to it they really don’t act in the same way that they say.”

WichitaLiberty.TV January 19, 2014

In this episode of WichitaLiberty.TV: How much would you pay to visit the Wichita Art Museum? You might be surprised to learn how much each visit really costs. Then: A transparency agenda for Wichita city government and the Kansas Legislature. Finally, a look at public schools wasting money. Episode 28, broadcast January 19, 2014. View below, or click here to view at YouTube.

Wichita’s growth in gross domestic product

Wichita City HallCompared to peer areas, Wichita’s record of growth in gross domestic product is similar to that of job creation: Wichita performs poorly.

Looking at growth in GDP, Wichita lags behind the metropolitan statistical areas that we consider our peers (according to Visioneering Wichita), but not behind all the peer cities that I selected. Wichita does better than Springfield, Illinois, for example. I chose to include that as a peer metropolitan area because that’s the immediate past city that Gary Plummer worked in. He was president of that city’s Chamber of Commerce, and is now president of the Wichita Metro Chamber of Commerce.

Wichita also does better than Wichita Falls, Texas. That city is the immediate past home of Tim Chase. He was the head of Wichita Falls Economic Development Corporation. He’s now president of Greater Wichita Economic Development Coalition, the primary organization in charge of economic development for the Wichita area.

What Wichita is missing

If the Wichita-area GDP grew faster, Wichita could generate many more jobs.

growth-gdp-metropolitan-area-wichita-2012-01From 2001 to 2012, Wichita GDP grew at a rate of 0.734 percent per year, compounded annually. U.S. Metropolitan areas, as a whole, managed 1.571 percent growth over the same period. That seems like a small difference, just 0.837 percentage points. But over time, compounding adds up, so to speak. Here’s what it could amount to.

GDP in the Wichita MSA in 2012 was $29,644 million (current dollars). For that year the number of people working averaged 285,600, so each job contributed, on average, $103,796 to GDP.

A metropolitan area the size of Wichita that grew at the historic growth rate of all U.S. Metropolitan areas would be producing an additional $2,751 million in GDP in ten years, compared to a metropolitan area growing at Wichita’s historical rate. That could mean an additional 26,000 jobs.

Using the visualization.

Using the visualization.

If you’d like to use the interactive visualization of metropolitan GDP data, you may click here to open it in a new window. Data is from U.S. Bureau of Economic Analysis along with author’s own calculations. Visualization created using Tableau Public.

A transparency agenda for Wichita

Wichita City Hall

Kansas has a weak open records law, and Wichita doesn’t want to follow the law, as weak as it is. But with a simple change of attitude towards open government and citizens’ right to know, Wichita could live up to the goals its leaders have set.

The City of Wichita is proud to be an open and transparent governmental agency, its officials say. Wichita Mayor Carl Brewer often speaks in favor of government transparency. For example, in his State of the City address for 2011, he listed as an important goal for the city this: “And we must provide transparency in all that we do.” When the city received an award for transparency in 2013, a city news release quoted Wichita City Manager Robert Layton:

“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”

Wichita logic open records
But when we look at some specific areas of government transparency, we find that the city’s efforts are deficient. Below are a few areas in which the city could improve. Much more is available here: Open government in Kansas

The Kansas Open Records Act (KORA), in KSA 45-216 (a) states: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.

In reality, Kansas has a weak open records law. Wichita doesn’t want to follow the law, as weak as it is. But with a simple change of attitude towards open government and citizens’ right to know, Wichita could live up to the goals its leaders have set.

Attitude

Citizen watchdogs need access to records and data. The City of Wichita, however, has created several not-for-profit organizations that are controlled by the city and largely funded by tax money. The three I am concerned with are the Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Coalition.

I have asked each organization for checkbook-level spending data. Each has refused to comply, using the reasoning that they are not “public agencies” as defined in the Kansas Open Records Act. But consider the WDDC: In every year but one, its percent of revenue derived from taxes is well over 90 percent. In many years the only income WDDC received was from taxes and a small amount of interest earned. Click here to see how much of WDDC’s revenue comes from taxes.

The Wichita city attorney backs these organizations and their interpretation of the law. So do almost all city council members. After 14 months investigating this matter, the Sedgwick County District Attorney agreed with the city’s position. (Click here to read the determination.) The only course of action open to me as a citizen watchdog is to raise thousands of dollars to fund a lawsuit.

There is one other course of action, however. That is, these agencies and the city could fulfill the records requests that I have made. These agencies believe the law doesn’t require them to release the records, but the law does not prohibit or restrict releasing the records. They could fulfill requests if they wanted to, which goes back to the attitude of the city. For more, see Wichita, again, fails at open government.

Citizen watchdogs and others need the ability to examine the spending of tax money. When government creates quasi-governmental bodies that are almost totally funded through taxes and then refuses to disclose how that money is spent, we have to wonder why the city doesn’t want citizens to know how this money is spent.

An example of why this is important is the case of Mike Howerter, a trustee of Labette Community College in Parsons. He noticed that a check number was missing from a register. Upon his inquiry, it was revealed that the missing check was used to reimburse the college president for a political campaign contribution. While the college president committed no violation by making this political contribution using college funds, this is an example of the type of information that citizens may want regarding the way public funds are spent.

Website

The most important way governments can communicate with their subjects is through their websites. Wichita moved to a new website early in 2013. While the former website had its share of problems — such as a search feature that didn’t work very well — the new website has been a step backwards.

For example, it appears that for citizen review boards like the Metropolitan Area Planning Commission and Historic Preservation Board, agendas and minutes prior to 2012 did not survive the conversion to the new website. Other documents that were previously available but appear to be missing after the conversion include the daily arrest reports. It appears that only a few years of past budgets are available, but the comprehensive annual financial reports are available for about ten years back. (If I missed any documents that are actually available, I apologize. But the fact that I couldn’t find them is its own problem.)

The prior website had a service called “MyWichita.” This was a very useful service. After registration, citizens could see a list of documents and check the types of documents for which they’d like to receive notification when newly available, such as meeting agenda and minutes. This email reminder service was very valuable. It didn’t survive the conversion to the new website, and there’s nothing new to replace its function.

The search feature on the new website is better than on the old. But there is a curious twist to the new search: It gives different results depending on the starting page. This could be a potentially useful feature if users were made aware of it. For example, if the user is currently viewing the Finance Department web page and starts a search, the system could give the user a choice of search just the Finance Department, or all of the website. Presently, it appears that the search would be confined to just the Finance Department, and users could easily conclude that documents they searched for don’t exist, when in fact they do.

Most new websites in recent years will adapt so they are usable from mobile devices like smartphones. Not so with the new Wichita website.

Spending data

Many governmental agencies post their checkbooks on their websites. Sedgwick County does, and also the Wichita school district. Not so the City of Wichita.

wichita-checkbook-register-example
Even after asking for checkbook spending data, Wichita can supply data of only limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult and 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 it would be very useful. This is a serious defect in the city’s transparency efforts.

Legal notices

Kansas law requires that local government agencies publish legal notices for a variety of topics. Presently these are published in the Wichita Eagle at great cost to taxpayers. These notices could also be published on the city’s website, where they could be searched and archived. This would increase the usability of these documents at very little cost to the city.

Publish requests

When governmental agencies like the City of Wichita fulfill records requests, they could also publish the records on their websites. Most of the time the records are supplied electronically, so this is an additional simple (and low cost) step that would leverage the value of the city’s effort.

Leveraging our lobbyists

What do lobbyists, including taxpayer-funded lobbyists, do in Topeka? One thing they do is testify before committees, in both verbal and written form. Another thing they do is to prepare reports for the clients, advising them on upcoming legislation, analyzing how it affects them, and what the prospects for the bill might be. They also meet with legislators and their clients, which are your elected officials.

Here’s a proposal that will help citizens make best use of their taxpayer-funded lobbyists:

I see nothing in the Kansas Open Records Act that allows local governmental units in Kansas to refuse to disclose these documents: testimony, reports by lobbyists to their government clients, and the lobbyists’ calendars (or billing records for contract lobbyists). Instead of making citizens ask for these records, possibly paying fees to obtain what they’re already paying for, why don’t local governments post these documents immediately on their websites?

Citizens could then benefit from the activities of the lobbyists they’re paying for. They could learn more about legislation as it works its way through the process. Citizens could judge whether the positions taken by the government lobbyists they’re paying for are aligned with their policy preferences.

If the actions taken by taxpayer-funded lobbyists are truly in the public interest, you’d think that cities, counties, and school boards would already be making this information easily available. In any case, there should be no resistance to starting this program.

Wichita City Hall.

Wichita’s legislative agenda favors government, not citizens

city-council-chambers-sign-small

This week the Wichita City Council will consider its legislative agenda. This document contains many items that are contrary to economic freedom, capitalism, limited government, and individual liberty. Yet, Wichitans pay taxes to have someone in Topeka promote this agenda. I’ve excerpted the document here, and following are some of the most problematic items.

Agenda: Existing economic development tools are essential for the continued growth and prosperity of our community.

First. The premise of this item is incorrect. We don’t have growth and prosperity in Wichita. Compared to a broad group of peer metropolitan areas, Wichita performs very poorly. See For Wichita’s economic development machinery, failure for details.

Second: In general, these incentives don’t work to increase prosperity. Click here for a summary of the peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view. “Peer-reviewed” means these studies were stripped of identification of authorship and then subjected to critique by other economists, and were able to pass that review.

Third: Wichita leaders often complain that Wichita doesn’t have enough “tools in the toolbox” to compete effectively in economic development. The city’s document lists the tools the city wants the legislature to protect:

  • GWEDC/GO WICHITA: Support existing statutory records exemptions
  • Industrial Revenue Bond tax abatements (IRBX)
  • Economic Development Exemptions (EDX)
  • Tax Increment Financing (TIF)
  • Sales Tax Revenue (STAR) Bonds
  • Community Improvement Districts (CID)
  • Neighborhood Revitalization Area (NRA) tax rebates
  • Special Assessment financing for neighborhood infrastructure projects, facade improvements and abatement of asbestos and lead-based paint.
  • State Historic Preservation Tax Credits (HPTC)
  • State administration of federal Low Income Housing Tax Credits (LIHTC)
  • High Performance Incentive Program (HPIP) tax credits
  • Investments in Major Projects and Comprehensive Training (IMPACT) grants
  • Promoting Employment Across Kansas (PEAK) program
  • Economic Revitalization and Reinvestment Act bonding for major aviation and wind energy projects
  • Kansas Industrial Training (KIT) and Kansas Industrial Retraining (KIR) grants
  • Network Kansas tax credit funding
  • State support for Innovation Commercialization Centers in Commerce Department budget

That’s quite a list of incentive programs. Some of these are so valuable that Kansas business leaders told the governor that they value these incentives more than they would value elimination of the state corporate income tax.

Agenda: GWEDC/GO WICHITA: Support existing statutory records exemptions

This may refer to the city wanting to prevent these agencies from having to fulfill records requests under the Kansas Open Records Act. (If so, I wonder why the Wichita Downtown Development Corporation was left off.) City leaders say Wichita has an open and transparent government. But Kansas has a weak records law, and Wichita doesn’t want to follow the law, as weak as it is. This is an insult to citizens who are not able to access how their taxes are spent. For more on this issue, see Open Records in Kansas.

Agenda: The Wichita City Council opposes any legislative attempts to restrict the taxing and spending authority of local governments.

As Wichita city leaders prepare to ask for a higher sales tax rate in Wichita, we can hope that the legislature will save us from ourselves. At best, we can hope that the legislature requires that all tax rate increases be put to popular vote.

Agenda: The Wichita City Council opposes any restrictions on the use of state and/or local public monies to provide information to our citizens and to advocate on their behalf.

This is the taxpayer-funded lobbying issue. As you can see in this document, many of the things that Wichita city leaders believe people want, or believe that will be good for their constituents, are actually harmful. Additionally, many of the methods the city uses to engage citizens to determine their needs are faulty. See In Wichita, there’s no option for dissent for an example. Also, see Wichita survey questions based on false premises.

Agenda: The Wichita City Council supports the current framework for local elections, continuing the current February/April schedule of local primary and general elections, as well as the local option allowing non-partisan elections.

The present system of non-partisan elections held in the spring results in low voter turnout that lets special interest groups exercise greater influence than would be likely in fall elections. See my legislative testimony in Kansas spring elections should be moved.

Agenda: The Wichita City Council supports the development of appropriate state and local incentives to nurture and preserve arts activity throughout the City of Wichita and the State of Kansas.

Translation: The city knows better than you how to provide for your entertainment and cultural edification, and will continue to tax you for your own benefit.

Agenda: Public support and awareness of the possibility of passenger rail service connecting Oklahoma City and Wichita/Newton has grown over the past two years.

I’m not sure where the claim of public support and awareness growing comes from, but people are definitely not informed about the economics of passenger rail. In 2010, when the state rolled out several plans for this passenger rail service link, I reported as follows:

Expansion of rail service in Kansas is controversial, at least to some people, in that any form of rail service requires taxpayer involvement to pay for the service. First, taxpayer funding is required to pay for the start-up costs for the service. There are four alternatives being presented for rail service expansion in Kansas, and the start-up costs range from $156 million up to $479 million.

After this, taxpayer subsidies will be required every year to pay for the ongoing operational costs of providing passenger rail service. The four alternatives would require an annual operating subsidy ranging from $2.1 million up to $6.1 million. Taking the operating subsidy and dividing by the estimated number of passengers for each alternative, the per-passenger subsidy ranges from $35 up to $97 for every passenger who uses the service.

It would be one thing if tickets sales and other revenue sources such as sale of food and beverage paid for most of the cost of providing passenger rail service, and taxpayers were being asked to provide a little boost to get the service started and keep it running until it can sustain itself. But that’s not the case. Taxpayers are being asked to fully fund the start-up costs. Then, they’re expected to pay the majority of ongoing expenses, apparently forever.

Also, in Amtrak, taxpayer burden, should not be expanded in Kansas I reported on the Heartland Flyer route specifically. This is from 2010, but I doubt much has changed since then.

For the Heartland Flyer route, which runs from Fort Worth to Oklahoma, and is proposed by taxpayer-funded rail supporters to extend into Kansas through Wichita and Kansas City, we find these statistics about the finances of this operation:

Amtrak reports a profit/loss per passenger mile on this route of $-.02, meaning that each passenger, per mile traveled, resulted in a loss of two cents. Taxpayers pay for that.

But this number, as bad as it is, is totally misleading. Subsidyscope calculated a different number. This number, unlike the numbers Amrak publishes, includes depreciation, ancillary businesses and overhead costs — the types of costs that private sector businesses bear and report. When these costs are included, the Heartland Flyer route results in a loss of 13 cents per passenger mile, or a loss of $26.76 per passenger for the trip from Fort Worth to Oklahoma City.

Asking the taxpayers of Wichita to pay subsidies each time someone boards an Amtrak train: This doesn’t sound like economic development, much less a program that people living in a free society should be forced to fund.

For Wichita’s economic development machinery, failure

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

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

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

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

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

wichita-peer-job-growth-1990-2014-01

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

wichita-peer-job-growth-2007-2014-01

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

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

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

Then, we come to Wichita.

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

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

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

toolbox-29058_640

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

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

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

In Wichita, ‘free markets’ used to justify business welfare

Wichita City HallIncredibly, a prominent Wichita business uses the free market to justify its request for economic development incentives. A gullible city council buys the argument.

At the December 10, 2013 meeting of the Wichita City Council, Bombardier LearJet received an economic development incentive that will let it avoid paying some property taxes on newly-purchased property. The amount involved in this particular incident is relatively small. According to city documents, “the value of the abated taxes on that investment could be as much as $1,980.”

(Bombardier receives millions each year in other government subsidies; see Kansas PEAK program: corporate welfare wrapped in obfuscation and Bombardier Learjet should pay just a little for examples.)

While the amount of the incentive granted in the December 10 action is small, the meeting was useful in letting us understand how some prominent members of Wichita’s business community have distorted the principles of free markets and capitalism. As illustrated by the fawning of Wichita City Council Member and Vice Mayor Pete Meitzner (district 2, east Wichita) and others, elected officials have long forsaken these ideas.

Bombardier’s argument

Don Pufahl, who is Director of Finance at Bombardier Learjet, addressed the council regarding this matter. He started his remarks on a positive note, telling the council “There are various aspects to a free-market economy. There’s the rule of law, there’s property rights, and another major aspect is incentives.”

We must be careful when using the term incentive. In a free-market economy or capitalism, incentive refers to the motivation of the possibility of earning profits. Another incentive — the flip side of the same coin — is avoiding losses. That’s why capitalism is called a profit-and-loss system. The losses are just as important as profits, as losses are a signal that the economic activity is not valued, and the resources should be shifted to somewhere else where they are valued more highly.

But in the field of economic development as practiced by government, incentive means something given to or granted to a company. That’s what the representative from Bombardier meant by incentive. He explained: “One party, in this case, the local government, uses incentives for another party, in this case our company, to invest in the community.”

A few thoughts: First, Bombardier is not investing in the community. The company is investing in itself.

Second, the free market system that the speaker seemed to praise is a system based on voluntary exchange. That flows from property rights, which is the fundamental idea that people own themselves and the product of their labor, and are free to exchange with others, or to not exchange. But when government uses incentives, many people do not consent to the exchange. That’s not a free market system.

Third, an important part of a free market system is market competition. That is, business firms compete with others for customers. They also compete with other business firms for resources needed for production, such as capital. When government makes these decisions instead of markets, we don’t have a free market system. Instead, we have cronyism. Charles G. Koch has described the harm of cronyism, recently writing: “The effects on government are equally distorting — and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

In the same article Koch wrote: “We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.” (Charles G. Koch: Corporate cronyism harms America)

The representative from Bombardier also said that the city’s incentives would reduce Bombardier’s investment risk. There is little doubt this is true. What has happened, however, is that the risk has not been eliminated or reduced. It has merely been shifted to the people of Wichita, Sedgwick County, the Wichita public school district, and the State of Kansas. When government does this on a piecemeal basis, this is called cronyism. When done universally, we call this socialism.

We can easily argue that actions like this — and especially the large subsidies granted to Bombardier the by state — increase the risk of these investments. Since the subsidies reduce the cost of its investment, Bombardier may be motivated to make risky investments that it might otherwise not make, were it investing its own funds (and that of its shareholders).

The cost of Bombardier’s investments, and the accompanying risk, is spread to a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. But we can’t identify these. We don’t know who they are. But we need an economic development strategy that creates an environment where these young entrepreneurial firms have the greatest chance to survive. (See Kansas economic growth policy should embrace dynamism and How to grow the Kansas economy.)

Now the city and Bombardier will say that these investments have a payoff for the taxpayer. That is, if Bombardier grows, it will pay more in taxes, and that constitutes “profit” for taxpayers. Even if we accept that premise — that the city “profits” from collecting taxes — why do we need to invest in Bombardier in order to harvest its “profits” when there are so many companies that pay taxes without requiring subsidy?

Finally, the representative from Bombardier said that these incentives are not a handout. I don’t see how anyone can say that and maintain a straight face.

wichita-chamber-job-growth-2013-12
It would be one thing if the Wichita area was thriving economically. But it isn’t. We’re in last place among our self-identified peers, as illustrated in Wichita and Visioneering peers job growth. Minutes from a recent meeting of Greater Wichita Economic Development Coalition, the primary organization in charge of economic development, holds this paragraph: “As shown in the Chart below Wichita economy suffered the largest loss of employment among peer cities and has not seen any signs of rebounding as the other communities have. Wichita lost 31,000 jobs during the recession principally due to the down turn in general aviation.”

Following is a fuller representation of the Bombardier representative’s remarks to the council.

There are various aspects to a free-market economy. There’s the rule of law, there’s property rights, and another major aspect is incentives.

One party, in this case, the local government, uses incentives for another party, in this case our company, to invest in the community.

As the company moves forward to invest in the community, those investments are not without risk. … Your incentives allow us to offset some of that risk so that we can move forward with those investments, which hopefully create new jobs and also then also improves the quality of life in our community. … These incentives are not a handout. They are a way that the local government uses such things to offset some of the risk that is involved in local companies as they invest in the community, bring jobs to the community, and improve the community overall.


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Employment visualization updated; Wichita still in last place

city-council-chambers-sign-smallWichita continues to lag behind its peer cities in job growth, according to data from the Bureau of Labor Statistics.

The interactive visualization referenced below lets you select any number of metropolitan areas (or states) and track progress in job growth.

employment-growth-visioneering-2013-12

The nearby chart shows Wichita and its Visioneering peer cities (click on charts for larger versions). For about the last ten years Wichita has been in last place in job growth, and by no small margin. It wasn’t always that way. Results like this should cause us to question our economic development strategies and the people and organizations we have charged with managing this effort.

wichita-chamber-job-growth-2013-12

This poor performance of Wichita compared to peers has not gone unnoticed. Minutes from a recent meeting of Greater Wichita Economic Development Coalition, the primary organization in charge of economic development, holds this paragraph: “As shown in the Chart below Wichita economy suffered the largest loss of employment among peer cities and has not seen any signs of rebounding as the other communities have. Wichita lost 31,000 jobs during the recession principally due to the down turn in general aviation. To improve our local economy we have to add new economic engines to the aviation sector thereby insulating the regional economy from future massive fluctuations.”

Data is from the Bureau of Labor Statistics of the U.S. Department of Labor. Visualization created by myself using Tableau Public. Click here to open the visualization in a new window.

kansas-employment-sample-2013-12

Wichita can advocate for government transparency, or not

Wichita City Hall

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

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

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

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

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

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

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

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

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

Why open records are important

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

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

This item in the past

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

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

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

Randy Brown, who is chair of the Kansas Sunshine Coalition for Open Government and former opinion page editor of the Wichita Eagle was at the meeting and spoke on this matter. In his remarks, Brown said “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”

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

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

Misunderstanding the scope of KORA

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

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

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

Is the city overwhelmed with records requests?

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

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

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

Wichita’s attitude towards citizens

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

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

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

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

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

Wichita logic open records

Wichita economic development not being managed

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

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

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

wichita-economic-development

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

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

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

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

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

The case of InfoNXX

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

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

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

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

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

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

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

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

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

gwedc-office-operations

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

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

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

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

Going forward

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

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

Wichita job growth under the Visioneering/Brewer regime

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

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

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

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

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

Sedgwick County votes for harmful intervention

man-digging-coins

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

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

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

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

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

Dear Investors,

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

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

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

Tim Chase

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No evidence of large firm impacts on local economy”

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

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

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

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

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

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

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

Why is business welfare necessary in Wichita?

A company in Wichita requires business welfare in order to capture a new business opportunity. What’s wrong with this picture?

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Our local and state economic development regime wanted Sedgwick county commissioners to approve a grant to a company without the commissioners knowing the entire spectrum of benefits the company will receive. Wichita city council members likely would have found themselves in the same position.

But we now know the details of economic development incentives approved and proposed for Triumph Aerospace Systems in Wichita. Press releases from Kansas Department of Commerce and Greater Wichita Economic Development Coalition didn’t give specifics. But based on the agreement between the Department of Commerce and Triumph, the state will give Triumph $100,000 immediately, and then $25,000 at the end of each of the next two years if job creation targets are met.

This $150,000 is in addition to two forgivable loans of $78,000 each expected to be granted by Sedgwick County and the City of Wichita. (Forgivable loans are like conditional grants. The loan is not repaid as long as targets are met.) That’s a total of $306,000.

This type of economic development action is routine in Wichita and Kansas. But, as measured in a variety of ways, Wichita economic growth and job creation is slow. So we ought to ask a few questions before proceeding.

First, what is wrong with Wichita’s business environment that in order for a company to expand, it must receive business welfare? I realize that “business welfare” is a harsh term. But how else do we describe these grants paid for through taxation?

Second: If there is no problem with Wichita’s business environment, and if these incentives are not necessary for the company to expand, why are we granting them?

Third, how were these amounts determined? Why $306,000? Why not $206,000 or $406,000? If we gave the company a bigger grant, could it hire more people?

Fourth: An analysis performed for Sedgwick County indicates a benefit-cost ratio of 1.31, meaning that for every $1.00 the county invests in this forgivable loan, it expects to receive $1.31. This inspires a question: If we really believe in this benefit to the county (and similar benefits to the city and state), why is the county investing only $78,000? And why doesn’t the county make more investments like this? Surely there are other worthy companies that need capital for expansion. If it really is so easy to induce economic growth and job creation, we should be doing things like this at every county commission meeting. Several times each meeting, I would say.

Fifth: Not all companies that expand receive incentives. How are other companies in Wichita able to expand or start without the aid of incentives?

Finally: A continuing goal in Wichita is to diversify our economy, to reduce the proportion of jobs and income earned in aviation and aerospace. Triumph, the company expanding, is in that industry. It’s not bad that the company is expanding. But the costs of these incentives are a burden to other companies that are starting and trying to establish themselves. Instead of diversifying our economy, this action further concentrates our economic base in a way that is deemed undesirable. Was this considered when evaluating this incentive opportunity versus others?

I’m just asking.

What to do, and not to do

Politicians and bureaucrats promote programs like these grants as targeted investment in our economic future. They believe that they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by the state that shapes the future direction of the Wichita and Kansas economy.

These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies receiving grants or escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

Embracing Dynamism: The Next Phase in Kansas Economic Development Policy

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs is an example of precisely the wrong policy.

We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

Without government, there would be no change: Wichita Mayor

It’s worse than President Obama saying “You didn’t build that.” Wichita Mayor Carl Brewer tells us you can’t build that — not without government guidance and intervention, anyway.

City of Wichita logoWhen President Barack Obama told business owners “You didn’t build that,” it set off a bit of a revolt. Those who worked hard to build businesses didn’t like to hear the president dismiss their efforts.

Underlying this episode is a serious question: What should be the role of government in the economy? Should government’s role be strictly limited, according to the Constitution? Or should government take an activist role in managing, regulating, subsidizing, and penalizing in order to get the results politicians and bureaucrats desire?

Historian Burton W. Folsom has concluded that it is the private sector — free people, not government — that drives innovation: “Time and again, experience has shown that while private enterprise, carried on in an environment of open competition, delivers the best products and services at the best price, government intervention stifles initiative, subsidizes inefficiency, and raises costs.”

But some don’t agree. They promote government management and intervention into the economy. Whatever their motivation might be, however it was they formed their belief, they believe that without government oversight of the economy, things won’t happen.

But in Wichita, it’s even worse. Without government, it is claimed that not only would we stop growing, economic progress would revert to a previous century.

Mayor Carl Brewer made these claims in a 2008 meeting of the Wichita City Council.

In his remarks (transcript and video below), Brewer said “if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.”

When I heard him say that, I thought he’s just using rhetorical flair to emphasize a point. But later on he said this about those who advocate for economic freedom instead of government planning and control: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

Brewer’s remarks are worse than “You didn’t build that.” The mayor of Wichita is telling us you can’t build that — not without government guidance and intervention, anyway.

Many people in Wichita, including the mayor and most on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

This tradition of entrepreneurship is disappearing, replaced by the public-private partnership and programs like Visioneering Wichita, sustainable communities, Greater Wichita Economic Development Coalition, Regional Economic Area Partnership (REAP), and rampant cronyism. Although when given a chance, voters are rejecting cronyism.

We don’t have long before the entrepreneurial spirit in Wichita is totally subservient to government. What can we do to return power to the people instead of surrendering it to government?

Wichita Mayor Carl Brewer, August 12, 2008:

“You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

“I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

“Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

“Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

“But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

“This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

“But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

“But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

“So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

“So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

“And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

“So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.”

Wichita economic development solution, postponed

Recent reporting in the Wichita Business Journal on Wichita’s economic development efforts has many officials saying Wichita doesn’t have enough incentives to compete with other cities. That is, we are not spending enough on incentives.

Whether these incentives are good economic development policy is open for debate. I don’t believe we need them, and that we in Kansas and Wichita can chart another course to increase economic freedom in Kansas. That will make our area appealing to companies. But our local bureaucrats, most business leaders, and nearly all elected officials believe that targeted incentives are the way to attract and retain business.

(Charts at the end of this article illustrate the record in Wichita on jobs.)

Our leaders have identified what they believe is a solution to a problem, but have not implemented that solution effectively, in their own words.

I should say have not implemented the solution on a widespread basis, because Wichita has devoted more tax money to economic development. According to the 2010 City Manager’s Policy Message, page CM-2, “One mill of property tax revenue will be shifted from the Debt Service Fund to the General Fund. In 2011 and 2012, one mill of property tax will be shifted to the General Fund to provide supplemental financing. The shift will last two years, and in 2013, one mill will be shifted back to the Debt Service Fund. The additional millage will provide a combined $5 million for economic development opportunities.”

So the city has decided to spend more tax dollars on economic development, but this allocation is being phased out — at the same time nearly everyone is calling for more to be spent in this area.

Isn’t this a failure of political and bureaucratic leadership? We have a long-standing problem, officials have identified what they believe is a solution, but it is not being implemented. These leaders have the ability to spend more on economic development, as illustrated by Wichita’s shifting of tax revenue.

Even if we believe that an active role for government in economic development is best (and I don’t believe that), we have to conclude that our efforts aren’t working. Several long-serving politicians and bureaucrats that have presided over this failure: Mayor Carl Brewer has been on the city council or served as mayor since 2001. Economic development director Allen Bell has been working for the city since 1992. City Attorney Gary Rebenstorf has served for many years. At Sedgwick County, manager William Buchanan has held that position for 21 years. On the Sedgwick County Commission, Dave Unruh has been in office since 2003, and Tim Norton since 2001. Unruh has said he wants to be Wichita’s next mayor.

Wichita City Manager Robert Layton has had less time to influence the course of economic development in Wichita. But as he approaches his fourth anniversary in Wichita, he starts to become part of the legacy of Wichita’s efforts in economic development.

Wichita’s job creation record

Two charts illustrate the record of job growth in Wichita. The first shows Wichita job growth compared to Kansas and the nation. Data is from U.S. Bureau of Economic Analysis, and indexed with values for 2001 set to 1.00.

As you can see, job growth in Wichita trails both Kansas and the nation.

The next chart shows Wichita job growth by sector.

Private sector job growth is prominently lower than government. This is a problem, because more economic activity is directed away from the productive private sector to inefficient government.

In Wichita, failure to value open records and open government

On the KAKE Television public affairs program “This Week in Kansas” the failure of the Wichita City Council, especially council member Wichita City Council Member Pete Meitzner (district 2, east Wichita), to recognize the value of open records and open government is discussed.

For more background, see Wichita, again, fails at open government.

Wichita, again, fails at open government

The Wichita City Council, when presented with an opportunity to increase the ability of citizens to observe the workings of the government they pay for, decided against the cause of open government, preferring to keep the spending of taxpayer money a secret.

The occasion was consideration of renewing its contract with Go Wichita Convention and Visitors Bureau. I asked, as I have in the past for this agency and also for Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition, that they consider themselves to be what they are: public agencies as defined in the Kansas Open Records Act.

In the past I’ve argued that Go Wichita is a public agency as defined in the Kansas Open Records Act. But the city disagreed. And astonishingly, the Sedgwick County District Attorney agrees with the city’s interpretation of the law.

So I asked that we put aside the law for now, and instead talk about good public policy. Let’s recognize that even if the law does not require Go Wichita, WDDC, and GWEDC to disclose records, the law does not prohibit them from fulfilling records requests.

Once we understand this, we’re left with these questions:

Why does Go Wichita, an agency funded almost totally by tax revenue, want to keep secret how it spends that money, over $2 million per year?

Why is this city council satisfied with this lack of disclosure of how taxpayer funds are spent?

Why isn’t Go Wichita’s check register readily available online, as it is for Sedgwick County?

For that matter, why isn’t Wichita’s check register online?

It would be a simple matter for the council to declare that the city and its taxpayer-funded partner agencies believe in open government. All the city has to have is the will to do this. It takes nothing more.

Only Wichita City Council Member Michael O’Donnell (district 4, south and southwest Wichita) gets it, and yesterday was his last meeting as a member of the council. No other council members would speak up in favor of citizens’ right to open government.

But it’s much worse than a simple failure to recognize the importance of open government. Now we have additional confirmation of what we already suspected: Many members of the Wichita City Council are openly hostile towards citizens’ right to know.

In his remarks, Wichita City Council Member Pete Meitzner (district 2, east Wichita) apologized to the Go Wichita President that she had become “a pawn in the policy game.” He said it was “incredibly unfair that you get drawn into something like this.”

He added that this is a matter for the Attorney General and the District Attorney, and that not being a lawyer, she shouldn’t be expected to understand these issues. He repeated the pawn theme, saying “Unfortunately there are occasions where some people want to use great people like yourself and [Wichita Downtown Development Corporation President] Jeff Fluhr as pawns in a very tumultuous environment. Please don’t be deterred by that.”

Mayor Brewer added “I would have to say Pete pretty much said it all.”

We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”

But by framing open government as a legal issue — one that only lawyers can understand and decide — Wichita city government attempts to avoid criticism for their attitude towards citizens.

It’s especially absurd for this reason: Even if we accept the city’s legal position that the city and its quasi-governmental taxpayer-funded are not required to fulfill records request, there’s nothing preventing from doing that — if they wanted to.

In some ways, I understand the mayor, council members, and bureaucrats. Who wants to operate under increased oversight?

What I don’t understand is the Wichita news media’s lack of interest in this matter. Representatives of all major outlets were present at the meeting.

I also don’t understand what Council Member Lavonta Williams (district 1, northeast Wichita) suggested I do: “schmooze” with staff before asking for records. (That’s not my word, but a characterization of Williams’ suggestion made by another observer.)

I and others who have made records requests of these quasi-governmental taxpayer-funded organizations have alleged no wrongdoing by them. But at some point, citizens will be justified in wondering whether there is something that needs to be kept secret.

The actions of this city have been noticed by the Kansas Legislature. The city’s refusal to ask its tax-funded partners to recognize they are public agencies as defined in the Kansas Open Records Act is the impetus for corrective legislation that may be considered this year.

Don’t let this new law be known as the “Wichita law.” Let’s not make Wichita an example for government secrecy over citizens’ right to know.

Unfortunately, that bad example has already been set, led by the city’s mayor and city council.

Wichita could do better regarding open government, if it wants

Tomorrow the Wichita City Council will consider renewing its contract with Go Wichita Convention and Visitors Bureau. The renewal will provide another opportunity for the council to decide whether it is truly in favor of open government and citizen access to records.

Go Wichita, along with the Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition, contends that it is not a “public agency” as defined in Kansas law, and therefore does not have to fulfill records requests. Mayor Carl Brewer and all council members except Wichita City Council Member Michael O’Donnell (district 4, south and southwest Wichita) are comfortable with this tortured interpretation of the law. Inexplicably, the Sedgwick County District Attorney agreed with the city.

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

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

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

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

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

Why open records are important

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

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

This item, last year

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

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

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

Randy Brown, who is chair of the Kansas Sunshine Coalition for Open Government and former opinion page editor of the Wichita Eagle was at the meeting and spoke on this matter. In his remarks, Brown said “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”

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

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

John Rolfe, president of Go Wichita, told the council that he has offered to provide me “any information that is relevant” regarding Go Wichita. He mentioned the various financial reports his organization provides. He said he is unclear on the transparency question, and what isn’t transparent.

Wichita City Council Member Michael O’Donnell (district 4, south and southwest Wichita) asked Rolfe if he had ever denied a KORA request. Rolfe replied no, perhaps not remembering that Go Wichita denied my request.

Misunderstanding the scope of KORA

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

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

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

Is the city overwhelmed with records requests?

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

In making this argument, Mr. Meitzner might have taken the time to learn how many records requests I’ve made to the city. The answer, to the best of my recollection, is that I have made no requests this year to the city citing the open records act. I have made perhaps a half-dozen informal requests, most of which I believe were fulfilled consuming just a few moments of someone’s time.

As to his concern over the costs of fulfilling records requests: The law allows for government and agencies to charge fees to fulfill requests. They often do this, and I have paid these fees. But more important than this, the attitude of council member Meitzner is troubling. Government should be responsive to citizens. As Randy Brown told the council, government should welcome opportunities to share information and be open and transparent.

As for a workshop for city council on the topic of open records: This would probably be presented by Rebenstorf, and his attitude towards the open records law is known, and is not on the side of citizens.

O’Donnell made a motion that the contract be approved, but amended that Go Wichita will comply with the Kansas Open Records Act. That motion didn’t receive a second.

Wichita’s attitude towards citizens

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

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

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

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

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

Tim Norton commercial: Some context

A television advertisement for Tim Norton, candidate for re-election to the Sedgwick County Board of Commissioners, contains claims that, while probably true, hide the reality of Norton’s record.

Tim Norton television advertisement

One claim in the ad is that “I’ve worked hard to create new jobs, and save what we have.” A graphic in the ad reads “Over 18,000 new & retained jobs.”

I don’t know the source of the job claims, but the numbers provided by Greater Wichita Economic Development Coalition, our area’s economic development organization, must be viewed with caution.

An example is MoJack, a company which had received a forgivable loan from Wichita and Sedgwick County based on promises to create a certain number of jobs.

But later MoJack revised its projections of job creation from 53 down to 26.

A larger example is likely to be reported soon is the case of Hawker Beechcraft. Economic development officials are taking credit for retaining 4,500 jobs there, a dubious claim to begin with. But there have been hundreds of layoffs this year.

Do economic development officials revise their statistics in response to these later events?

We ought to also take a look at Sedgwick County employment since Norton took office in 2001. The following chart shows that the number of people working in Sedgwick County is lower now than in 2001. We’ve endured two recessions during that time, to be sure, and these were not the fault of anyone in Sedgwick County government. And while jobs are created, others are lost due to the dynamic nature of the economy.

But when we talk about creating jobs, we ought to also take a look at the entire employment situation.

Another look at Sedgwick County employment shows that government employment has grown at the expense of private sector jobs.

I’m not saying that Tim Norton is responsible for the growth of federal and state employees in Sedgwick County during his three terms as commissioner. But this information provides context to any claims of job creation or growth.

A recent report from GWEDC shows us that power of government to influence economic development is weak. The organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts. See Wichita economic development isn’t working.

Tim Norton television advertisement

Another graphic in the commercial reads “Reduced the mill levy 3 consecutive years.” This is true. But it’s not the entire history of Sedgwick County property taxes while Norton has been on the commission. The chart below illustrates.

Notice how the property tax rate jumps in 2006? It increased from 28.758 to 31.315 mills, according to Sedgwick County Comprehensive Annual Financial Reports. That’s an increase of 8.9 percent. Tim Norton, along with other commissioners, explicitly voted for this tax increase on August 9, 2006. It wasn’t an accidental increase. It was deliberate.

While Norton in later years voted with other commissioners to reduce the mill levy — making the claim in the advertisement true — these reductions were not at his initiative. Instead, his attitude, I believe, is revealed by his opposition to initiatives that would require voter approval for tax increases. He prefers to keep the power to raise taxes.

Wichita economic development, two stories

Two items on the agenda for the Wichita City Council give an insight into the nature and efficacy of economic development efforts in Wichita.

First, a local company will come to the Wichita City Council asking for a property tax exemption. This is not unusual, as it happens almost every week, and multiple times at some meetings. In this case, we learn that estimates of job creation used to support an economic development incentive weren’t realistic.

The company, MoJack, had received a forgivable loan from Wichita and Sedgwick County based on promises to create a certain number of jobs. The loan amount was $35,000 from each, for a total of $70,000. If MoJack meets the job and payroll targets, the loan will be forgiven.

But we learn in city materials this week that there’s been a change: “As a result of this expansion, Mojack plans to add at least 26 new employees to its workforce at a starting average wage of $44,000. In June 2012, Mojack repaid the forgivable loan because it had been based on an earlier estimate that 53 new jobs would be created, which was not realistic.” (The agenda report may be read at Public Hearing and Tax Exemption Request (Mojack Holdings, LLC/Mojack Distributors, LLC).)

In June, MoJack repaid its forgivable loan to Sedgwick County, presumably for the same reasons.

While city officials say they conduct due diligence before granting economic development incentives, the reality is that economic development officials have to work with whatever figures the applicant companies provide. How can the city verify the projected growth of a company? We wouldn’t want to even give that a try.

What’s important is this: Greater Wichita Economic Development Coalition is our economic development agency. In their annual report of their activities, they took credit for the MoJack jobs. Now that the number of jobs to be created is expected to be smaller, will GWEDC update its job creation figures?

Also, MoJack participated in several economic development incentives from the state of Kansas. Hopefully the Kansas Department of Commerce will consider the new, revised employment projects with managing its incentive awards, and will also update its claims of job creation accordingly.

We also learned this week that Hawker Beechcraft may not be meeting its agreed-upon employment levels required to continue to receive incentives from the state, Sedgwick County, and City of Wichita.

In Wichita Business Journal reporting we learn the numbers:

Hawker Beechcraft Corp. appears to be close to violating an agreement with state and local governments to maintain employment of at least 4,000 workers in Wichita.

The company has declined to discuss its employment level in detail and as recently as last week told the Wichita Business Journal that it had employment of 4,500 workers, the same number it reported to the WBJ in March.

However, according to a database of mass layoffs maintained by the Kansas Department of Commerce, from March to June this year Hawker issued 885 60-day layoff notices to Wichita employees. And since late July it has filed layoff notices for 56 more Wichita workers.

All told, that’s 941 layoff notices since March. If all those job cuts have taken place, and the 4,500 number was accurate in March, that would suggest a current employment level of 3,559 in Wichita, based solely on layoffs and not assuming any potential attrition or, on the other hand, new hires.

The article explains that while the official job count for agreement compliance purposes is taken at the end of the year, Hawker is not forthcoming with information about its employment levels. While it is not required to answer WBJ’s questions about its job count, we should remember that we have a public-private partnership with Hawker, under which taxpayers will be investing millions in the company. Wichita economic development leaders tout the public-private partnership as a powerful tool.

By taking our money and entering in a partnership, Hawker ought to be more forthcoming with legitimate information requests. Failure to do so is not polite, even if it is not required.

There’s also this question: When Hawker releases its employment figures, will GWEDC adjust its success story to reflect the likely lower number of jobs? If we’re to have an economic development effort that’s based on factual information, GWEDC should. But based on past history, I doubt it will. Therefore, we continue to make decisions based on incomplete data and facts.

By the way, the Hawker Beechcraft campus is outside the city limits of Wichita. By what authority does the city give it Wichita taxpayers’ money?

Open records again an issue in Kansas

Responses to records requests made by Kansas Policy Institute are bringing attention to shortcomings in the Kansas Open Records Act.

Those who have made records requests in Kansas are probably not surprised that KPI has had difficulty in having its records requests respected and filled. In 2007 Better Government Association and National Freedom of Information Coalition gave Kansas a letter grade of “F” for its open records law. Last year State Integrity Investigation looked at the states, and Kansas did not rank well there, either. See Kansas rates low in access to records.

This week KPI president Dave Trabert appeared before the Sedgwick County Commission to express his concerns regarding the failure of Greater Wichita Economic Development Coalition to fulfill a records request made under the provisions of the Kansas Open Records Act. Video is at Open government in Sedgwick County Kansas.

While commissioners Karl Peterjohn and Richard Ranzau spoke in favor of government transparency and compliance with records requests, not all their colleagues agreed.

Dave Unruh asked Trabert if GWEDC had responded to his records request. Trabert said yes, and the response from GWEDC is that the agency believes it has complied with the open records law. This, he explained, is a common response from agencies.

Commission Chair Tim Norton expressed concern that any non-profit the commission gives money to would have to hire legal help, which he termed an unintended consequence. He made a motion to receive and file Trabert’s remarks, which is routine. His motion also included taking this matter under advisement, which is what politicians do in order to bury something. Unruh seconded the motion.

Peterjohn made a substitute motion that a representative from GWEDC would appear before the commission and discuss the open records act. This motion passed four to one, with Unruh in the minority. Even though Norton voted in favor of Peterjohn’s motion, it’s evident that he isn’t in favor of more government transparency. Unruh’s vote against government transparency was explicit.

Wichita school district records request

USD 259, the Wichita public school district, also declined to fulfill a records request submitted by KPI. In a press release, KPI details the overly-legalistic interpretation of the KORA statute that the Wichita school district uses to claim that the records are exempt from disclosure.

In a news report on KSN Television, school board president Lynn Rogers explained the district’s reason for denying the records request: “But some school board members with USD 259 in Wichita say, the numbers brought up in court are preliminary numbers. That’s the reason they are not handing them over to KPI. ‘We have worked very hard over the years to be very forthright and we’ve tried to disclose the information when we have it,’ says Lynn Rogers.’”

This claim by Rogers — if sincere — is a break from the past. In 2008 Rogers told me that it is a burden when citizens make requests for records.

Until recently the Wichita school district had placed its monthly checkbook register on its website each month, and then removed it after a month had passed. Rogers explained that the district didn’t have space on its servers to hold these documents. That explanation is total nonsense, as the pdf check register documents are a very small fraction of the size of video files that the district hosted on its servers. Video files, by the way, not related to instruction, but holding coverage of groundbreaking ceremonies.

City of Wichita

KPI has made records requests to other local governmental agencies. Some have refused to comply on the basis that they are not public agencies as defined in Kansas statutes. This was the case when I made records requests to Wichita Downtown Development Corporation, Greater Wichita Economic Development Coalition, and Go Wichita Convention and Visitors Bureau.

In 2009 I addressed the Wichita City Council and asked that the city direct that WDDC follow the law and fulfill my records requests. (Video is at Video: City of Wichita and the Kansas Open Records Act.)

In my remarks, I told Mayor Carl Brewer and the council this:

The Kansas Open Records Act (KORA), in KSA 45-216 (a) states: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.”

But in my recent experience, our city’s legal staff has decided to act contrary to this policy. It’s not only the spirit of this law that the city is violating, but also the letter of the law as well.

Recently I requested some records from the Wichita Downtown Development Corporation. Although the WDDC cooperated and gave me the records I requested, the city denies that the WDDC is a public agency as defined in the Kansas Open Records Act.

This is an important issue to resolve.

In the future, requests may be made for records for which the WDDC may not be willing to cooperate. In this case, citizens will have to rely on compliance with the law, not voluntary cooperation. Or, other people may make records requests and may not be as willing as I have been to pursue the matter. Additionally, citizens may want to attend WDDC’s meetings under the provisions of the Kansas Open Meetings Act.

Furthermore, there are other organizations similarly situated. These include the Greater Wichita Economic Development Coalition and the Go Wichita Convention and Visitors Bureau. These organizations should properly be ruled public agencies as defined in the Kansas Open Records Act so that citizens and journalists may freely request their records and attend their meetings.

Here’s why the WDDC is a public agency subject to the Open Records Act. KSA 45-217 (f)(1) states: “‘Public agency’ means the state or any political or taxing subdivision of the state or any office, officer, agency or instrumentality thereof, or any other entity receiving or expending and supported in whole or in part by the public funds appropriated by the state or by public funds of any political or taxing subdivision of the state.”

The Kansas Attorney General’s office offers additional guidance: “A public agency is the state or any political or taxing subdivision, or any office, officer, or agency thereof, or any other entity, receiving or expending and supported in whole or part by public funds. It is some office or agency that is connected with state or local government.

The WDDC is wholly supported by a special property tax district. Plain and simple. That is the entire source of their funding, except for some private fundraising done this year.

The city cites an exception under which organizations are not subject to the Kansas Open Records Act: “Any entity solely by reason of payment from public funds for property, goods or services of such entity.”

The purpose of this exception is so that every vendor that sells goods and services to government agencies is not subject to the Kansas Open Records Act. For example, if a city buys an automobile, the dealer is not subject simply because it sold a car to the city.

But this statute contains an important qualifier: the word “solely.” In this case, the relationship between the City of Wichita and the WDDC is not that of solely customer and vendor. Instead, the city created a special tax district that is the source of substantially all WDDC’s revenue, and the existence of the district must be renewed by the city soon. The WDDC performs a governmental function that some cities decide to keep in-house. The WDDC has only one “customer,” to my knowledge, that being the City of Wichita.

Furthermore, the revenue that the WDDC receives each year is dependent on the property tax collected in the special taxing district.

The only reasonable conclusion to draw is that in terms of both funding and function, the WDDC is effectively a branch of Wichita city government.

The refusal of the city’s legal department to acknowledge these facts and concede that the WDDC is a public agency stands reason on its head. It’s also contrary to the expressly stated public policy of the state of Kansas. It’s an intolerable situation that cannot be allowed to exist.

Mr. Mayor and members of the council, it doesn’t take a liberal application of the Kansas Open Records Act to correct this situation. All that is required is to read the law and follow it. That’s what I’m asking this body to do: ask the city legal department to comply with the clear language and intent of the Kansas Open Records Act.

The following year when WDDC’s contract was before the council for renewal, I asked that the city, as part of the contract, agree that WDDC is a public agency as defined in Kansas law. (Video is at Kansas Open Records Act at Wichita City Council.) Then-council member Paul Gray, after noting that he had heard all council members speak in favor of government transparency, said that even if WDDC is not a public agency under the law, why can’t it still proceed and fulfill records requests? This is an important point. The Kansas Open Records Act contains many exclusions that agencies use to avoid releasing records. But agencies may release the records if they want.

Any council member could have made the motion that I asked for. But no one, including Gray, former council member Sue Schlapp, former member Jim Skelton (now on the Sedgwick County Commission), Mayor Carl Brewer, and council members Jeff Longwell (district 5, west and northwest Wichita), Janet Miller (district 6, north central Wichita), and Lavonta Williams (district 1, northeast Wichita) would make a motion to increase government transparency and citizens’ right to know. Wichita city manager Robert Layton offered no recommendation to the council.

Last year I appeared again before the council to ask that Go Wichita agree that it is a public agency as defined in the open records act. Randy Brown, who is chair of the Kansas Sunshine Coalition for Open Government and former opinion page editor of the Wichita Eagle was at the meeting and spoke on this matter. In his remarks, Brown said “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”

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

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

Discussion on this matter revealed a serious lack of knowledge by some council members regarding the Kansas Open Records Act. In remarks from the bench James Clendenin (district 3, southeast and south Wichita) asked the city manager a series of questions aimed at determining whether the city was satisfied with the level of service that Go Wichita has provided. He then extended that argument, wondering if any company the city contracts with that is providing satisfactory products or service would be subject to “government intrusion” through records requests. Would this discourage companies from wanting to be contractors?

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

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

Pete Meitzner (district 2, east Wichita) asked that there might be a workshop to develop a policy on records requests. He expressed concern that departments might be overwhelmed with requests from me that they have to respond to in a timely fashion, accusing me of “attempt to bury any of our departments in freedom of information acts [sic].” Such a workshop would probably be presented by Wichita City Attorney Gary Rebenstorf. His attitude towards the open records law is that of hostility, and is not on the side of citizens.

In making this argument, Mr. Meitzner might have taken the time to learn how many records requests I’ve made to the city. The answer, to the best of my recollection, is that I made no requests that year to the city citing the open records act. I have made perhaps a half-dozen informal requests, most of which I believe were fulfilled consuming just a few moments of someone’s time.

As to Meitzner’s concern over the costs of fulfilling records requests: The law allows for government and agencies to charge fees to fulfill requests. They often do this, and I have paid these fees. But more important than this, the attitude of council member Meitzner is troubling. Government should be responsive to citizens. As Randy Brown told the council, government should welcome opportunities to share information and be open and transparent.

Michael O’Donnell (district 4, south and southwest Wichita) made a motion that the contract be approved, but amended that Go Wichita will comply with the Kansas Open Records Act. That motion didn’t receive a second.

Brown and I appeared on the KAKE Television public affairs program This Week in Kansas to discuss this matter. Video is at In Wichita, disdain for open records and government transparency.

Enforcement of Kansas Open Records Act

In Kansas, when citizens believe that agencies are not complying with the Kansas Open Records Act, they have three options. One is to ask the Kansas Attorney General for help. But the policy of the Attorney General is to refer all cases to the local District Attorney, which is what I did. The other way to proceed is for a citizen to pursue legal action at their own expense.

After 14 months, Sedgwick County DA Nola Foulston’s office decided in favor of the governmental agencies. See Sedgwick County DA Response to KORA Request to Wichita Downtown Development Corporation.

When newspapers have their records requests refused, they usually give publicity to this. The Wichita Eagle is aware of my difficulties with records requests in Wichita, as their reporters have attended a number of meetings where my records requests were discussed, sometimes at length. But so far no coverage of an issue that, were the newspaper in my shoes, would undoubtedly covered on the front page. Something tells me that KPI won’t get any coverage, either.

Additional information on this topic is at:

Wichita Mayor Carl Brewer on role of government

When President Barack Obama told business owners “You didn’t build that,” it set off a bit of a revolt. Those who worked hard to build businesses didn’t like to hear the president dismiss their efforts.

Underlying this episode is a serious question: What should be the role of government in the economy? Should government’s role be strictly limited, according to the Constitution? Or should government take an activist role in managing, regulating, subsidizing, and penalizing in order to get the results politicians and bureaucrats desire?

Historian Burton W. Folsom has concluded that it is the private sector — free people, not government — that drives innovation: “Time and again, experience has shown that while private enterprise, carried on in an environment of open competition, delivers the best products and services at the best price, government intervention stifles initiative, subsidizes inefficiency, and raises costs.”

But some don’t agree. They promote government management and intervention into the economy. Whatever their motivation might be, however it was they formed their belief, they believe that without government oversight of the economy, things won’t happen.

But in Wichita, it’s even worse. Without government, it is claimed that not only would we stop growing, economic progress would revert to a previous century.

Mayor Carl Brewer made these claims in a 2008 meeting of the Wichita City Council.

In his remarks (transcript and video below), Brewer said “if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.”

When I heard him say that, I thought he’s just using rhetorical flair to emphasize a point. But later on he said this about those who advocate for economic freedom instead of government planning and control: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

Brewer’s remarks are worse than “You didn’t build that.” The mayor of Wichita is telling us you can’t build that — not without government guidance and intervention, anyway.

Many people in Wichita, including the mayor and most on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

This tradition of entrepreneurship is disappearing, replaced by the public-private partnership and programs like Visioneering Wichita, sustainable communities, Greater Wichita Economic Development Coalition, Regional Economic Area Partnership (REAP), and rampant cronyism. Although when given a chance, voters are rejecting cronyism.

We don’t have long before the entrepreneurial spirit in Wichita is totally subservient to government. What can we do to return power to the people instead of surrendering it to government?

Wichita Mayor Carl Brewer, August 12, 2008: You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.

Wichita revises economic development policy

The City of Wichita has passed a revision to its economic development policies. Instead of promoting economic freedom and a free-market approach, the new policy gives greater power to city bureaucrats and politicians, and is unlikely to produce the economic development that Wichita needs. Sedgwick County will also consider adopting this policy.

The city wants to have policies that everyone can understand, but it also wants flexibility to waive policies and guidelines in light of mitigating factors.

Here’s an illustration of how difficult it is to adhere to policies. The draft proposal of the new economic development policy states: “The ratio of public benefits to public costs, each on a present value basis, should not be less than 1.3 to one for both the general and debt service funds for the City of Wichita; for Sedgwick County should not be less than 1.3 overall.”

The policy also states that if the 1.3 to one threshold is not met, the incentive could nonetheless be granted if two of three mitigating factors are found to apply. But there is a limit, according to the policy: “Regardless of mitigating factors, the ratio cannot be less than 1.0:1.”

Last August the city council passed a multi-layer incentive package for Douglas Place, which is better known as the Ambassador Hotel and environs. Here’s what the material accompanying the letter of intent that the council passed on August 9, 2011 held: “As part of the evaluation team process, the WSU Center for Economic Development and Business Research studied the fiscal impact of the Douglas Place project on the City’s General Fund, taking into account the requested incentives and the direct, indirect and induced generation of new tax revenue. The study shows a ratio of benefits to costs for the City’s General Fund of 2.62 to one.

So far, so good. 2.62 is greater than 1.3. But the policy applies to both the general fund and the debt service fund. So what about the impact to the debt service fund? Here’s the complete story from the WSU CEDBR report:

                                   Cost-benefit ratio
City Fiscal Impacts General Fund         2.63
City Fiscal Impacts Debt Service         0.83
City Fiscal Impacts                      0.90

The impact on the debt service fund is negative, and the impact in total is negative. (A cost-benefit ratio of less than one is “negative.”)

Furthermore, the cost of the Ambassador Hotel subsidy program to the general fund is $290,895, while the cost to the debt service fund is $7,077,831 — a cost factor 23 times as large.

So does the city have the wherewithal to stick to the policies it formulates? In my experience, not always. In this case, the city didn’t make this negative information available to the public. It was made public only after I requested the report from WSU CEDBR. It is not known whether council members were aware of this information when they voted.

There are, however, other factors that may allow the city to grant an incentive: “In addition to the above provisions, the City Council and/or County Commission may consider the following information when deciding whether to approve an incentive.” A list of 12 factors follows, some so open-ended that the city can find a way to approve almost any incentive it wants.

At yesterday’s city council meeting, when explaining the policy to the council, Wichita economic development chief Allen Bell said there should be “rational criteria” for when exceptions can be considered. We should also ask for truthfulness and complete disclosure, including negative factors.

When considering cost-benefit ratios, we also need to realize that the “benefits” in the calculation are in the form of increased tax revenue paid to the city, county, etc. There is no consideration of actually rewarding the taxpayers that pay for — and assume the risk of — economic development incentives. Furthermore, these benefits are not like profits that business firms earn. Instead, they are in the form of taxes that government takes.

Speculative industrial buildings

A new feature of the policy implements property tax forgiveness for speculative industrial buildings. The proposed plan had a formula that grants a higher percentage of tax forgiveness as building size increases, but the council eliminated that and voted a 100 percent tax abatement for all buildings larger than 50,000 square feet.

Given tax costs and industrial building rents, this policy gives these incentivized buildings a cost advantage of about 20 percent over competitors. That’s very high, and makes it difficult for existing buildings to compete. Probably no one will build these buildings unless they qualify for and receive this incentive.

While the city hopes that these incentivized buildings will generate new jobs in Wichita, there appears to be nothing in the policy that prevents existing companies in Wichita from moving to these buildings. This simply moves jobs from one location to another, and would harm existing landlords.

While the policy was designed to encourage large buildings instead of small, there appears to be no limitation on the size of space someone can rent. A building 100,000 square feet in size gets 100 percent tax abatement. But the space could be rented out in smaller parcels to multiple tenants, making it easy to steal local tenants from another landlord.

Finally, are pre-built facilities really necessary? Wind energy firms in Newton and Hutchinson built their plants from ground up.

Tax costs

Since many of the economic development incentives involve relief from paying taxes, we have to ask whether our tax levels and tax policies are discouraging business investment. Now we have an answer.

This year the Tax Foundation released a report that examines the tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. Wichita was cited in the report, and the city did not do well. See Kansas and Wichita lag the nation in tax costs.

Wichita’s record on economic development

Earlier this year Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. The shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

In his 2012 State of the City address, Wichita Mayor Carl Brewer took credit for creating a similar percentage of jobs in Wichita.

Rarely mentioned are the costs of creating these jobs — the costs of the incentives and the cost of the economic development bureaucracy. These costs have a negative economic impact on those who pay them, meaning that economic activity and jobs are lost somewhere else in order to pay for the incentives.

Also, at least some of these jobs would have been created without the efforts of GWEDC. All GWEDC should take credit for is the marginal activity that it purportedly created. Government usually claims credit for all that is good, however.

The targeted economic development efforts of governments like Wichita and Sedgwick County fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. In the case of the Wichita and Sedgwick County policy, do we really know which industries should be targeted? Are we sure about the list of eligible business activities that subsidies can be used to pay? Is 1.3 to one really the benchmark we should seek, or we be better off and have more jobs if we insisted on 1.4 to one or relaxed the requirement to 1.2 to one?

This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita and other cities engage in: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs and other economic development programs is an example of precisely the wrong policy.

We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances. Wichita and Sedgwick County are moving in the wrong direction.

Wichita-area economic development policy changes proposed

The City of Wichita and Sedgwick County are considering a revision to their economic development policies. Instead of promoting economic freedom and a free-market approach, the proposed policy gives greater power to city bureaucrats and politicians, and is unlikely to produce the economic development that Wichita needs.

A new feature of the proposed policy implements property tax forgiveness for speculative industrial buildings, with a formula that grants a higher percentage of tax forgiveness as building size increases. And, in a stroke of pure bureaucratic central planning, the ceilings of these buildings must be at least 28 feet high.

The policy requires that projects have an estimated ratio of public benefits to public costs of at least 1.3 to 1, although there are factors that allow exceptions. This ratio should be met for both the city’s general fund, and its debt service fund. This — if the city actually enforces this — would be a welcome change. But within the last year, the city ignored a large negative cost-benefit ratio for the Ambassador Hotel, and instead used a positive ratio for the city’s general fund. See Fact checking the Wichita Ambassador Hotel campaign.

Wichitans also need to realize that the “benefits” in the calculation are in the form of increased tax revenue paid to the city, county, etc. There is no consideration of actually rewarding the taxpayers that pay for — and assume the risk of — economic development incentives.

There is also the curious focus on jobs that pay above-average wages. But what about workers who don’t have the skills to earn above-average wages? Shouldn’t they be able to benefit from the city’s economic development efforts?

There is also the focus on exports: “A ‘Value-Added Job’ produces goods and/or services that are sold predominately outside of the MSA. Importing wealth into the community through value added jobs grows the local economy. Whereas non-value-added jobs typically re-circulate wealth within the community.” This is reminiscent of mercantilism, an economic strategy where exports are prized and imports are discouraged. It ignores the benefit that Wichitans receive from trading with themselves.

There are also targeted industries and a list of eligible business activities.

Clawbacks — the recovery of incentives if a company fails to live up to its agreed-to goals — are important in the new proposed policy. But the city has had clawbacks in effect, in the form of personal guarantees from TIF developers, for example. But last year the city decided not to enforce that agreement, and instead refinanced the debt at credit risk to the city.

The record on economic development

Earlier this year Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. The shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

In his 2012 State of the City address, Brewer took credit for creating a similar percentage of jobs in Wichita.

Rarely mentioned are the costs of creating these jobs. These costs have a negative economic impact on those who pay these costs. This means that economic activity and jobs are lost somewhere else in order to pay for the incentives.

Also, at least some of these jobs would have been created without the efforts of GWEDC. All GWEDC should take credit for is the marginal activity that it purportedly created. Government usually claims credit for all that is good, however.

Danger going forward

The danger we in the Wichita area face is the overwhelming urge of politicians to be seen doing something. For example, in response to the departure of Boeing, Wichita Mayor Carl Brewer called for the community to “launch an aggressive campaign of job recruitment and retention.”

It is likely that we will become susceptible to large-scale government interventions in an attempt to gain new jobs. Our best course would be to take steps to make Kansas and Wichita an inviting place for all firms to do business. The instinct of politicians and bureaucrats, however, is to take action, usually in the form of targeted incentives as a way to spur economic development.

We’ve seen the disappointing results — not only with Boeing, but also in a report showing that Wichita has declined in economic performance compared to other areas.

These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. In the case of the Wichita and Sedgwick County policy, do we really know which industries should be targeted? Are we sure about the list of eligible business activities? Is 1.3 to 1 really the benchmark we should seek, or we be better off and have more jobs if we insisted on 1.4 to 1 or relaxed the requirement to 1.2 to 1?

This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

Embracing Dynamism: The Next Phase in Kansas Economic Development Policy

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita and other cities engage in: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs and other economic development programs is an example of precisely the wrong policy.

We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances. Wichita and Sedgwick County are moving in the wrong direction.

Tax costs block progress in Kansas

If we in Kansas and Wichita wonder why our economic growth is slow and our economic development programs don’t seem to be producing results, there is now data to answer the question why: Our tax costs are high — way too high.

Recently the Tax Foundation released a report that examines the tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms.

The report is Location Matters: A Comparative Analysis of State Tax Costs on Business.

The study is unusual in that it looks at the impact of states’ tax burden on mature and new firms. This, according to report authors, “allows us to understand the effects of state tax incentives compared to a state’s core tax system.” In further explanation, the authors write: “The second measure is for the tax burden faced by newly established operations, those that have been in operation less than three years. This represents a state’s competitiveness after we have taken into account the various tax incentive programs it makes available to new investments.”

The report also looks at the tax costs for specific types of business firms. For Kansas, some individual results are better than overall, but still not good. For a mature corporate headquarters, Kansas ranks 30th. For locating a new corporate headquarters — one that would benefit from tax incentive programs — Kansas ranked 42nd. For a mature research and development facility, 46th; while new is ranked 49th. For a mature retail store, 38th, while new is ranked 45th.

There are more categories. Kansas ranks well in none.

The report also looked at two cities in each state, a major city and a mid-size city. For Kansas, the two cities are Wichita and Topeka.

Among the 50 cities chosen, Wichita ranks 30th for a mature corporate headquarters, but 42nd for a new corporate headquarters.

For a mature research and development facility, Wichita ranks 46th, and 49th for a new facility.

For a mature and new retail store, Wichita ranks 38th and 45th, respectively.

For a mature and new call center, Wichita ranks 43rd and 47th, respectively.

In its summary for Kansas, the authors note the fecklessness of Kansas economic development incentives: “Kansas offers among the most generous property tax abatements and investment tax credits across most firm types, yet these incentives seem to have little impact on the state’s rankings for new operations.”

Kansas tax cost compared to neighbors. Click here for a larger version.

It’s also useful to compare Kansas to our neighbors. The comparison is not favorable for Kansas.

More evidence of failure

Recently the Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. This report shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

In his 2012 State of the City address, Wichita Mayor Carl Brewer took credit for creating a similar percentage of jobs in Wichita.

The report by the Tax Foundation helps us understand why the economic development efforts of GWEDC, Sedgwick County, and Wichita are not working well: Our tax costs are too high.

While economic development incentives can help reduce the cost of taxes for selected firms, incentives don’t help the many firms that don’t receive them. In fact, the cost of these incentives is harmful to other firms. The Tax Foundation report points to this harm: “While many state officials view tax incentives as a necessary tool in their state’s ability to be competitive, others are beginning to question the cost-benefit of incentives and whether they are fair to mature firms that are paying full freight. Indeed, there is growing animosity among many business owners and executives to the generous tax incentives enjoyed by some of their direct competitors.”

But there is one incentive that can be offered to all firms: Reduce tax costs for everyone. The policy of reducing tax costs for the selected few is not working. This “active investor” approach to economic development is what has led companies in Wichita and Kansas escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita and Kansas has been pursuing and which Wichita’s Brewer wants to step up: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs is an example of precisely the wrong policy.

We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances, except to reduce the cost of government for everyone.

Cabela’s opening a reminder of failure in Wichita

Yesterday’s opening of a Cabela’s store in Wichita was celebrated as a great success, but the circumstances of the store’s birth should remind us of the failure of Wichita’s economic development strategies and efforts.

We have to ask why Wichita is not able to attract retailers like Cabela’s without offering some sort of subsidy. In the current example, we are allowing Cabela’s to add 1.2 cents per dollar extra sales tax. Cabela’s keeps one cent, and 0.2 cents will be used to build a new highway exit ramp — one not seriously contemplated until Cabela’s wanted it.

This turnover of public taxation to private interests through the community improvement district (CID) program is contrary to good public policy. The power to tax is one of the most important — and harmful — functions of government. It ought to be used to pay for public goods, instead of being turned over to private benefit, as it has for Cabela’s.

At the opening ceremony, I spoke with Kansas Governor Sam Brownback and reminded him that just two weeks ago Wichita voters spoke out against special tax deals similar to the deal Cabela’s received. What is the future of these special tax deals? “I think the better approach is broad tax reduction,” he said.

While the governor was referring primarily to income taxes, there is strong evidence that Kansas needs to reduce all forms of business tax costs. The release of a report from the Tax Foundation ranking the states in business tax costs brought that into sharp focus two weeks ago. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms.

This raises the question: Was the CID tax giveaway truly necessary for Cabela’s to open, or is Cabela’s business model so flimsy that it requires corporate welfare to survive, or is Cabela’s simply an opportunistic company, willing to feed off taxpayers as another source of profit?

Community Improvement Districts

CIDs allow merchants to apply a higher sales tax rate to sales. The money from shoppers is collected under the pretense of government authority, but it is earmarked for the exclusive benefit of the owners of property in the CID. This is perhaps the worst aspect of CIDs. Landlord and merchants already have a way to generate revenue from their customers under free exchange: through the prices posted or advertised for their products, plus consumers’ awareness of the sales tax rates that prevail in a state, county, and city.

But most consumers may never be aware that they paid an extra tax for the exclusive benefit of the CID. If they happen to calculate the sales tax they paid, they may conclude that the high CID rate is charged all across Wichita — thereby staining our reputation.

The Wichita city council had a chance to provide transparency to shoppers by requiring merchants in CIDs to post signs informing shoppers of the amount of extra tax to be changed in the store. But CID advocates got the city council to back down from that requirement. CID advocates know how powerful information is, and they along with their allies on the city council realized that signage with disclosure would harm CID merchants. Council Member Sue Schlapp succinctly summarized the subterfuge that must accompany the CID tax when she said: “This is very simple: If you vote to have the tool, and then you vote to put something in it that makes the tool useless, it’s not even any point in having the vote, in my opinion.” She voted against the signage requirement.

Jeff Longwell (district 5, west and northwest Wichita), in explaining his vote against the signage requirement with the tax rate displayed, said he thought this information would be confusing to shoppers.

Are incentives necessary?

The age-old question is whether economic activity will occur without economic development incentives. Governor Brownback said it is a “legitimate question” as to whether Cabela’s would be here anyway.

In the case of Cabela’s, the store might not be in Wichita without incentives, as the company has shown itself to be especially eager and adept at gathering corporate welfare paid for by taxpayers. One writer concluded “For its part, Cabela’s is unabashed about its dependence on corporate socialism, even declaring in its annual report that grabbing public money is key to its business plan.”

We see elected officials and economic development bureaucracies eager to create jobs, so much so that they offer incentives that are not necessary. This leads to a cycle of dependency on city hall for economic development. That’s good for politicians and bureaucrats, but bad for everyone else.

It would be one thing if our economic development activities were working. But there’s evidence that they’re not. Recently we learned that the job-creating activities of Greater Wichita Economic Development Coalition last year resulted in a number of jobs barely more than one-half of one percent of the labor force.

That’s not a very good job. But keeping a website up to date ought to be easy. The GWEDC site, however, is terribly out of date. On a page titled Recent Relocations Highlights, the most recent item is from 2009. Have we not had any relocations since then, or does GWEDC simply not care to update and maintain its website?

A recent Wichita Eagle article, (Why isn’t Wichita winning projects?, January 22, 2012 Wichita Eagle), after listing four items economic development professionals say Wichita needs but lacks, reported “The missing pieces have been obvious for years, but haven’t materialized for one reason or another.”

If these pieces are truly needed and have been obviously missing for years: Isn’t that a startling assessment of failure of Wichita’s economic development regime?

In Wichita, Epic Sports highlights need for reform

Last week the Tax Foundation and KMPG issued a report that gives us some insight as to why this city council may feel it is necessary to award economic development incentives like the one being considered for Epic Sports today. According to the report, our tax costs on business are high — way too high.

The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. The report also had some separate figures for Wichita, and the results were similar.

While many of the problems with high tax costs on business are state issues, the city’s legislative agenda calls for continued authority to use existing economic development incentives. In particular, the city this year has testified for the continued use of historic preservation tax credits. Spending on these incentive programs reward the lucky few, but increases the cost of government, and therefore taxes, for everyone else.

We need to realize that the city’s “active investor” method of targeted economic development isn’t working.

As evidence, recently the Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. It claimed to have to have created 1,509 jobs in Sedgwick County during 2011. But that’s only 0.59 percent of the county’s labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts, which were at great cost.

There is one incentive that can be offered to all firms: Reduce tax costs for all. The Tax Foundation report should be a shrill wake up call to the city and state that we must change our ways.

But the action the council is considering today moves us in the opposite direction. These incentives have a cost. Other businesses have to pay. That motivates many to seek incentives from the city and state, which in turn raises the cost of government and taxes. It’s a spiral that leads to ever-increasing control of economic activity by city hall.

We in Wichita need to build a dynamic economy in Wichita that is based on free enterprise and entrepreneurship rather than a government handout. This is the way we can have organic and sustainable economic development. We can start on this path today by saying no to this incentive package.

Kansas and Wichita lag the nation in tax costs

If we in Kansas and Wichita wonder why our economic growth is slow and our economic development programs don’t seem to be producing results, there is now data to answer the question why: Our tax rates are high — way too high.

This week the Tax Foundation released a report that examines the tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms.

The report is Location Matters: A Comparative Analysis of State Tax Costs on Business.

The study is unusual in that it looks at the impact of states’ tax burden on mature and new firms. This, according to report authors, “allows us to understand the effects of state tax incentives compared to a state’s core tax system.” In further explanation, the authors write: “The second measure is for the tax burden faced by newly established operations, those that have been in operation less than three years. This represents a state’s competitiveness after we have taken into account the various tax incentive programs it makes available to new investments.”

The report also looks at the tax costs for specific types of business firms. For Kansas, some individual results are better than overall, but still not good. For a mature corporate headquarters, Kansas ranks 30th. For locating a new corporate headquarters — one that would benefit from tax incentive programs — Kansas ranked 42nd. For a mature research and development facility, 46th; while new is ranked 49th. For a mature retail store, 38th, while new is ranked 45th.

There are more categories. Kansas ranks well in none.

The report also looked at two cities in each state, a major city and a mid-size city. For Kansas, the two cities are Wichita and Topeka.

Among the 50 cities chosen, Wichita ranks 30th for a mature corporate headquarters, but 42nd for a new corporate headquarters.

For a mature research and development facility, Wichita ranks 46th, and 49th for a new facility.

For a mature and new retail store, Wichita ranks 38th and 45th, respectively.

For a mature and new call center, Wichita ranks 43rd and 47th, respectively.

In its summary for Kansas, the authors note the fecklessness of Kansas economic development incentives: “Kansas offers among the most generous property tax abatements and investment tax credits across most firm types, yet these incentives seem to have little impact on the state’s rankings for new operations.”

Kansas tax cost compared to neighbors. Click here for a larger version.

It’s also useful to compare Kansas to our neighbors. The comparison is not favorable for Kansas.

More evidence of failure

Recently the Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. This report shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

In his 2012 State of the City address, Wichita Mayor Carl Brewer took credit for creating a similar percentage of jobs in Wichita.

The report by the Tax Foundation helps us understand why the economic development efforts of GWEDC, Sedgwick County, and Wichita are not working well: Our tax costs are too high.

While economic development incentives can help reduce the cost of taxes for selected firms, incentives don’t help the many firms that don’t receive them. In fact, the cost of these incentives is harmful to other firms. The Tax Foundation report points to this harm: “While many state officials view tax incentives as a necessary tool in their state’s ability to be competitive, others are beginning to question the cost-benefit of incentives and whether they are fair to mature firms that are paying full freight. Indeed, there is growing animosity among many business owners and executives to the generous tax incentives enjoyed by some of their direct competitors.”

But there is one incentive that can be offered to all firms: Reduce tax costs for everyone. The policy of reducing tax costs for the selected few is not working. This “active investor” approach to economic development is what has led companies in Wichita and Kansas escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita and Kansas has been pursuing and which Wichita’s Brewer wants to step up: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs is an example of precisely the wrong policy.

We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances, except to reduce the cost of government for everyone.

Wichita economic development isn’t working

Recently the Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. That report, along with a Wichita Eagle article from January, tells us that the traditional methods of economic development used in the Wichita area isn’t working very well.

In the Eagle article, (Why isn’t Wichita winning projects?, January 22, 2012 Wichita Eagle), after listing four items economic development professionals say Wichita needs but lacks, the reporter wrote “The missing pieces have been obvious for years, but haven’t materialized for one reason or another.”

If these pieces are truly needed and have been obviously missing for years: Isn’t that a startling assessment of failure of Wichita’s economic development regime?

While Wichita Mayor Carl Brewer was quoted in the article as saying “You hear a lot from the loud minority,” the fact is that the minority rarely wins. Six of seven members of the Wichita City Council will vote for almost any giveaway to any company, no matter how unnecessary or unwise the subsidy program is.

With two of its five members having a realistic view of government’s power to influence economic development, it’s a little tougher to push programs through the Sedgwick County Commission. But most programs make it through or don’t need the county’s participation.

The GWEDC report also shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

In his 2012 State of the City address, Brewer took credit for creating a similar percentage of jobs in Wichita.

Not mentioned are the costs of creating these jobs. These costs have a negative economic impact on those who pay these costs. This means that economic activity and jobs are lost somewhere else in order to pay for the incentives.

Also, at least some of these jobs would have been created without the efforts of GWEDC. All GWEDC should take credit for is the marginal activity that it purportedly created. Government usually claims credit for all that is good, however.

GWEDC website stale and out-of-date

If GWEDC is looking for ways to improve its efforts in marketing Wichita, it might start with its own website. While the site features a high level of design sophistication, examining its contents reveals a lack of attention being paid to the site.

For example, on a GWEDC page titled Recent Relocations Highlights, the most recent item is from 2009.

The “News” page holds as its most current story one encouraging attendance at a conference that took place in 2010. The second and final story on this page notifies us that someday in the future there will be an Intrust Bank Arena in downtown Wichita. That arena has now been open for two years.

The site also promotes an RFP (request for proposal) with a deadline in 2009 — three years ago.

Anyone who comes across the GWEDC site would conclude from this negligence that this is an organization — and by extension, a city — that simply doesn’t care about its online presence.

Going forward

The danger we in Kansas, and specifically the Wichita area, face is the overwhelming urge of politicians to be seen doing something. For example, in response to the departure of Boeing, Wichita Mayor Carl Brewer called for the community to “launch an aggressive campaign of job recruitment and retention.”

It is likely that we will become susceptible to large-scale government interventions in an attempt to gain new jobs. Our best course would be to take steps to make Kansas and Wichita an inviting place for all firms to do business. The instinct of politicians such as Brewer, however, is to take action, usually in the form of targeted incentives as a way to spur economic development. GWEDC is the agency responsible for this.

We’ve seen the disappointing results — not only with Boeing, but also in a report showing that Wichita has declined in economic performance compared to other areas.

These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This, however, does not stop governments from creating policies for the awarding of incentives. It also doesn’t stop the awarding of incentives willy-nilly without a policy, as the Wichita City Council has done for a hotel.

This “active investor” approach to economic development is what has led to Boeing and other companies escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita is sure to undertake in response to the loss of Boeing: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs is an example of precisely the wrong policy.

We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

Wichita falls in economic performance ranking

Recently the Milken Institute released a report examining the economic performance of metropolitan areas in the United States. The report, titled Best-Performing Cities 2011, describes itself as “The annual Best-Performing Cities index provides an objective, comprehensive measure of economic performance across metropolitan areas of the country.”

Specifically, this report “measures growth in jobs, wages and salaries, and technology output over a five-year span (2005–2010 for jobs and technology output and 2004-2009 for wages and salaries) to adjust for extreme variations in business cycles.”

On the composition of the index, the report states: “Employment growth is weighted most heavily in the index because of its critical importance to community vitality. Wage and salary growth measures the quality of the jobs being created and sustained. Technology output growth is another key element of economic vibrancy.”

Among the top 200 metropolitan areas, Wichita ranked 104th in overall performance this year, down from 72nd the year before.

In the category of one-year job growth from 2009 to 2010, Wichita ranked 199th out of the 200 largest metropolitan areas. For five-year job growth Wichita did better, ranking 63rd of 200.

Interestingly, Wichita ranks high — ninth out of 200 — in a measure of high-technology industry concentration. The description of this measure in which Wichita ranks highly is: “High-tech location quotients (LQs), which measure the concentration of the technology industry in a particular metro relative to the national average, are included to indicate a metro’s participation in the knowledge-based economy.”

Reports such as these can be useful, but can also be misunderstood or misapplied — or sometimes incorrect. For example, Wichita isn’t usually thought of as a center of concentration in high-tech industry. In a 2011 ranking of the best cities for high tech jobs produced by Joel Kotkin, Wichita didn’t make the list, which included 51 cities. That list was based on “Employment in 45 high technology manufacturing, services, and software industry sectors.”

Some will dismiss Wichita’s fall in rankings because of our heavy reliance on aviation, particularly business aviation, which was hit very hard by the recession.

Wichita — and Kansas — can take note, however, of the high performance by cities in Texas. Four of the top five are in Texas, as are nine of the top 25. There is a movement in Kansas to reduce the state’s income tax rates to make Kansas more attractive to business. Texas has no state income tax.

We should also note that Wichita’s ranking fell at a time of vigorous economic development efforts by Wichita and Sedgwick County, the major components of the Wichita metropolitan area. In his State of the City address this year, Wichita Mayor Carl Brewer spoke about Wichita’s economic development efforts. The mayor said that the city’s efforts saved 745 jobs and created 435 jobs, for a total impact of 1,180 jobs. To place those numbers in context, we note that American Community Survey data from the U.S. Census Bureau indicates the labor force in Wichita is 191,760 persons. This means that the economic development efforts of the City of Wichita affected a number of jobs equivalent to 0.6 percent of the city workforce.

This small number of jobs impacted by the city’s economic development initiatives is dwarfed by other economic events. Additionally, these efforts by the city are counterproductive — if our interest is creating a dynamic economy in Wichita. Analysis by the Kauffman Foundation finds that it is new firms — young firms, in other words — that are the primary drivers of job creation. But the economic development policies of cities like Wichita are definitely biased toward older, established firms. The cost of these economic development efforts, which are paid for by everyone — including young businesses firms struggling to grow — means that we prop up unproductive companies at the expense of the type of firms we need to really grow the Wichita economy.

Wichita is not the only component of the Wichita metropolitan area, but is certainly the driving force in the region’s economy.

Reports such as these are evidence that the economic development policies of Wichita and Sedgwick County are not working well. We need to distinguish ourselves somehow and produce greater economic growth. Kansas Governor Sam Brownback released an economic development plan that sounded some of the right notes, but in practice his administration is relying on more of the same targeted subsidies that most states and cities use.

Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business has made a convincing case that Kansas needs to move away from the “active investor” approach to economic development. This is where government decides which companies will receive special treatment, be it in the form of tax abatements, tax credits, grants, tax increment financing, community improvement district special taxes, and other forms of subsidy. Being an “active investor” is the approach of the City of Wichita.

In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

Later, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita and Kansas rely on for economic development: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

We need business and political leaders in Wichita and Kansas who can see beyond the simple imagery of a groundbreaking ceremony and can assess the effect of our failing economic development policies on the entire community. Unfortunately, we don’t have many of these.

Wichita open records issue buried

Update: This agenda item has been moved from the consent agenda to a regular agenda.

This week the Wichita City Council will decide whether to issue another contract to Go Wichita Convention and Visitors Bureau. The city should not issue this contract until an issue regarding the Kansas Open Records Act is resolved.

I have asked for records from Go Wichita Convention and Visitors Bureau. It refused to comply. Its reason was that it believes it is not a “public agency” as defined in the KORA. When citizens have problems with agencies refusing to comply with the law, one avenue citizens may take is to ask the local district attorney to look into the matter. When I did this, the Sedgwick County District Attorney’s office decided in favor of Go Wichita, using some contorted legal reasoning that few believe would survive judicial scrutiny. It would cost thousands of dollars for the next step.

Why Go Wichita Convention and Visitors Bureau should be subject to the Kansas Open Records Act

Here’s why the Go Wichita Convention and Visitors Bureau is a public agency subject to the Kansas Open Records Act. KSA 45-217 (f)(1) states: “‘Public agency’ means the state or any political or taxing subdivision of the state or any office, officer, agency or instrumentality thereof, or any other entity receiving or expending and supported in whole or in part by the public funds appropriated by the state or by public funds of any political or taxing subdivision of the state.”

The Kansas Attorney General’s office offers additional guidance: “A public agency is the state or any political or taxing subdivision, or any office, officer, or agency thereof, or any other entity, receiving or expending and supported in whole or part by public funds. It is some office or agency that is connected with state or local government.”

Now, apply these guidelines to Go Wichita: The most recent IRS Form 990 that is available (for the year 2009) states that the agency had total revenue of $2,651,600, with $2,266,300 coming from “fees from government agencies.” This is government, through taxation, providing 85 percent of its total income.

If we consider only “program service revenue,” which was $2,467,764, the government-funded portion of its income is 92 percent.

Does this count as being supported “in part” by public funds? Absolutely.

The Kansas Open Records Act has an exception, but I and many others believe it should not apply to this agency. There’s no rational or reasonable basis for the this agency’s assertion that it is not a public agency subject to the Kansas Open Records Act.

We should also look at the plain language of the Kansas Open Records Act, observing the intent of the Kansas Legislature as embodied in the statute: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.”

Wichita claims transparency

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

I submit that in order to actually provide the level of transparency that Mayor Brewer proclaims the city should be providing, quasi-governmental agencies that are supported almost totally by tax revenue — like Go Wichita Convention and Visitors Bureau, the Wichita Downtown Development Corporation, and Greater Wichita Economic Development Coalition — need to be subject to the Kansas Open Records Act.

Until this happens, the message from the City of Wichita is clear: Accountability and transparency is handled on the city’s terms, not on citizens’ terms and the law.

Why open records are important

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

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

Issue is buried in consent agenda

Twice last year I appeared before the city council when the city was considering renewal of its contract with Wichita Downtown Development Corporation and Go Wichita Convention and Visitors Bureau. I asked the mayor and council that as a condition of renewing the contracts, the city ask that these agencies agree that they are public agencies as defined in the Kansas Open Records Act.

For the December 13th meeting of the Wichita City Council, the contract for Go Wichita is up for renewal again. But instead of being on a regular agenda — where it is customary for citizens to have a chance to give input to the council — the item is on a consent agenda.

A consent agenda is a group of items that are voted on with a single vote. Usually there is no discussion of the individual items on a consent agenda, unless a council member requests to “pull” an item for discussion and perhaps a vote specific to that item. Usually the items placed on consent agendas are through to be routine and non-controversial.

But a city contract for over $2 million, especially one that has been handled as a regular agenda item in years past, does not qualify as routine and non-controversial. It seems that the city wants to avoid discussion of the open records issue.

Kansas and Wichita quick takes: Wednesday September 28, 2011

Obama’s intercontinental railroad. Burton Folsom notices a recent speech by President Barack Obama that mentioned how America built the “intercontinental railroad.” Folsom grants Obama some slack for the gaffe — we all make them, after all — and explains to readers the most important lesson that should be learned from our experience building the transcontinental railroad: “… the story of the transcontinental railroads really is a great teaching tool for today. If we study the Union Pacific, the Central Pacific, and the Northern Pacific Railroads, we learn they all went broke after receiving a combined total of 61 million acres of land. And they ran the nation deep into debt, too. … federal spending on transcontinentals meant corruption, land grabs, and wasted taxpayer dollars. But wait. The Great Northern Railroad, which went from St. Paul to Seattle, never went bankrupt and was one of the best-built railroads in the United States. Why did the Great Northern succeed when the others failed? Because James J. Hill, the president, built his railroad with no federal subsidies. He built the Great Northern slowly and made each part profitable before expanding it further. … Hill made profits and never went bankrupt. Here is the lesson: that which is privately owned is properly cared for and is best positioned to create jobs and profits. When the government gets involved, profits vanish and quality declines. Therefore, the president is right. Let’s discuss railroad history and apply what we learn to the present day.” The article is Interfacing with Obama’s Intercontinental Railroad.

Alain festival starts. Today marks the first day of Jehan Alain, 1911-1940 — The American Festival, a three-day event celebrating the music of the French organist and composer, who died at the age of 29 fighting for his country against Germany in World War II. This three-day event is organized by Lynne Davis of Wichita State University. If you can attend only one event, I would suggest the opening recital to be performed by Davis at 7:30 pm tonight. The location is Wiedemann Recital Hall (map) on the campus of Wichita State University. … For more about Davis and WSU’s Great Marcussen Organ including photographs I took while climbing around the interior of the massive instrument, see my story from last year.

How business loves regulation and hates markets. In a chapter of the book Back on the Road to Serfdom: The Resurgence of Statism edited by Thomas E. Woods Jr., Timothy P. Carney writes about the cultural costs of corporatism: “Despite the widespread assumption that a free market is the ideal economy for big business, and that regulation checks the power of big business, more often the opposite is true. Regulation, by adding to the cost of doing business, disproportionately hurt smaller business and acts as a barrier to entry, keeping out new competitors. Likewise, government subsidies can be far more valuable, or at least more reliable, then income for consumers, for which businesses must continually fight with competitors. The dynamics of the lobbying game are crucial here. Bigger companies enjoy a greater advantage in Washington than they do in the market. Not only can bigger companies hire the better lobbyists — former lawmakers are top administration aides — and handout more in campaign contributions, but they also matter more to lawmakers. The more workers you employ and the more taxes you pay, the more lawmakers care about your well-being, desires, and wishes.” … Carney goes on to explain that big government enables political entrepreneurs to succeed over market entrepreneurs. And big companies are better equipped to be political entrepreneurs. So while the standard account is that Walmart kills small-town retailers, the reality is that Walmart is effective at political entrepreneurship in ways that mom-and-pop retailers can’t be. “An unbridled free market isn’t killing Mom and Pop; an untethered state is.” The effect of this is, he writes: “And so reading the market is no longer as valuable as reading the polls. Research and development is not as good an investment as political connections. A good lobbyist is now worth more than a good idea.” … While Carney is writing about the situation at the federal level, we see the same dynamic at work in Wichita, where the city Council and its surrogates such as the Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition have large power over the granting of government favors. Connections to the politicians and bureaucrats that control these organizations replaces market allocation and market decisions.

The Buffet rule won’t work. In a Cato daily podcast, Cato Institute Senior Fellow Alan Reynolds says “It doesn’t work. We tried it.” He’s referring to raising tax rates to collect more revenue from high-income earners. Reynolds explains that starting in 1986 and for the next 10 years the capital gains tax rate was 28 percent. But then President Bill Clinton lowered the rate to 20 percent, and Reynolds said that the stock market soared and the government was flush with cash. This, he said, was an example of lower tax rates increasing tax revenue. … Reynolds also explained that Berkshire Hathaway — the company Warren Buffet formed — was a tax avoidance device until 2003. As a holding company, it purchased companies that paid dividends, but Berkshire didn’t pay dividends itself. This practice avoided the higher dividends tax by converting dividends into capital gains. (Prior to 2003, dividends were taxed as ordinary income, which for most taxpayers was higher than the capital gains tax rate. Plus, capital gains can be deferred.) This purposeful design by Buffet belies his current contention that the wealthy should pay higher taxes.

Sedgwick County budget: there are ways to save

Remarks delivered to a budget hearing before the Sedgwick County Commission.

Listening to the budget hearings two weeks ago, I was struck by the reach of government into people’s lives, and to the extent that the recipients of services expect the general taxpayer to pay.

It’s one thing when we help people who are truly not able to care for themselves. While I do not believe government is the best agent for that, it’s the system we have in place for now.

For example: the g2goutside program, which offers recreational programs in the great outdoors. Is this a worthy goal? Sure, but this should not be a government program. It is recreation. Government should not be involved.

Then, a farmer said a farm bureau program helps him plan his crops and their management. Commissioners, a farm is a business. If it has need for information and management consulting advice, it should pay for its own needs, just like we expect other business firms to do.

I’m almost reluctant to say this, as these people seem to be well-meaning. But these two examples and other testimony presented that day remind me of Henry Hazlitt and what he termed the “special pleading of selfish interests.” In his book Economics in one lesson, he wrote:

While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for then plausibly and persistently.

Looking through the budget, it seems like Sedgwick County makes very little use of outsourcing. In fact, in 769 pages the word “outsource” or its variant is used only once. I would ask that the commissioners take notice of the city of Sandy Springs, Georgia, which outsources nearly everything the city does. It would take me a while to read the list of functions that the city outsources. This is not a small town; its population is over 90,000. We in Sedgwick County can do more with outsourcing as a way to improve service delivery at lower cost.

I also see no reason as to why the county should be supporting Wichita State University.

Regarding our economic development efforts: According to the recent report by the Greater Wichita Economic Development Coalition, 517 jobs were created through the combined economic development efforts in Sedgwick County. That’s an annual rate of 1,034 jobs. That sounds like a lot, but place this number in context. According to the U.S. Department of Labor, the labor force in Sedgwick County averaged 253,045 people in 2010. That means the number of jobs created by our economic development efforts amounted to 0.4 percent of the county’s labor force.

I would suggest that this amounts to mere statistical noise; a vanishingly small number which is overwhelmed by other events.

Furthermore, we find that despite the economic development incentives we’ve granted are often not really needed. We have two examples — one here and one at Wichita City Hall — where developers told this body that without incentives, their projects could not go forward. The Wichita example is relevant because it involved the city granting forgiveness of taxes that the country would otherwise collect.

In these cases, despite the insistence of developers that welfare was required for their projects, the projects went ahead without it.

Tomorrow I believe you will be dealing with another example of developer welfare given to someone at great cost to taxpayers, but now is not needed after all.

The statistics cited above, along with these three examples, show that money can be saved on our economic development efforts.

Wichita Mayor Carl Brewer: State of the City 2011

This week Wichita Mayor Carl Brewer delivered his annual “State of the City” address. While the Wichita Eagle editorial commenting on the mayor’s speech is titled “Cause to boast, hope,” a look at some of the important topics the mayor addressed will lead some to conclude otherwise.

The text of the mayor’s address may be read at several places, including here.

Economic development

Regarding Wichita’s economic development, the mayor said that the city’s efforts saved 745 jobs and created 435 jobs, for a total impact of 1,180 jobs. To place those numbers in context, we note that American Community Survey data from the U.S. Census Bureau indicates the labor force in Wichita is 191,760 persons. This means that the economic development efforts of the City of Wichita affected a number of jobs equivalent to 0.6 percent of the city workforce.

This small number of jobs impacted by the city’s economic development initiatives is dwarfed by other economic events. Additionally, these efforts by the city are counterproductive — if our interest is creating a dynamic economy in Wichita. Analysis by the Kauffman Foundation finds that it is new firms — young firms, in other words — that are the primary drivers of job creation. But the economic development policies of cities like Wichita are definitely biased toward older, established firms. The cost of these economic development efforts, which are paid for by everyone including young businesses firms struggling to grow, means that we prop up unproductive companies at the expense of the type of firms we need to really grow the Wichita economy.

In particular, the mayor’s proudest achievement — he nearly burst with pride when speaking of it — pours a large amount of state, county, and city funds into Hawker Beechcraft, an old-line company that is shrinking its employment in Kansas. This deal with Hawker Beechcraft should not be viewed as a proud moment for Wichita and Kansas. Instead, we should view this as succumbing to economic blackmail by Hawker, based on a threat that may not have been genuine. We responded by making in investment in an old-line, shrinking company, apparently the first time that the state has invested public funds in a downsizing company.

Furthermore, the investment in Hawker comes on the heels of an analysis that says Hawker should divest itself of all its lines of business except for one. The analysis paints a grim future for Hawker: “In addition, backlogs are dwindling, R&D budgets are miniscule, employee pensions are underfunded by $296 million and the prospects of paying down its long-term debt are remote. At this point, it would be a monumental task just to roll-over the debt, let alone pay it off entirely. At the root of the problem is the state of Hawker Beechcraft’s business jet product lines. … At the heart of HBC’s current strategy is the assumption that a market recovery will fix what’s ailing the company, and that is just not true. The company’s business aviation products are seriously underperforming with new products relegated to minor upgrades due to a token R&D budgets based on an across-the-board derivative strategy.”

The mayor also touted an agreement with Bombardier Learjet for the company to produce a new jet in Wichita. This deal required that the state issue bonds to raise money to give to Bombardier. The bonds will be paid off by the company’s employee withholding taxes. That’s money that would normally go to the state’s general fund. Instead, this deal raises the cost of government for everyone else.

The mayor said of these deals: “As I suggested at the time of the Hawker deal, this was a declaration that Kansas and Wichita will fight to keep its aircraft industry. As I said then, ‘You’re not going to take what’s most important to us, and that’s our aviation industry.’ Simply put, we will not lose these jobs. Period.”

Unfortunately, the mayor’s declaration is an invitation to Kansas companies of all types to seek public funds just as these two companies did, and as others have across Kansas. The result is increased costs of government and a state and city less inviting to the dynamic and innovative young companies that we now know are the engine of prosperity and job growth.

The mayor also lauded the use of “revenue bonds” used for the construction of a IMAX movie theater in west Wichita. Focusing on the bonds allowed the mayor to gloss over the large measure of property tax forgiveness — corporate welfare — granted to the Warren Theater. The theater’s owners have received corporate welfare before from the city.

Plans for downtown

On the master plan for the revitalization of downtown Wichita, the mayor said the plan will “lead us to a point where ultimately the private investment exceeds public investment by a 15 to 1 ratio.” At the time agitation for a downtown plan started two years ago, research indicated that the ratio of private to public investment in downtown was approximately one to one. It’s quite a stretch for the mayor to promise an eventual 15 to one ratio, especially since the Goody Clancy plan recently adopted by the city council calls for — over the next 20 years — $500 million in private investment supported by $100 million of public investment. That’s a five to one ratio, not the 15 to one mentioned by the mayor. Even then, it will be surprising if anything near a five to one ratio is achieved.

The mayor also promoted the decision by Cargill to build a new facility downtown as a sign of success. This facility, however, required over $2.5 million in various subsidy from state and local governments. It hardly seems a measure of proud success when companies are able to extract this level of corporate welfare in exchange for locating facilities in Wichita.

Accountability and transparency

In his address, Mayor Brewer promoted the city’s efforts in accountability and transparency, telling the audience: “We must continue to be responsive to you. Building on our belief that government at all levels belongs to the people. We must continue our efforts that expand citizen engagement. … And we must provide transparency in all that we do.”

This an instance in which the actions of the city do not match with Brewer’s rhetoric. A small example is from last fall when the city had a stakeholder meeting to discuss the city’s community improvement district policy. While the term “stakeholder” is vague and means different things to different people, you might think that such a gathering might include representatives from the community at large. Instead, the meeting was stacked almost exclusively with those who have an interest in extracting as much economic subsidy as possible from the city. Often we find that meetings of this type are designed so that no dissenting voices are present.

More importantly, the City of Wichita has failed to follow a fundamental law that provides accountability and transparency: the Kansas Open Records Act.

I have made requests for records from three quasi-governmental agencies, two of which are under the city’s direct influence: Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Coalition. Each of these organizations denied that they are public agencies as defined in the KORA, and therefore refused to fulfill my requests.

Two times last year I appeared before the city council when the city was considering renewal of its contract with Wichita Downtown Development Corporation and Go Wichita Convention and Visitors Bureau. I asked the mayor that as a condition of renewing the contracts, the city ask that the agencies follow the law. But the mayor and the city rely on an incorrect interpretation of the KORA from city attorney Gary Rebenstorf and refused to act on my request. It should be noted that Rebenstorf has been wrong several times before when issuing guidance to the council regarding the Kansas Open Meetings Act, which is similar to the Open Records Act. He’s taken the blame and apologized for these violations.

The Kansas Open Records Act in KSA 45-216 (a) states: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.” Governments in Kansas should be looking at ways to increase availability of information. Instead, the City of Wichita uses a narrow — not liberal — interpretation of the records law restrict citizen access to records. At some time I believe the city’s legal position will be shown to be wrong.

At any time the mayor could ask — and it could have been written into their contracts — that these agencies comply with the Kansas Open Records Act. The mayor’s refusal to do so indicates an attitude of accountability and transparency on the city’s terms, not on citizens’ terms and the law.

Citizen response

At many levels of government, when the chief executive makes an annual address like this, time is provided for someone to make a response, usually someone with a different point of view. This is the practice at the federal level, and also in Kansas when the governor delivers the state of the state address.

The City of Wichita ought to do the same.

Kansas and Wichita quick takes: Monday January 17, 2011

Kansas legislature website. While there has been some improvement to the Kansas Legislature website, major problems remain. Some calendars and journals are available, but not in time to be useful. … Documents like calendars and journals are presented in OpenDocument format. This is a document format that not all website visitors may be able to open on their computers. Generally, the ubiquitous Adobe pdf format is used for documents like these, as this is a useful format that nearly all computers, even mobile devices like an Iphone, can open and view. … Bills are presented in pdf format, although still in an unconventional viewing frame that reduces functionality and ease of use. … Some files are presented with file names like “sb1_00_0000.zip.odt” which might be an attempt to deliver an OpenDocument format file in zip format. If it is, the file is misnamed and can’t be handled by most computers in the usual fashion. It would be a silly exercise to compress such small files. … Contact information is still missing for many members. … The way the statutes are presented is unusable. … At this point it seems the best course is to bring back the old legislature website. That worked.

Federal health care reform costs. Timothy P. Carney in The Washington Examiner: “In fighting against Obamacare repeal this week, Democrats portray their health care law as a money saver, claiming Republicans would add to the deficit by abolishing the legislation. But in their franker moments, the bill’s authors admit that ‘reform’ could be something of a time bomb that will cause exploding health care costs down the line. One top Senate aide plainly stated last summer, ‘This is a coverage bill, not a cost reduction bill.’ The time-bomb nature of Obamacare was presaged by Mitt Romney’s health care bill in Massachusetts, which also expanded health insurance coverage by mandating that all individuals buy insurance, prohibiting insurers from dropping customers, and subsidizing the insurance of those with difficulty affording it.” Carney goes on to draw on the lessons of Massachusetts. … Most people seem to forget that the fiscal score of Obamacare uses ten years of taxes to pay for six years of benefits.

This week at Wichita City Council. There will be no meeting this Tuesday. It’s not a holiday, but the day after a holiday, so the council won’t meet.

This week at Sedgwick County Commission. Wednesday’s meeting of the Sedgwick County Commission features two grant applications. One is from the Kansas Department of Transportation for a public transit assistance program. The second is also to KDOT for a rural general public transpiration program. From a quick look at the applications — they are lengthy — both require a local matching share. From a public policy perspective, this is the way governments control the levels of government below them: they tax, and then send back the tax money to be used for specific programs, while requiring that even more money be spent. … Also several appointments to boards such as Greater Wichita Economic Development Coalition will be made, marking a transition away from commission members who favor a free market approach to economic development to those who favor increased government activism in this area.

Eisenhower on military industrial complex. President Dwight D. Eisenhower was concerned about the military industrial complex for two reasons, writes Christopher Preble in Eisenhower’s Lament. First, there was the opportunity costs of military spending. Then, there are the political and social costs of the U.S. becoming a “garrison state.” In conclusion, Preble writes: “But I suspect that the permanence of the MIC would be most disturbing to President Eisenhower, were he with us now. Twenty years after the collapse of the Soviet Union, Americans today spend more on the military than at any time since World War II, and more than twice as much — in inflation-adjusted dollars — than when Ike left office. The general-president clearly failed to convince his fellow Americans of the need to limit the military’s growth. For all practical purposes, the MIC won.”

Rasmussen last week. “Support for repeal of the national health care law passed last year remains steady, as most voters continue to believe the law will increase the federal budget deficit.” See here. … A huge margin think that federal health care reform will cost more than official estimates. See 75% Think Health Care Law May Cost More Than Estimated. … Most don’t feel politics was motive for Arizona shootings. See here. … Few say stricter gun control laws would prevent such shootings; see here.

For Wichita city government, open records are not valued

As a condition of renewing its contract with the Go Wichita Convention and Visitors Bureau, I asked that the Wichita City Council require that the agency comply with the Kansas Open Records Act. As has been the case before, the city council and city staff say they are in favor of open records and government transparency, but their actions indicate that they are not.

After my remarks, which are presented below, City manager Bob Layton said that my attack on the city attorney was unfair, that it was not he who made this decision not to comply with the Kansas Open Records Act. Instead, he said the decision was made by the Convention and Visitors Bureau’s own attorney. John Rolfe, the Bureau’s president, said he believes that his organization has been open in their explanations of how they spend their funds, at least to the City.

Rolfe also repeated his mistaken belief that I’ve discussed with the Bureau’s attorney how I might gain access to the information that I’ve requested. These discussions have not happened. That’s not the way the Kansas Open Records Law works. Citizens do not negotiate with agencies to gain access to records. The law says that citizens make requests, and agencies comply.

Furthermore, the duty of the Bureau’s attorney is to protect and advance the interests of his client, not the interests of the public. The fact that the city council and the city manager are comfortable with this arrangement is disturbing.

Any member of the city council could have followed my suggestion to make a motion that the city ask that the Convention and Visitors Bureau to simply agree that they are in fact a public agency as defined in the Kansas Open Records Act. But none of them did.

Council member Jim Skelton asked questions several times seeking to find out how the agency spends its funds, but he did not give “how” a specific meaning. The city and most agencies would like to present simple and broad budgets or income statements to account for their spending. But this level of disclosure, which is what the Convention and Visitors Bureau provides to the public, is not sufficient.

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

This is the type of information that I have requested. It is what is needed to perform effective oversight. Three agencies — Go Wichita Convention and Visitors Bureau, Greater Wichita Economic Development Coalition, and Wichita Downtown Development Corporation — have all refused to comply with requests like this. The city council members and staff have agreed with their positions.

This is not transparency. This is not accountability.

When citizens believe that agencies are not complying with the Kansas Open Records Act, they have three options. One is to ask the Kansas Attorney General for help. But the policy of the Attorney General is to refer all cases to the local District Attorney, which is what I have done. The other way to proceed is for a citizen to pursue legal action at their own expense.

The Sedgwick County District Attorney has had my case since December 17 of last year. That office has been working on the case, and a decision is expected soon.

No matter which way the District Attorney decides, the City of Wichita, its quasi-governmental taxpayer-supported agencies, and their hostility to open records is a matter that the Kansas Legislature should notice. We need a better records law.

Following are remarks I delivered today to the Wichita City Council regarding the city’s compliance with the Kansas Open Records Act.

I’m recommending that the city not renew its contract with the Go Wichita Convention and Visitors Bureau until that organization decides to follow Kansas law, specifically the Kansas Open Records Act.

I’ve requested records from this agency. Its response is that the agency is not a “public agency” and therefore is not subject to the open records law.

Here’s why the Go Wichita Convention and Visitors Bureau is a public agency subject to the Kansas Open Records Act. KSA 45-217 (f)(1) states: “‘Public agency’ means the state or any political or taxing subdivision of the state or any office, officer, agency or instrumentality thereof, or any other entity receiving or expending and supported in whole or in part by the public funds appropriated by the state or by public funds of any political or taxing subdivision of the state.”

The Kansas Attorney General’s office offers additional guidance: “A public agency is the state or any political or taxing subdivision, or any office, officer, or agency thereof, or any other entity, receiving or expending and supported in whole or part by public funds. It is some office or agency that is connected with state or local government.”

According to its 2008 annual report, 89% of Go Wichita Convention and Visitors Bureau’s revenue came from the transient guest tax. I suggest that this qualifies as supported “in whole or in part” by public funds.

The Kansas Open Records Act has an exception, but that does not apply to this agency. There’s no rational or reasonable basis for the this agency’s assertion that it is not a public agency subject to the Kansas Open Records Act.

Mr. Mayor and council members, look at the plain language of the Kansas Open Records Act, as I’ve explained. Look at the intent of the Kansas Legislature as embodied in the statute: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.”

The policy of the state is that records should be open. Governmental bodies shouldn’t be looking for excuses to avoid complying with the law, as has the City of Wichita and this agency, and has two other similar agencies. Especially when the reasons the city legal staff has used are wrong, both in terms of the letter of the law and its intent.

Now I realize that Mr. Gary Rebenstorf, the Wichita City Attorney, disagrees with my contention that this agency is in fact a public agency as defined by the Kansas Open Records Act. Mr. Rebenstorf has been wrong several times before when issuing guidance to this council regarding the Kansas Open Meetings Act, which is similar to the Open Records Act. He’s taken the blame and apologized for these violations. He was quoted in the Wichita Eagle as saying “I will make every effort to further a culture of openness and ensure that like mistakes are avoided in the future.”

But with regard to my records requests, he’s advised this council to keep records closed when the law and the public policy of this state says they should be open.

He, or perhaps whoever is instructing him as to what opinions to write, is hostile towards towards open records and citizens’ right to know.

Mayor, you’ve spoken about “building public trust in government” and working to achieve greater transparency. Manager Layton has as a goal “Promoting transparency by providing timely, accurate and relevant information.”

This is a chance for the political leadership of this city to make a decision: does the city promote transparency by deciding itself what information to release, or does it agree to citizen-driven accountability, where citizens are in charge?

It’s not only this agency. The Wichita Downtown Development Corporation and the Greater Wichita Economic Development Coalition are similarly situated.

As a condition of renewing the city’s contract with the Go Wichita Convention and Visitors Bureau, I ask that this council instruct the Bureau to follow the Kansas Open Records Act.