Tag Archives: Jim Skelton

Sedgwick County Commissioner and former Wichita City Council Member Jim Skelton

Wichita’s evaluation of development team should be reconsidered

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

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

wichita-evaluation-matrix-2013-08

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

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

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

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

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

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

Dave Burk: He’s received many millions from many levels of government, but still thinks he doesn’t get enough. This is what we can conclude by his appeal of property taxes in a TIF district. Those taxes, even though they are rerouted back to him for his benefit, were still too high for his taste, and he appealed. The Wichita Eagle reported in the article (Developer appealed taxes on city-owned property): “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

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

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

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

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

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

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

warren-bailout-poses-dilemma

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

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

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

Sedgwick County Commission: Let’s not vote today

At the October 31 meeting of the Sedgwick County Commission, Karl Peterjohn introduced a measure that would let the Kansas Legislature know that the commission supports improving the tax climate in Kansas, and specifically would limit property tax growth. But electoral politics forced a delay in a vote.

In response to Peterjohn’s proposal, the coalition of one Democrat and two liberal Republicans that form the working majority on the commission maneuvered to delay voting on the measure until after the November 6 election. With the item appearing on tomorrow’s agenda, it’s very likely that the majority coalition — Commission Chair Tim Norton, Dave Unruh, and Jim Skelton — will vote against the proposal.

Why the rush for delay? Norton was facing a vigorous challenge in the election. He couldn’t afford to cast a vote against property tax reform. With Skelton publicly supporting Norton, and Unruh doing so behind the scenes, the two Republicans supported their liberal Democratic fellow traveler in delaying the vote until after the election.

But after the election, Norton is free to vote against property tax reform. Skelton and Unruh don’t face the voters for another two years, and they’ll be relying on the short memory span of most voters.

Sedgwick County tower sale was not in citizens’ best interest

The sale of a radio tower owned by Sedgwick County reveals another case of local government not looking out for the interests of citizens and taxpayers, with the realization that the stain of cronyism is alive and well.

As a result of system upgrades, the county no longer needs a radio tower located near 77th Street North and Interstate 135. Pixius Communications, LLC made an offer to purchase the tower and the five acre tower site for $280,000. The county proceeded making arrangements for the sale, preparing a sales agreement contract between Sedgwick County and Pixius with a sales price of $280,000, along with several other legal documents necessary to support the sale. These documents are available at the agenda file for this item.

According to sources, County Manager William Buchanan supported the Pixius offer. So did commissioners Dave Unruh and Jim Skelton.

But commissioners Richard Ranzau and Karl Peterjohn felt that the best way to sell the tower was through an auction.

Commission Chair Tim Norton, because of his receipt of campaign contributions from Pixius, Jay Maxwell (owner of Pixius), and Penny Maxwell (spouse of owner), was going to abstain from voting. (Skelton has accepted contributions from the Maxwells, but he was going to vote nonetheless.)

So there was not a majority of three votes to accept the Pixius offer. Buchanan suggested the auction. All commissioners agreed.

Now we know the results of the auction: A Florida company offered $610,000. After a sales commission ($55,000) and half of closing costs ($1,128), the county will net $553,872. That’s almost twice the price the county manager and two commissioners were willing to sell the tower for.

There’s something else: What will be the appraised value of the tower and site for tax purposes? The selling price of a property is strong evidence of its value. As a result of the auction, therefore, this property is likely to be appraised at $610,000 instead of $280,000. That’s good for those who think it’s good for government to bring in more tax revenue.

This episode is another instance where no-bid contracts and cronyism cost taxpayers. Maxwell, the almost-beneficiary of this sweetheart no-bid contract, has been the recipient of many benefits at taxpayer expense, such as tax increment financing and community improvement district taxes. He’s tried for more, but even the Wichita City Council has a limit to its cronyism, now and then. Although cronyism and no-bid contracts have been a problem at Wichita City Hall.

Interestingly, a recent KSN Television news story characterized Ranzau and Peterjohn as “hardline fiscal conservatives.” The story went on to report “Incumbent Democrat Tim Norton often sides with the two more moderate members of the commission with many votes being decided by a 3-2 margin.” Those moderate members are, of course, Unruh and Skelton.

Norton didn’t have to take sides — at least publicly — on this issue, but I’m confident that if this was not an election year for Norton, he would have voted for the original Pixius deal that we now see was a disaster for taxpayers.

In the KSN story Norton was quoted as saying “I’m a business man of many years in Wichita. I understand the business climate and job retention.”

Unruh and Skelton are also businessmen. I hope these commissioners look after their personal business with more care and concern than they have shown for the business of taxpayers.

Special interests will capture south-central Kansas planning

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

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

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

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

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

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

Who will plan?

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

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

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

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

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

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

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

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

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

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

By the way, did you know that Sedgwick County Commissioner Dave Unruh, who voted in favor of the plan that benefits REAP, is now chairman of REAP? Special interest groups know how to play the political game.

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 voters reject cronyism — again

Tuesday’s primary election in Kansas was notable for the large number of victories by conservative challengers over Republican senate incumbents. Also important is that voters in Wichita and the surrounding area rejected, for the second time this year, the culture of political cronyism that passes for economic development in Wichita.

On Tuesday incumbent Sedgwick County Commissioner Karl Peterjohn defeated a challenge by Wichita City Council Member Jeff Longwell. The contrast was clear: Peterjohn with his long-time, outspoken advocacy for limited government and free market principles, although perhaps tempered a bit based on some votes he’s made. Longwell, however, advocates for “more tools in the toolbox.” In other words, a larger role for government in economic development and centralized planning.

The result: Peterjohn won, 57 percent to 43 percent.

Longwell had the endorsements of many Wichita-area politicians, including Wichita Mayor Carl Brewer and all other Wichita City Council members except Michael O’Donnell (district 4, south and southwest Wichita): Vice Mayor Janet Miller (district 6, north central Wichita) and council members Lavonta Williams (district 1, northeast Wichita), James Clendenin (district 3, southeast and south Wichita), and Pete Meitzner (district 2, east Wichita).

Sedgwick County Commission members Tim Norton, Jim Skelton, and Dave Unruh also endorsed Longwell.

In addition to these endorsements, Longwell had a large money advantage over Peterjohn. According to campaign finance reports filed July 30, Longwell had raised nearly $62,000.

Peterjohn’s July 30 report showed about $20,000 raised, so as of that date Longwell had over three times as much campaign money at his disposal than Peterjohn.

The money advantage and the endorsements are linked. On Longwell’s July 30 campaign finance report we learned that executives of a Michigan construction company made campaign contributions immediately before and after Longwell participated in a city council voted that benefited them. Key Construction, a heavy contributor to Longwell’s campaign, also benefited from Longwell’s vote that day. This was just another episode in Longwell’s history of voting for overpriced no-bid contracts and no-interest city loans for his large campaign contributors.

The day after Peterjohn held a news conference questioning Longwell’s Michigan contributions, Longwell held the news conference that announced the above-mentioned endorsements. Many of those endorsers also receive campaign money from those they award with no-bid contracts and other taxpayer-funded largesse.

Despite the advantage in campaign funds and the endorsements, voters in west Wichita and west Sedgwick County rejected the political cronyism that is Jeff Longwell’s legacy in government service.

It’s the second time this year voters have rejected cronyism. In February Wichita voters voted down a tax giveaway to the Ambassador Hotel by a margin of 62 percent to 38 percent.

Longwell played a role in that election, too. When citizens exercised their constitutional right to challenge the taxpayer-funded giveaway to the hotel, Jeff Longwell said it was “disappointing,” and a “stunt.” He said that using this fundamental aspect of democracy causes citizens to “lose credibility.”

When it came time for the council to set the date for the special election on the hotel tax, Longwell attempted to have the election commissioner set the date as early as possible, obviously thinking that a short campaign would benefit the hotel developers.

Those hotel developers, by the way, included many of Longwell’s long-time campaign contributors.

After Wichita voters rejected this special tax deal, the Wall Street Journal in a column titled “A Wichita Shocker: You can beat city hall” wrote: “Local politicians like to get in bed with local business, and taxpayers are usually the losers. So three cheers for a voter revolt in Wichita, Kansas last week that shows such sweetheart deals can be defeated.”

It’s no wonder Longwell was disappointed when citizens petitioned their government. Voters soundly rejected the political cronyism and sweetheart deals that are Longwell’s legacy.

Skelton, Sedgwick County Commissioner, censured by party

Yesterday evening the Sedgwick County Republican Party censured a Sedgwick County Commissioner for supporting a Democrat in an upcoming election.

Treatha Brown-Foster, who is chair of Kansas Black Republican Council, offered a resolution critical of Jim Skelton.

The resolution read: “Whereas, Jim Skelton, an elected Republican official in Sedgwick County, who has benefited from the support of the Sedgwick County Republican Party, has publicly supported a Democratic candidate over a Republican candidate for election to the Sedgwick County Commission. Be it resolved that Jim Skelton be censured for this action.”

The resolution was met with applause. The motion was seconded and the vote to approve it was unanimous.

In June Skelton expressed his support in a Wichita Eagle article for incumbent Tim Norton over challenger Ben Sauceda. Norton is a Democrat; Sauceda is a Republican. The two face no primary challenges, and will meet in the November 6th general election.

In January Skelton joined with fellow Republican Commissioner Dave Unruh to elect Norton as commission chair. Despite Republicans holding a four to one majority, the commission is chaired by a Democrat.

Sedgwick County will hold Southfork TIF hearing

Since the Wichita City Council passed a resolution authorizing the formation of the Southfork tax increment financing district, the affected county (Sedgwick) and school district (Wichita) have an opportunity to veto the district’s formation. They don’t have to take action to approve the district — only silent assent is required. But they can take action, as Sedgwick County did in January, to cancel the formation of the district.

At Tuesday’s commission staff meeting, commission chair Tim Norton along with commissioners Dave Unruh and Jim Skelton didn’t believe a public hearing was necessary the matter should not be placed on the agenda. That would mean the county gave its silent consent to the district’s formation.

But after learning of that action, myself and at least two others contacted the county manager’s office and asked to be placed on the public agenda portion of the meeting, where citizens may address any topic.

Whether we would be allowed to speak was touch-and-go. County policy is that speakers must “provide your request in writing to the Sedgwick County Manager’s Office at least nine days prior to the meeting date.” The emphasis is in the original. (I wonder if email counts as writing?)

(That lengthy nine day lead time is a problem in itself. I believe that good public policy requires that the lead time be at least one day less than the period between meetings of the body, which is case of this commission, is normally seven days.)

But late Tuesday someone at the courthouse had a change of heart or mind, and now there will be a public hearing on Wednesday May 9th on this matter. Strictly speaking, it’s not a public hearing, but the item will be on the agenda, and it’s anticipated that chairman Norton will allow the public to address the commissioners on this issue.

I can understand (but not approve of) the motives of the three commissioners who approve of this district not wanting to hear members of the public speak against this item and their policies. Especially when the public has shown their skepticism on these matters, an example being the vote turning down an incentive for the Wichita Ambassador Hotel. In that election, voters repudiated the big-spending, big-government programs of the liberal Republicans on the Wichita City Council. If citizens could vote on the formation of this TIF ddistrict, commissioners Skelton and Unruh might find themselves in the same situation.

In Kansas, planning will be captured by special interests

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

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

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

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

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

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

Who will plan?

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

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

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

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

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

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

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

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

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

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

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

Federal, United Nations planning imported to Wichita

Yesterday the Sedgwick County Commission voted to participate in a HUD Sustainable Communities Regional Planning Grant.

Republican commissioners Dave Unruh and Jim Skelton joined with Democrat Tim Norton to pass the measure. Below, Paul Soutar of Kansas Watchdog explains why this planning process is a bad idea.

Local Planning Initiative Has Federal Strings, UN Roots

by Paul Soutar, Kansas Watchdog

The Sedgwick County Commission will decide Wednesday whether to give a consortium of South Central Kansas governments and organizations broad control over community planning funded by a federal grant and based on a United Nations agenda.

The Regional Economic Area Partnership (REAP) Consortium for Sustainable Communities seeks to implement a Regional Plan for Sustainable Development (RPSD) for South Central Kansas.

REAP’s application for a federal grant said the plan will “provide an overall vision and commitment for sustainable growth in South Central Kansas. The RSPD will provide goals, strategies, and action steps to support that vision. Specifically, that RPSD will create a regional integrated transportation, housing, air quality and water infrastructure plan that aligns federal resources and provides for sustainable development and resources (fiscal, human and capital) to support our economic centers.‘

Much of the language and goals of sustainable communities grants reflect the goals of the U.N.’s Agenda 21, a global environmental agenda for the 21st century revealed at the 1992 U.N. Conference on Environment and Development in Rio de Janeiro.

Agenda 21 is a comprehensive framework for global, national and local action aimed at improving environmental equality through massive changes in how resources are consumed and allocated.

According to Sustainable Development in the 21st century (SD21), a December 2011 UN review of implementation of Agenda 21, “Achieving greater equity requires a significant reduction in consumption by industrialized countries.”

Continue reading at Local Planning Initiative Has Federal Strings, UN Roots.

A Wichita shocker

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

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

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

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

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

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

Sedgwick County commissioners vote Democratic

This morning the Sedgwick County Commission voted to select member Tim Norton of Haysville as chairman for the upcoming year. Norton, a Democrat, received the votes of two of the board’s four Republican members: Those of outgoing Chairman Dave Unruh and Jim Skelton.

Commissioner Karl Peterjohn nominated Richard Ranzau for the position, but he received only two votes.

It may be remarkable that a board with a four to one majority in one party elected a member of the minority party to serve as chair, or it may simply be a reflection of the actual ideological makeup of the board. Peterjohn and Ranzau consistently take stances and make votes that favor limited government and free markets, while Unruh and Skelton generally join with the politically-liberal Norton on most issues. The chairman is more than just a ceremonial position, as the chairman presides over commission meetings. On many agenda items, the commission is not obligated to hear testimony from citizens, although it must when there are items that have public hearings required by law. It was the practice of Kelly Parks and Peterjohn, when they served as chair, to allow anyone who appeared at meetings to speak. In his term as chair, Unruh was seen as less accommodating, although I think that anyone who really cared to was allowed to speak, sometimes with a gentle admonition to hurry along. It is unknown in what manner Norton will run the meetings while he is chair. A hint: He’s objected to the term “ObamaCare” as pejorative, so I wouldn’t use that word around the courthouse.

For Chairman Pro Tem, the commissioners selected Skelton. Ranzau’s name was placed into nomination by Peterjohn, and he received the same two votes as he did for chairman. The votes for Skelton by Norton and Unruh are surprising. Skelton’s recent behavior has been erratic, even bizarre at times. His recent appearance at the Wichita City Council (video here) brought laughter and guffaws from both the bench and the public. I got the sense, however, the people were laughing at Skelton, not with him.

Unruh’s selection for 2011 Chairman’s award

Chairman Unruh selected Visioneering Wichita as the recipient of the annual Chairman’s award. This organization is in favor of government intervention into the economy — and people’s lives — on a large and increasing scale. Most of the items on its legislative agenda involve more government spending. While Visioneering — its chair Jon Rolph, anyway — denies advocating for increased taxes, Milton Friedman has taught us that it is the level of spending that is the true measure of the size of government. The size of that Visioneering seeks to expand.

Wichita’s political class

From June.

The discussion at yesterday’s Wichita City Council meeting provided an opportunity for citizens to discover the difference in the thinking of the political class and those who value limited government and capitalism.

At issue was Mid-Continent Instruments, Inc., which asked the city for a forgivable loan of $10,000. It received the same last week from Sedgwick County. According to city documents, the State of Kansas through its Department of Commerce is also contributing $503,055 in forgivable loans, sales tax exemptions, training grants, and tax credits.

At the city council meeting Clinton Coen, a young man who ran for city council earlier this year, spoke against this measure, which he called corporate welfare.

In response to Coen, Council Member James Clendenin (district 3, south and southeast Wichita) asked if we should ignore companies that want to do business here, or should we allow them to leave? Implicit in the question is that the threat dangled by Mid-Continent is real: that unless the city gives them $10,000, they will expand somewhere else. How citizens and council members feel about this issue largely depends on their perceived genuineness of this threat.

When Coen recommended that the city cut spending, Clendenin said “I can guarantee you, from what I have seen, this city government has cut a tremendous amount of spending.” When pressed by Coen for examples of cuts, he demurred. Clendenin also said that the $10,000 is needed to show the city’s commitment to the company.

Perhaps coming to the rescue of her younger and less experienced colleague, Council Member Janet Miller asked City Manager Bob Layton how much has been cut from the budget, and he replied “we’ve cut over $20 million in the general fund over three years.”

In saying that, Layton is using the language and mind-set of bureaucrats and politicians. In this world, it’s a cut if spending does not rise as fast as planned or hoped for. As you can see from the accompanying chart, Wichita general fund spending has not been cut in recent years. It has risen in each of the last three years, and plans are for it to keep rising.

Wichita general fund spending

This illustrates a divide between the thinking of the political class and regular people. Blurring the distinction between plans and reality lets politicians and bureaucrats present a fiscally responsible image — they cut the budget, after all — and increase spending at the same time. It’s a message that misinforms citizens about the important facts.

Miller also praised the return on investment the city receives for its spending on economic development, citing Wichita State University Center for Economic Development and Business Research and the cost-benefit calculations it performs. These calculations take the cost of providing the incentives and compare it to the returns the city and other governmental entities receive.

What is rarely mentioned, and what I think most people would be surprised to learn, is that the “returns” used in these calculations is manifested in the form of increased tax revenue. It’s not like in the private sector, where business firms attempt to increase their sales and profits by providing a product or service that people willingly buy. No, the city increases its revenue (we can’t call it profit) by collecting more taxes.

It’s another difference between the political class and everyone else: The political class craves tax revenue.

Aside from this, the cost-benefit calculations for the city don’t include the entire cost. The cost doesn’t include the county’s contribution, the majority of which comes from residents of its largest city, which is Wichita. Then, there’s the half-million in subsidy from the state, with a large portion of that paid for by the people of Wichita.

But even if you believe these calculations, there’s the problem of right-sizing the investment. If an investment of $10,000 has such glowing returns — last week Sedgwick County Commissioner Jim Skelton called the decision a “no-brainer” — why can’t we invest more? If we really believe this investment is good, we should wonder why the city council and county commission are so timid.

Since the applicant company is located in his district, Council Member Pete Meitzner (district 2, east Wichita), praised the company and the state’s incentives, and made a motion to approve the forgivable loan. All council members except Michael O’Donnell (district 4, south and southwest Wichita) voted yes.

Going forward

While the political class praises these subsidies and the companies that apply for them, not many are willing to confront the reality of the system we’re creating. Some, like O’Donnell and Sedgwick County Commissioner Richard Ranzau, have recognized that when government is seen as eager to grant these subsidies, it prompts other companies to apply. The lure of a subsidy may cause them to arrange their business affairs so as to conform — or appear to conform — to the guidelines government has for its various subsidy programs. Companies may do this without regard to underlying economic wisdom.

We also need to recognize that besides simple greed for public money, businesses have another reason to apply for these subsidies: If a publicly-traded company doesn’t seek them, its shareholders would wonder why the company didn’t exercise its fiduciary duty to do so. But this just perpetuates the system, and so increasing amounts of economic development fall under the direction of government programs.

While most people see this rise in corporate welfare as harmful — I call it a moral hazard — the political class is pleased with this arrangement. As Meitzner said in making his motion, he was proud that Wichita “won out” over the other city Mid-Continent Instruments considered moving to.

Another harmful effect of these actions is to create a reputation for having an uncompetitive business environment. Not only must businesses of all types pay for the cost of these subsidies, some face direct competition by a government-subsidized competitor. This is the situation Wichita-area hotels face as a result of the city granting millions in subsidy to a hotel developer to build a Fairfield Inn downtown.

Even those not in direct competition face increased costs as they attempt to hire labor, buy supplies, and seek access to capital in competition with government-subsidized firms. Could this uneven competitive landscape be a factor that business firms consider in deciding where to locate and invest?

We can expect to see more government intervention in economic development and more corporate welfare. Former council member Sue Schlapp in April took a job with the Kansas Department of Commerce. Her job title is “senior constituent liaison,” which I think can be better described as “customer service agent for the corporate welfare state.” Her office is in Wichita city hall.

Increasingly we see politicians and bureaucrats making decisions based on incorrect and misleading information, such as claiming that the city’s general fund budget has been cut when spending has increased. Sometimes they are fed incorrect information, as in the case of a presentation at Sedgwick County Commission that bordered on fraudulent.

Sometimes, I think, officeholders just don’t care. It’s easiest to go along with the flow and not raise ripples. They participate in groundbreakings and get their photograph in the newspaper and on television that way. Which brings up an important question: why do none of our city’s mainstream media outlets report on these matters?

Kansas and Wichita quick takes: Wednesday December 7, 2011

Wichita petitions. At yesterday’s meeting of the Wichita City Council, the invocation featured a Bible verse that contained the phrase “Petitions, prayers, intercession, and thanksgiving be offered for those in authority.” I don’t think the speaker was aware of the irony, since petitions were delivered to city hall just the day before. These petitions seek to overturn an action of the city council, and city leaders are not pleased that citizens took to the streets to gather signatures in opposition to the council’s action.

Petitions being contested. Speaking of petitions, the developers of the Ambassador Hotel are calling those who signed the petition and asking them to rescind their signature. The signers are being read a script that claims a study by Wichita State University indicates that 978 jobs will be created by the project. At the time the hotel developers persuaded the Wichita City Council and other governmental units to grant them over $15 million in taxpayer subsidy, they claimed the project would create 100 to 120 jobs. More reporting by Bill Wilson of the Wichita Eagle at Clash over hotel incentives heating up. … Work started and continues on the hotel even though the subsidy targeted by the petition is in doubt, so it appears the hotel will open — and jobs be created — no matter what happens to the petition.

AFP statement on peitition. “Activists with Americans for Prosperity and many other local organizations are firmly engaged in the public process, acting on our right to ask for a public vote on how our city doles out tax dollars to private interests,” said Susan Estes, AFP-Kansas grassroots coordinator and Wichita resident. “Certainly the opposition in this matter is acting on its right to fight our efforts. “However, from what we have heard from some of the recipients of recent phone calls, the actions of our opposition seem desperate, insulting and even intimidating to some. We find it interesting that an entity so concerned about receiving public incentives is so against allowing the public to vote on one portion of the approved incentive package. Great lengths are being taken — and at great expense — to prevent Wichitans from voting, even going so far as to have individuals from Colorado calling petition signers to sway their opinion about a Wichita issue.” … “The signature gathering process has simply been about one thing: providing the people of Wichita an opportunity to express support or opposition to this type of public tax policy. A campaign would allow both proponents and opponents to share their message with the people of Wichita. We believe his would be a healthy debate for our community. One that is needed, one that we hoped would be embraced by all. We are not afraid of this public debate, but apparently some are.”

Smart Taxpayers Exposing Waste. An initiative of the American Beverage Association is exposing ways in which government is spending money to run attack ads on the beverage industry. The claim is that $230 million of federal stimulus money has been spent in this way. The Facebook page, located at Smart Taxpayers Exposing Waste (STEW), holds many examples.

Planning grant to be topic of meeting. On Monday December 12th Americans for Prosperity Foundation will feature Sedgwick County Commission Member Richard Ranzau speaking on the topic “The $1.5 million dollar Regional Economic Area Partnership (REAP) HUD Sustainable Development Planning Grant: Economic Development or Economic Destruction?” Some background on this item may be found at Sedgwick County considers a planning grant. This free event is from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

Kansas history writer to speak. This Friday (December 9th) the Wichita Pachyderm Club features Beccy Tanner, Kansas history writer and reporter for The Wichita Eagle, speaking on “The Kansas Sesquicentennial (150th) Anniversary.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On December 16: Kansas Senator Garrett Love. The youthful legislator, just completing his first year in office, will be speaking on “Young people in politics.” … On December 23 there will be no meeting. The status of the December 30th meeting is undetermined at this time. … On January 6: David Kensinger, Chief of Staff to Kansas Governor Sam Brownback. … On January 13: Speaker of the Kansas House of Representatives Mike O’Neal, speaking on “The untold school finance story.” … On January 20: Sedgwick County Commissioner Karl Peterjohn.

Wichita City Council. Some video from this week’s meeting of the Wichita City Council. First, my discussion of tax increment financing (TIF) districts. Then, click here for Clinton Coen and Wichita Mayor Carl Brewer’s discussion. Under the mayor’s leadership, things disintegrate. Finally, former council member Jim Skelton returns to Wichita city council chambers.

Kansas and Wichita quick takes: Friday December 2, 2011

Wichita trip to Ghana. KAKE Television reports that Wichita Mayor Carl Brewer believes the recent trip to Africa by him and others may result in sales of beef and airplanes. I wonder, though: don’t marketers of beef and airplanes know about Africa already? And who has the greater motive to sell, not to mention knowledge about the products that might meet African customers’ needs: sales reps for these companies, or politicians? … The most telling indication that this trip is more junket than anything else is that Brewer and Vice Mayor Lavonta Williams (district 1, northeast and east Wichita) paid for their own airfare. If this trip was truly good for the city, the city should pay all expenses for those who go, just as companies pay legitimate travel expenses for their employees.

Register of Deeds returns funds. At this week’s meeting of the Sedgwick County Commission Register of Deeds Bill Meek returned $200,000 in unspent funds from his office. These unspent funds may be used by other county offices for “equipment or technological services relating to the land or property records filed or maintained by Sedgwick County,” according to the resolution passed by commissioners.

Transaction fee, or interest? At the same commission meeting, there was discussion on the topic of the county charging extra fees for paying money to the county using credit cards. During the discussion, Commissioner Jim Skelton speculated that, depending on the card you have, there will be “$50 to $250 or more on interest” each month. The commissioner may not have heard that if you pay the entire statement balance each month, there won’t be any interest charges.

This is a cut? In Republicans Take an Ax to Government, David Boaz writes: “Sort of. Two million dollars. Two million dollars. That’s what the Washington Post sees as ‘shrinking government.’ I’m guessing the Post doesn’t often run a story when a governor does something that “expands government” by $2 million. But Virginia has a reputation for fiscal conservatism. Maybe $2 million is actually a big chunk of the state’s budget. Let’s check the numbers. As it turns out, this week the National Governors Association and the National Association of State Budget Officers put out a report on state finances, and it showed that Virginia’s general fund spending is up 7.1 percent in 2012. And according to Virginia’s own budget, that’s an increase of $1.1 billion in FY2012. That’s not the whole budget, by the way. In addition to the $16 billion in General Fund spending, Virginia will also spend $23 billion in FY2012. ”

Tax incentives questioned. In a commentary in Site Selection Magazine, Daniel Levine lays out the case that tax incentives that states use to lure or keep jobs are harmful, and the practice should end. In Incentives and the Interstate Competition for Jobs he writes: “Despite overwhelming evidence that state and local tax incentives are having little to no positive effect on promoting real economic growth anywhere in the country, states continue to up the ante with richer and richer incentive programs. … there are real questions as to whether the interstate competition for jobs is a wise use of anyone’s tax dollars and, if not, then what can be done to at least slow down this zero sum game?” As a solution, Levine proposes that the Internal Revenue Service classify some types of incentives as taxable income to the recipient, which would reduce the value and the attractiveness of the offer. Levine also correctly classifies tax credits — like the historical preservation tax credits in Kansas — as spending programs in disguise: “Similarly, when a ‘tax credit’ can be sold or transferred if unutilized it ceases to have a meaningful connection to state tax liability. Instead, in such circumstances the award of tax credit is merely a delivery mechanism for state subsidy.” In the end, the problem — when recognized as such — always lies with the other guy: “Most state policy makers welcome an opportunity to offer large cash incentives to out-of-state companies considering a move to their state but fume with indignation when a neighboring state uses the same techniques against them.”

Golden geese on the move. Thomas Sowell: “The latest published data from the 2010 census show how people are moving from place to place within the United States. In general, people are voting with their feet against places where the liberal, welfare-state policies favored by the intelligentsia are most deeply entrenched.” Sowell notes that blacks, especially those young and educated, are moving to the South and suburbs. “Among blacks who moved, the proportions who were in their prime — from 20 to 40 years of age — were greater than in the black population at large, and college degrees were more common among them than in the black population at large. In short, with blacks, as with other racial or ethnic groups, those with better prospects are leaving the states that are repelling their most productive citizens in general with liberal policies.” Detroit, he writes is “the most striking example of a once-thriving city ruined by years of liberal social policies.” Finally, a lesson for all states, including Kansas: “Treating businesses and affluent people as prey, rather than assets, often pays off politically in the short run — and elections are held in the short run. Killing the goose that lays the golden egg is a viable political strategy.” (Mass Migration Of America’s Golden Geese.) The migration statistics concerning Kansas are not favorable, although some are trending in a better direction.

Rep. Hedke, author of new book, to speak. This Friday (December 2nd) the Wichita Pachyderm Club features Kansas Representative Dennis Hedke speaking on “Energy and environmental policy.” Hedke is the author of the just-published book The Audacity of Freedom, described as an “unequivocal challenge to the Socialist-Marxist-Communist principles being pushed upon freedom loving Americans by entities and individuals both within and outside the United States.” In his forward to the book, Speaker of the Kansas House of Representatives Mike O’Neal writes: “Dennis Hedke’s The Audacity of Freedom is a timely and welcome “from the heart” wake-up call for those who value freedom and America. Unapologetically, Hedke does not mince words in describing the combination of crises that threaten our country. His irrefutable and precise recitation of compelling facts and refreshingly candid faith and patriotism are infectious. He exhorts us not to stand by and suffer any longer the fools who have been insulting our collective intelligence and bringing us dangerously close to a socialistic irrelevance in the world. His book, in short, is important.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On December 9: Beccy Tanner, Kansas history writer and reporter for The Wichita Eagle, speaking on “The Kansas Sesquicentennial (150th) Anniversary.” … On December 16: David Kensinger, Chief of Staff to Kansas Governor Sam Brownback. … On December 23 there will be no meeting. The status of the December 30th meeting is undetermined at this time. … On January 6: Kansas Senator Garrett Love. … On January 13: Speaker of the Kansas House of Representatives Mike O’Neal, speaking on “The untold school finance story.” … on January 20: Sedgwick County Commissioner Karl Peterjohn.

Economic freedom in America: The decline, and what it means. “The U.S.’s gains in economic freedom made over 20 years have been completely erased in just nine.” Furthermore, our economic freedom is still dropping, to the point where we now rank below Canada. The result is slow growth in the private sector economy and persistent high unemployment. This is perhaps the most important takeaway from a short new video from Economic Freedom Project, which is a project of the Charles Koch Institute. The video explains that faster growth in government spending causes slower growth in the private economy. This in turn has lead to the persistent high unemployment that we are experiencing today. … To view the video at the Economic Freedom Project site, click on Episode Two: Economic Freedom in America Today. Or, click on the YouTube video below.

Kansas PEAK program: corporate welfare wrapped in obfuscation

Whether one agrees with the effectiveness and wisdom of government involvement in local economic development, there’s one thing that’s certain: facts and understanding are in short supply.

An illustration of how confusing things can get was provided last Wednesday at a meeting of the Sedgwick County Commission. Aviation manufacturer Bombardier LearJet was seeking a small part of a larger incentive package from the county. The county was being asked to contribute $1 million, but the overall package Bombardier is seeking is worth $52.7 million. That’s the entire cost of the Wichita portion of the project.

A large part of the package Bombardier is seeking is based on the Promoting Employment Across Kansas (PEAK) program. Administered by the Kansas Department of Commerce, the program allows qualifying companies to retain 95 percent of the state income withholding taxes their employees pay.

It’s a roundabout method of distributing corporate welfare that allows companies — and gullible or self-serving politicians — to pretend as though this program has no cost, or that companies are in fact investing their own money.

In the present case, Bombardier LearJet plans to obtain $27.0 million through this program. It’s described in a company presentation as “Initial State of Kansas Bond Issuance.” They call it that because the State of Kansas will issue bonds that LearJet will buy. That makes it seem that Bombardier LearJet is actually contributing something of their own.

This misconception might be reinforced in a dialog between John Dieker, vice president of strategic projects for Bombardier Learjet, and Sedgwick County Commissioner Jim Skelton. Skelton was perhaps trying to counter my testimony earlier in the meeting. I had wondered if Bombardier LearJet was contributing even one dollar of their own funds to the project.

Skelton asked Dieker “Where is this money coming from?”

Dieker replied “We have the incentives we got from the state at $27 million. We have the interest that throws off since corporate bought the bonds, that’s corporate money that’s going back into the project, so that’s $6 million.

Skelton asked “So the corporation did buy the bonds?”

The answer was “Yes, corporation bought the bonds.”

Skelton concluded: “Well that’s your … I would consider that your money, sir.”

Dieker didn’t dispute Skelton’s conclusion. He should have.

Here’s how this financing works, in this case: The state issues $27 million in bonds and sells them to Bombardier Learjet. At this moment, LearJet holds bonds (both an asset and a liability) worth $27 million. The state’s balance sheet hasn’t changed.

Going forward is where Bombardier LearJet benefits. In the normal course of affairs, the bonds would be repaid out of the company’s cash flow. But under the PEAK program, the bonds are repaid by its employees, through the tax withheld on their paychecks.

The benefit to LearJet is that it has to pay these taxes, but it manages to be the exclusive beneficiary. Normally these taxes go to fund the operations of Kansas state government. But under the PEAK program, these tax payments go right back to Learjet and are used to pay off the liability of the bonds. The tax payments never benefit the state, as do tax payments from almost all other companies in Kansas. (Bombardier is not the only company benefiting from PEAK.)

Bombardier is even counting the interest on these bonds as part of their capital contribution to the project. The interest, however, is also being paid by employee withholding taxes, at no cost to the company.

So did Bombardier LearJet contribute $27 million of its own money, as Skelton claims? When the entire economic transaction is considered, the answer is absolutely not.

If you’re not convinced by this argument, simply ask: why would Bombardier LearJet engage in such a transaction if it didn’t benefit them?

Schemes like this call into question one of the the fundamental principles of taxation: that the proceeds be used to fund the operations of government, not to enrich one particular person or company. But continually, chasing economic development dreams, states and local government concoct schemes like PEAK — and others like tax increment financing (TIF) districts, Community Improvement Districts (CIDs), rebates of hotel guest taxes, revenue bonds of various forms, and other monstrosities — that turn over a public function to benefit private interests.

Kansas and Wichita quick takes: Thursday November 10, 2011

Occupy Wall Street. One of the most troubling things about OWS is the anti-semitism. FreedomWorks has a video which explains. Also from FreedomWorks, president Matt Kibbe contributes a piece for the Wall Street Journal (Occupying vs. Tea Partying: Freedom and the foundations of moral behavior.). In it, he concludes: “Progressives’ burning desire to create a tea party of the left may be clouding their judgment. Even Mr. Jones has grudgingly conceded that tea partiers have out-crowd-sourced, out-organized, and out-performed the most sophisticated community organizers on the left. ‘Here’s the irony,’ he said back in July. ‘They talk rugged individualist, but they act collectively.’ He and his colleagues don’t seem to understand that communities can’t exist without respect for individual freedom. They can’t imagine how it is that millions of people located in disparate places with unique knowledge of their communities and circumstances can voluntarily cooperate and coordinate, creating something far greater and more valuable than any one individual could have done alone. In the world of the contemporary Western left, someone needs to be in charge — a benevolent bureaucrat who knows better than you do. They can’t help but build hierarchical structures — a General Assembly perhaps — because they don’t understand how freedom works.”

Johnson Controls. Rhonda Holman’s recent Wichita Eagle editorial criticized those who spoke against the award of a forgivable loan to Johnson Controls, specifically mentioning the claim by Sedgwick County Commissioner Richard Ranzau that Johnson was going to move these jobs to Wichita “no matter what.” No one has disputed Ranzau. I specifically asked at the commission meeting that someone from Johnson address this assessment. The Johnson people in the audience chose not to answer. It would be helpful if someone at the newspaper or county at least pretended as through they cared about the truth of these matters. … At one time newspapers might have objected to Commission member Jim Skelton voting on this matter due to a family member working at Johnson. True, Kansas law says he was eligible to vote on the matter. Sedgwick County has no code of ethics that prohibited it, either. But Skelton could have acted as though the county had a code of ethics, and a model code of ethics says Skelton should not have voted on this matter.

Save-A-Lot store opens. Yesterday a Save-A-Lot grocery store opened in Wichita’s Planeview neighborhood. This is a store that was said to be impossible to build without subsidy in the form of tax increment financing (TIF) and an extra community improvement district (CID) sales tax of two cents per dollar. The Sedgwick County Commission exercised its veto power over the TIF district, and developer developer Rob Snyder canceled his plans for the store. But someone else found a way. Said Snyder at the time to the Wichita City Council: “We have researched every possible way, how do we make this project work with the existing funding that’s available to us. … We might as well say if for some reason we can’t figure out how to get this funding to go through, there won’t be a shopping center over there.” As part of his presentation to the council Allen Bell, Wichita’s Director of Urban Development explained that to be eligible for TIF, developers must demonstrate a “gap,” that is, an analytical finding that conventional financing is not sufficient for the project, and public assistance is required: “We’ve done that. We know, for example, from the developer’s perspective in terms of how much they will make in lease payments from the Save-A-Lot operator, how much that is, and how much debt that will support, and how much funds the developer can raise personally for this project. That has, in fact, left a gap, and these numbers that you’ve seen today reflect what that gap is.” … This episode has severely harmed the credibility of those who plead for incentives and subsidies, and also of the city hall bureaucrats who plead their cases for them. For more see For Wichita, Save-A-Lot teaches a lesson.

Teacher pay. A look at public school teacher pay by American Enterprise Institute finds that — opposite of the myth spread by school spending advocates — teachers are paid much more than they could earn in the private sector. While teachers are paid less than private sector workers with similar college degree attainment, the course of study for teachers is less demanding than most other fields. Fringe benefits for teachers are much higher than for private sector workers. Job security, even in the face of recent layoffs, is much greater for teachers and has a value: “Consider that one-fifth of the highest-performing public school teachers in Washington, D.C., recently declined to give up even part of their job security in exchange for base salary increases of up to $20,000.” … The authors note the study is based on averages: “Our research is in terms of averages. The best public school teachers — especially those teaching difficult subjects such as math and science — may well be underpaid compared to counterparts in the private sector.” But teachers have formed unions that ensure that all teachers are paid the same without regard to ability. See Public School Teachers Aren’t Underpaid: Our research suggests that on average — counting salaries, benefits and job security — teachers receive about 52% more than they could in private business. … Naturally, the best way to set teacher salaries is through voluntary exchange in markets. That doesn’t happen with public school teachers.

Ranzau, Skelton to speak. This week’s meeting (November 11th) of the Wichita Pachyderm Club features Sedgwick County Commission Members Richard Ranzau and Jim Skelton, speaking on “What its like to be a new member of the Sedgwick County Board of County commissioners?” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On November 18th: Delores Craig-Moreland, Ph.D., Wichita State University, speaking on “Systemic reasons why our country has one of the highest jail and prison incarceration rates in the world? Are all criminals created equal?” … On November 25th there will be no meeting.

Making economics come alive. On Monday November 14th Americans for Prosperity Foundation will show the video “Making Economics Come Alive” with John Stossel. Topics included in this presentation are Economics of Property Rights, Private Ownership and Conservation, Property Rights and the Status of Native Americans, Atlas Shrugged: Selfishness and the Economics of Exchange, Economics and the Military Draft, Regulation and Unintended Consequences, Regulation: Louisiana Florist, The Unintended Consequences of the Ethanol Subsidies, The Unintended Consequences of Minimum Wage Laws, Public Choice Economics and Crony Capitalism, Trade Restrictions and Crony Capitalism, Stimulus Spending and Crony Capitalism, and Political Versus Market Choices. This free event is from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

Economics in two minutes. In two minutes, Art Carden explains the important ideas of economics in Economics on One Foot: “Individuals strive to achieve their goals in the best ways possible, every action has a cost, incentives matter, value is determined on the margin, profits and losses help gauge value creation and destruction, and government interventions often have unintended and undesirable consequences.” … This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

Wichita city council: substance and process

Today the Wichita City Council will conduct a public hearing for the second time. The reason the council must hold the hearing again is that a mistake was made in the official notice of the hearing.

While I commend the city for realizing the mistake and following the letter of the law in conducting the hearing again, we must contrast this behavior, which is following the process according to the law, with the council’s past behavior, which has shown no regard for the spirit and substance of the law regarding public hearings.

The most recent example is when the city council approved a letter of intent to do something for which it had yet to hold a public hearing. That act made the public hearing a meaningless exercise. The council approved everything that was contained in the letter of intent, except that one item was modified, and that was not a result of the public hearing.

Another example is from 2008, when the council conducted a public hearing essentially in secret, making last-minute changes to the substance to be heard. At the time, Randy Brown, former editorial page editor for the Wichita Eagle and Executive Director of Kansas Sunshine Coalition for Open Government, agreed with my contention that the hearing was a “bait and switch” operation. Writing in a letter to the Eagle, Brown said:

Weeks is dead-on target when he says that conducting the public ‘s business in secret causes citizens to lose respect for government officials and corrupts the process of democracy (“TIF public hearing was bait and switch,” Dec. 5 Opinion). And that’s what happened when significant 11th-hour changes to the already controversial and questionable tax-increment financing plan for the downtown arena neighborhood were sneaked onto the Wichita City Council’s Tuesday agenda, essentially under cover of Monday evening’s darkness.

This may not have been a technical violation of the Kansas Open Meetings Act, but it was an aggravated assault on its spirit. Among other transgressions, we had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue.

The Wichita officials involved should publicly apologize, and the issue should be reopened. And this time, the public should be properly notified.

It turns out that the council’s actions regarding this hearing were permissible under the letter of the law, according to the Sedgwick County District Attorney’s office.

We are left with the realization, however, that we have a city with elected officials and bureaucratic leaders that are careful to follow the letter of the law, but are unable — or unwilling — to see the larger picture regarding public policy. Substance is of little concern.

Following is my op-ed from the December 5, 2008 Wichita Eagle:

On Tuesday December 2, 2008, the Wichita City Council held a public hearing on the expansion of the Center City South Redevelopment District, commonly known as the downtown Wichita arena TIF district. As someone with an interest in this matter, I watched the city’s website for the appearance of the agenda report for this meeting. This document, also known as the “green sheets” and often several hundred pages in length, contains background information on items appearing on the meeting’s agenda.

At around 11:30 am Monday, the day before the meeting, I saw that the agenda report was available. I download it and printed the few pages of interest to me.

At the meeting Tuesday morning, I was surprised to hear council member Jim Skelton expressed his dismay that a change to the TIF plan wasn’t included in the material he printed and took home to read. This change, an addition of up to $10,000,000 in spending on parking, is material to the project. It’s also controversial, and if the public had known of this plan, I’m sure that many speakers would have attended the public hearing.

But the public didn’t have much notice of this controversial change to the plan. Inspection of the agenda report document — the version that contains the parking proposal — reveals that it was created at 4:30 pm on Monday. I don’t know how much longer after that it took to be placed on the city’s website. But we can conclude that citizens — and at least one city council member — didn’t have much time to discuss and debate the desirability of this parking plan.

The news media didn’t have time, either. Reporting in the Wichita Eagle on Monday and Tuesday didn’t mention the addition of the money for parking.

This last-minute change to the TIF plan tells us a few things. First, it reveals that the downtown arena TIF plan is a work in progress, with major components added on-the-fly just a few days before the meeting. That alone gives us reason to doubt its wisdom. Citizens should demand that the plan be withdrawn until we have sufficient time to discuss and deliberate matters as important as this. What happened on Tuesday doesn’t qualify as a meaningful public hearing on the actual plan. A better description is political bait and switch.

Second, when the business of democracy is conducted like this, citizens lose respect for both the government officials involved and the system itself. Instead of openness and transparency in government, we have citizens and, apparently, even elected officials shut out of the process.

Third, important questions arise: Why was the addition of the parking plan not made public until the eleventh hour? Was this done intentionally, so that opponents would not have time to prepare, or to even make arrangements to attend the meeting? Or was it simple incompetence and lack of care?

The officials involved — council members Jeff Longwell and Lavonta Williams, who negotiated the addition of the parking with county commissioners; Allen Bell, who is Wichita’s director of urban development; and Mayor Carl Brewer — need to answer to the citizens of Wichita as to why this important business was conducted in this haphazard manner that disrespects citizen involvement.

Sedgwick County considers a planning grant

This week the Sedgwick County Commission considered whether to participate in a HUD Sustainable Communities Regional Planning Grant.

A letter from Sedgwick County Manager Bill Buchanan to commissioners said that the grant will “consist of multi-jurisdictional planning efforts that integrate housing, land use, economic and workforce development, transportation, and infrastructure investments in a manner that empowers jurisdictions to consider the interdependent challenges of economic prosperity, social equity, energy use and climate change, and public health and environmental impact.”

The budget of the grant is $2,141,177 to fund the three-year plan development process, with $1,370,000 from federal funds and $771,177 of “leveraged resources” as a local match. These leveraged resources are in the form of in-kind contributions of staff time, plus $60,000 in cash.

While Sedgwick County will be the grant’s “fiscal agent,” the work will be done by Regional Economic Area Partnership (REAP), an umbrella organization with the mission of, according to its website: “Guide state and national actions that affect economic development in the region and adopt joint actions among member governments that enhance the regional economy.”

REAP’s members include city and county governments in a nine-county area in south-central Kansas. One of its duties is to administer the Kansas Affordable Airfares Program, the program that pays subsidies to airlines to provide service to the Wichita airport. In 2011, Sedgwick County paid $15,272 in “assessments” for its membership in REAP, while the City of Wichita paid $27,192. Governments pay smaller amounts as part of REAP’s water resources program.

The counties that are considering participating in this planning grant are Reno, Harvey, Sedgwick, Sumner, and Butler.

County documents specify the county’s in-kind contribution as $120,707. That consists of portions of the salary and benefits for four existing employees, plus $85,800 in “indirect administration costs.” There is no cash match at this time.

John Schlegel, Director of Planning for the Wichita-Sedgwick County Metropolitan Area Planning Department, told commissioners that the end product of this grant would be the development of a regional plan for sustainable development. He said that we don’t know what the plan would contain, but that the purpose of the grant program is to get regions to work together on sustainability issues. The target area of the grant is a five-county area around Sedgwick County.

He said that examples of issues would be economic development, workforce development, fiscal sustainability such as balanced budgets and spending priorities, and working together to create efficiencies in the region like joint purchasing and cost sharing.

Commissioner Richard Ranzau asked to see a copy of the completed application, but the application is not complete.

In his remarks, Ranzau described the application process, reading from the application document: “The applicant must show a clear connection between the need that they have identified within the region, the proposed approach to address those conditions, and the outcomes they anticipate the plan will produce.” He said that it appears that REAP will do these within the application, but the commission is being asked to approve and commit to these items without having seen them, which he described as irresponsible. He made a motion that action on the grant be delayed until these things are known.

Joe Yager, chief executive officer of REAP, said that last year’s grant application is available on the REAP website, and that is the closest thing to a draft application that is available today. This year’s application is a second year of the program. Last year the commission voted not to participate in the grant by a 3 to 2 vote.

Commissioner Karl Peterjohn wondered if the new planning consortium is a duplication of existing regional authorities. He listed seven different groups, besides REAP, that are involved in planning for the region.

In further remarks, Peterjohn was concerned that smaller counties will have the same voting representation as Sedgwick County, which is many times larger than the small counties.

In response to a question from Peterjohn, Yager said that the current application is for category 1 funds only, which are for planning purposes. If REAP is successful in the application, it could apply for category 2 funds, which are for implementation of a plan.

Answering another question, Yager said that “livability principles,” which applicants must be committed to advance, are providing more transportation choices, promoting equitable and affordable housing, enhancing economic competitiveness, supporting existing communities, coordinating policies and leveraging investments, and valuing communities and neighborhoods. Peterjohn said these principles were not supplied in the information made available to commissioners.

Peterjohn said these principles sound innocuous on their face, but when details are examined, he said he could not support a “Washington-driven agenda” that could not pass the present Congress. He described this effort as part of an “administrative end-around,” baiting us with a federal grant, that will allow Washington, HUD, and EPA to “drive what we do in our community.”

The motion on deferring the item failed on a 2 to 3 vote, with Peterjohn and Ranzau voting for it.

The commission heard from three citizens. In his remarks, John Todd referenced a slide titled “Common Concerns” from a presentation given by REAP. Todd listed these concerns, which include: “A method of Social Engineering to restrict residence in the suburbs and rural areas and force Americans into city centers; a blueprint for the transformation of our society into total Federal control; will enforce Federal Sustainable Development zoning and control of local communities; will create a massive new ‘development’ bureaucracy; will drive up the cost of energy to heat and cool your home; will drive up the cost of gasoline as a way to get you out of your car; and will force you to spend thousands of dollars on your home in order to comply.”

Susan Estes of Americans for Prosperity challenged the attitude of some commissioners, particularly Jim Skelton, which is that approving the planning grant does not commit us to implementing the plan. She told the commissioners “If you know you don’t like the federal government coming in and planning for you, say so now. Let’s get it over with and be upfront and honest to those involved,” referring to the other cities and counties that may participate in the grant and planning process.

She characterized the language that appears in the grant materials as meaning “more control and less liberty.”

In his remarks, Ranzau asked Schlegel what problem we will solve by participating in the grant. Schlegel answered that the purpose of the grant is to “build the greater regional capacity for regions to better compete in what is really becoming a global marketplace.” This is the end product, he said.

Ranzau said that we don’t need more planning, that we have more than enough planning at the present time. This grant, he said, would create another consortium that is unaccountable to the people, as no one is elected to them. The organizations receive tax dollars, and while some elected officials serve on these bodies, it is not the same as being directly accountable to the people. The fact that the grant requires a new consortium to be formed is evidence that the agenda is to circumvent the will of the people, he said.

Ranzau also said that Schlegel told him that “acceptance of this grant will take REAP to another level, because right now they are struggling, and this will help plot the course for REAP.” He said that REAP, which is housed at the Hugo Wall School of Public Affairs at Wichita State University, needs to expand its role and authority in order to give it “something to do.” He said the grant will promote the “progressive agenda” of the Obama administration in this way.

Later Commission Chair Dave Unruh disputed the contention regarding the workload of REAP.

Ranzau also questioned whether we want the federal government to be a “source of solutions” for our local communities. He also questioned one of the stated goals of the program, which is to reduce cost to taxpayers. It’s a new program, he said, and would not reduce the cost to taxpayers.

He further questioned the ability of the grant program to help teach local communities to be fiscally responsible. With federal spending out of control, he said the federal government is not in a position to help in this regard.

He further said that talking in generalities sounds benign, and that he wanted to know what he is committing the county to this year. Repeating the concerns of Peterjohn, Ranzau said that accepting this grant would be accepting the policies of the Obama Administration as our own. He said that in the 2010 elections the people repudiated the agenda of the president, and this grant program is an example of the type of programs people have said they don’t want. It is concern with the agenda behind this grant program that is his greatest concern, he later explained.

Continuing, Ranzau questioned the ability of the federal government to create conditions for sustainable growth: “You’ve got to be kidding me. Look at the vision they now have for growth in this county. It’s a disaster. And now they want to take the same policies that have created and made our current economic situation worse — they want to bring them to our local communities by these sorts of grants.”

Both Ranzau and Peterjohn questioned the ability of this grant to produce affordable housing, citing the government’s role in the ongoing housing crisis.

Ranzau, who has voted against many grants, added that this is the “the worst and most troublesome grant” he’s seen in his time in office, adding that the grant is clearly an agenda created by President Obama. He said there are politicians who ran for office on platforms of limited government and fiscal responsibility, and this grant is an opportunity for them to “act on those values.”

In further discussion, it was brought out that each region makes its own definition of what sustainability means to it, but Yager provided this definition of sustainability: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.”

In his remarks, Unruh said that Sedgwick County has been involved in sustainability thinking and planning for at least two years. He said this is a strategy that helps the county plan for the future. He asked manager Buchanan if the county had a definition of sustainability. Buchanan replied the County has taken a similar approach to the International City/County Management Association, which he said involves four factors: Economic stability — sufficient jobs and economic development; ensuring that local governments are fiscally healthy so that they can provide quality services; social equity, which he said ensures that the delivery of services in communities is equitable; and the environment, which he said was not about global warming, but rather making sure we’re not wasting natural resources.

Unruh said that we are not opposed to these principles, that these are reasonable activities for elected officials. He added that regionalism is the “whole measuring stick.” We must consider communities close to us when planning, he added. It is reasonable to get these people together on a voluntary and non-binding basis. While he said he didn’t like excess spending at the federal level, it is his money that the federal government is spending, and we should take advantage of this program, adding that we need to plan. If the plans are not acceptable, he said we could simply not adopt them. He disagreed with the contention of Ranzau and Peterjohn that this process causes the county to yield to any master plan developed by the federal government. He again mentioned that we are using our money to develop this plan, and asked our federal officeholders to stop spending money in this way.

He added that he believes in limited government and fiscal responsibility, and that accessing these resources does not make him “hypocritical, insincere, or untruthful.”

In rebuttal to Buchanan, Ranzau said that the grant funding document says that one of the goals is to reduce greenhouse gas emissions, which are believed by many to be a cause of global warming or climate change. The document does mention helping regions “consider the interdependent challenges of … energy use and climate change.” This language was transmitted to commissioners in a letter from Buchanan. Ranzau again said it is important not to downplay the agenda that is associated with the grant funds. In earlier remarks, Ranzau had described how applications would be scored or ranked, and that winning applications would need to conform to the goals of HUD.

The commission voted to approve the grant, with Unruh, Norton, and Skelton voting in favor, and Ranzau and Peterjohn voting against.

Commentary

Discussions such as these, where the role of government and the nature of the proper relationship between the federal government and states, counties, and cities, are a regular feature at Sedgwick County Commission meetings, due to the concerns of Peterjohn and Ranzau. These discussion do not often take place at the Wichita City Council, unless initiated by citizens whose testify on matters.

The remarks of chairman Unruh illustrated one of the important conundrums of our day. Many are opposed to the level of federal (and other government) spending. Polls indicate that more and more people are concerned about this issue. Yet, it is difficult to stop the spending.

In particular, the grant process is thorny. The principled stand of Ranzau, and sometimes Peterjohn, is that we should simply refuse to participate in the spending — both federal and local — that grants imply, and in the process also accepting the strings attached to them. Others, Unruh and Skelton in particular, have what they believe is a pragmatic view, arguing that it is our money that paid for these grant programs, and so by participating in grants we are getting back some of the tax funds we send to Washington. This reasoning allows Unruh to profess belief in limited government and fiscal responsibility while at the same time participating in this spending.

But there is no doubt that accepting federal money such as these grant funds means buying in to at least parts of the progressive Obama agenda, something that I think conservatives like Unruh and Skelton would not do on a stand-alone basis. This is an example of the power and temptation of what appears to be “free” federal money, and Ranzau and Peterjohn are correctly concerned and appropriately wary.

It is even more troublesome to realize that this power over us is exercised using our own money, as Skelton and Unruh rightly recognize, but nonetheless go along.

There may be a legislative solution someday. First, we can elect federal officials who will stop these programs. But the temptation to bring money back to the home district, either through grant programs or old-fashioned pork barrel spending, is overwhelming. Just this week U.S. Senator Jerry Moran, who voted against raising the debt ceiling in August, pledged to find more federal funds to pay for Wichita’s aquifer storage and recovery program.

An example of legislation that may work is a bill recently introduced by U. S. Representative Mike Pompeo of Wichita and others. The bill is H. R. 2961: To amend the Patient Protection and Affordable Care Act to have Early Innovator grant funds returned by States apply towards deficit reduction. The purpose of the bill is to direct the early innovator grant funds that Kansas Governor Sam Brownback returned towards deficit reduction, rather than being spent somewhere else.

The fiscal conservatives who vote to accept federal grant funds should be aware of research that indicates that these grants cause future tax increases. In my reporting on such a study I wrote: This is important because, in their words, “Federal grants often result in states creating new programs and hiring new employees, and when the federal funding for that specific purpose is discontinued, these new state programs must either be discontinued or financed through increases in state own source taxes.” … The authors caution: “Far from always being an unintended consequence, some federal grants are made with the intention that states will pick up funding the program in the future.”

The conclusion to this research paper (Do Intergovernmental Grants Create Ratchets in State and Local Taxes?) states:

Our results clearly demonstrate that grant funding to state and local governments results in higher own source revenue and taxes in the future to support the programs initiated with the federal grant monies. … Most importantly, our results suggest that the recent large increase in federal grants to state and local governments that has occurred as part of the American Recovery and Reinvestment Act (ARRA) will have significant future tax implications at the state and local level as these governments raise revenue to continue these newly funded programs into the future. Federal grants to state and local governments have risen from $461 billion in 2008 to $654 billion in 2010. Based on our estimates, future state taxes will rise by between 33 and 42 cents for every dollar in federal grants states received today, while local revenues will rise by between 23 and 46 cents for every dollar in federal (or state) grants received today. Using our estimates, this increase of $200 billion in federal grants will eventually result in roughly $80 billion in future state and local tax and own source revenue increases. This suggests the true cost of fiscal stimulus is underestimated when the costs of future state and local tax increases are overlooked.

The situation in which we find ourselves was accurately described by economist Walter E. Williams in his recent visit to Wichita. As I reported: “The essence of our relationship with government is coercion,” Williams told the audience. This, he said, represents our major problem as a nation today: We’ve come to accept the idea of government taking from one to give to another. But the blame, Williams said, does not belong with politicians — “at least not very much.” Instead, he said that the blame lies with us, the people who elect them to office in order to get things for us. A candidate who said he would do only the things that the Constitution authorizes would not have much of a chance at being elected.

The further problem is that if Kansans don’t elect officials who will bring federal dollars to Kansas, it doesn’t mean that Kansans will pay lower federal taxes. The money, taken from Kansans, will go to other states, leading to this conundrum: “That is, once legalized theft begins, it pays for everybody to participate.”

We face a moral dilemma, then. Williams listed several great empires that declined for doing precisely what we’re doing: “Bread and circuses,” or big government spending.

Wichita City Council bows to special interests

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

The issue was a downtown hotel to be developed by a team lead by David Burk of Marketplace Properties. The subsidies Burk wants, specifically tax increment financing (TIF), require a public hearing to be held. The city scheduled the hearing for September 13th.

That schedule, however, didn’t suit Burk. In order to provide him a certain comfort level, the council agreed to issue a letter of intent stating that the council intends to do the things that the public hearing is supposed to provide an opportunity for deliberation.

I, along with others, contend that this action reduces the September 13th public hearing to a meaningless exercise. This action is not good government, and it’s not open and transparent government, despite the claims of Mayor Carl Brewer. It goes against our country’s principle of the rule of law, part of which holds that our laws are more important than any single person.

Several times council members — and once city attorney Gary Rebenstorf — explained that the letter of intent is non-binding on either party. But: No matter what information is presented at the September public hearing, no matter how strong public opinion might be against the incentives involved, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I think there is very little possibility of that.

Persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?

During the discussion, no one was able to explain adequately why a letter of intent — if it is non-binding and therefore does not commit the city — was asked for by the developers. Despite the lawyerly explanation of Rebenstorf and council members — including the mayor — the letter does have meaning. Practically, it has such a powerful meaning that it makes the holding of the public hearing on September 13th a mere charade, a meaningless exercise in futility.

It’s not just me and a handful of others who contend this. The Wichita Eagle’s Rhonda Holman, who is usually in favor of all forms of public spending on downtown, wrote: “Even though the letter of intent will be nonbinding, it risks making the Sept. 13 public hearing on tax-increment financing seem like a pointless afterthought.”

In his remarks, City Manager Bob Layton explained that the meeting was the first time for council members to “formally vet this project and all of the incentives.”

He added: “If the council were to say, for instance, there were two or three pieces of that that you had discomfort with, that would then put everyone on notice that the deal may not go forward.” He said this is the purpose of today’s action, and he added that the action is non-binding.

I would suggest that since the council, with the exception of Council Member Michael O’Donnell (district 4, south and southwest Wichita), found no problems with issuing the letter of intent, it has no problems with the deal, and this is what makes the September public hearing, as Holman said, a “pointless afterthought.”

Astonishingly, the manger said while this is “not intended to be the normal process,” he said that he “kind of like it” as it gave an initial opportunity to gauge the sentiment of council members.

I’m glad the manager didn’t mention the sentiment of the public, as with little notice as to the content of the deal and its incentives, citizens had no meaningful opportunity to prepare.

An example of the contorted logic council members use to justify their action: Council Member Jeff Longwell (district 5, west and northwest Wichita) explained that issuing letters of intent is a common practice in real estate deals. He confused, however, agreements made between private parties and those where government is a party. Private parties can voluntarily enter into whatever agreements they want. But agreements with government are governed by laws. Yesterday, the city council announced its intent to do something for which it is required to hold a public hearing. That didn’t violate the letter of the law, but it certainly goes against its spirit and meaning. Longwell said he has no problem with that.

Their bureaucratic enablers helped out, too. Wichita Downtown Development Corporation President Jeff Fluhr, in his testimony, said we are working towards becoming a “city of distinction.” That we are, indeed — a city distinguished by lack of respect for the rule of law and its disregard for citizens in favor of special interests.

A few observations from the meeting follow.

Public investment

In response to a question from the mayor, Allen Bell, Wichita’s Director of Urban Development, said that the ratio of private dollars to public dollars for this project is about 2.2 to 1. Whether these numbers are correct is doubtful. It will take an analysis of the deal to determine the true numbers, and the details have been available for only a short time. But if correct, this ratio falls well short of the stated goals. Two years ago, when agitation for a new round of downtown planing started, boosters spoke of a ratio of 15 to 1. Eventually planners promised a ratio of 5 to 1 private to public investment for downtown. This project, while of course is just a single project and not the entirety of downtown development, doesn’t reach half that goal.

Order of events and media coverage

During the meeting, Council Member Pete Meitzner (district 2, east Wichita) conceded that “the order of events is confusing.”

Before that, Council Member Janet Miller (district 6, north central Wichita) claimed that there had been much media coverage of the proposed hotel, and that the public was actually getting two opportunities to talk about this project. She said that the media had published information about today’s meeting and the public hearing on September 13th.

Miller is gravely mistaken. Until a Wichita Eagle article on Saturday, I saw no mention of the letter of intent, and no detail of the form of subsidies to be considered for this project. The city’s list of legal notices contains no mention of the action that was taken at this meeting.

Questions not answered

During my remarks to the council, I related how last year the Wichita Eagle alleged that David Burk, the managing member of this project — and I quote here: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

This Eagle article and a companion article went on to quote these people as having trouble with and being concerned, to varying degrees, with Burk’s acts: City Attorney Gary Rebenstorf; City Council member Jeff Longwell; City Council Member Lavonta Williams, now serving as vice mayor; then-Vice Mayor Jim Skelton, now on the Sedgwick County Commission; and City Manager Robert Layton.

In particular, the manager said, according to the Eagle, that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”

The manager’s quote is most directly damaging. Despite the fact that nearly all the property taxes Burk pays directly enriches himself and only him, he still doesn’t want to pay them. And according to the Wichita Eagle — not me — he engaged in deception in order to reduce them.

None of the four people in the council chambers — Rebenstorf, Longwell, Williams, and Layton — explained their apparent change of mind with regard to Burk’s acts.

Burk, who addressed the council immediately after I asked if he cared to explain his actions, decided to avoid the issue. In his shoes, I probably would have done the same, as there is no justification for the acts the Eagle accused him of doing. He, and his political and bureaucratic enablers in Wichita city hall, have to hope this issue fades.

Campaign contributions

Council member O’Donnell asked about a parking garage to be built at a cost of $6 million to the city: Will the city be putting this project out to competitive bid? Bell replied no, that is the developer’s request. City attorney Rebenstorf added that there is a charter ordinance that exempts these types of projects from bidding requirements.

O’Donnell said that awarding the construction contract to a company that has made campaign contributions to all council members (except him) “seems a little questionable.”

The company in question is Key Construction. Its principals regularly appear on campaign finance reports, making the maximum allowed contribution to a wide variety of candidates. Similarly, Burke and his wife also frequently make the maximum contribution to city hall candidates.

O’Donnell is correct to publicize these contributions. They emit a foul odor. In our political system, many people make contributions to candidates whose ideology they agree with, be it conservative, liberal, or something else.

But Burk and others routinely make the maximum contribution to all — or nearly all — candidates, even those with widely varying political stances. How can someone explain Burk’s (and his wife’s) contributions to liberals like Miller and Williams, and also to conservatives like Longwell, Meitzner, and former council member Sue Schlapp?

The answer is that Schlapp and Longwell, despite their proclamations of fiscal conservatism, have shown themselves to be willing to vote for any form of developer welfare Burk and others have asked for. They create tangled webs of tortured logic to explain their votes. Meitzner, along with his fellow new council member James Clendenin (district 3, south and southeast Wichita), seems to be following the same path.

Several council members and the mayor took exception to O’Donnell’s raising of this matter. Clendenin, for his part, objected and said that the public has had over 30 days to consider and take exception with this project. This contention, like Miller’s, isn’t supported by any facts that I am aware of. It appears that the first mention of any of the details of the plan and the subsidies is contained in a MAPC agenda that appears to have been created on July 29. Besides not being 30 days in advance, the MAPC agenda is an obscure place to release what Clendenin believes is adequate public notice.

Regarding the issue of campaign contributions, the mayor — without mentioning his name — strongly criticized O’Donnell for bringing up this matter. Many people watching this meeting felt that the extreme reaction of Brewer and others to O’Donnell’s observation reveals a certain uneasiness regarding these contributions. I don’t believe the mayor and council members are taking illegal bribes, although when any city is enriching people with millions of dollars of developer welfare there is always that threat, and in some cities and states such practices are commonplace.

The fact remains, however, that there is a small group of campaign contributors who — over and over — ask for and receive largess from city hall.

The mayor’s criticisms

In his comments, Mayor Brewer accused opponents of providing only partial facts about matters, because the full facts did not support their case. He was referring to my remarks that a lawsuit brought against the city by a party who felt the city had reneged on a letter of intent was litigated all the way to the Kansas Supreme Court. In my remarks I didn’t mention who won that case — the city did — and the mayor believes this is an example of slanting the facts.

The mayor went on to make accusations of “grandstanding” from some of the public and “some council members” because there are cameras in the council chambers. He mentioned that news media are present at every meeting and that council meetings are broadcast on television.

The mayor should take notice, however, that most people who care about public affairs and policy are severely disappointed with news media coverage of city hall events. The resources of news gathering agencies, especially newspapers, are severely depleted as compared to the past. In my coverage of a talk given by former Wichita Eagle editor Davis Merritt, I wrote this: “A question that I asked is whether the declining resources of the Wichita Eagle might create the danger that local government officials feel they can act under less scrutiny, or is this already happening? Merritt replied that this has been going on for some time. ‘The watchdog job of journalism is incredibly important and is terribly threatened.’ When all resources go to cover what must be covered — police, accidents, etc. — there isn’t anything left over to cover what should be covered. There are many important stories that aren’t being covered because the ‘boots aren’t on the street anymore,’ he said.” See Former Wichita Eagle editor addresses journalism, democracy, May 11, 2009.

In addition, Bill Wilson, the reporter the Wichita Eagle sent to cover the meeting, has a documented bias against the concept of free markets, and against those who believe in them.

The mayor, when delivering his criticism, does not use the names of those he criticizes. It would be useful if he did, but it would mean he has to take greater accountability for his remarks.

Following are links to excerpts of testimony from the meeting — perhaps examples of the “grandstanding” the mayor complained about: John Todd, Shirley Koehn, and Bob Weeks.

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

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

Here’s the situation: a person wants to gain approval of a tax increment financing (TIF) district project plan. This requires a public hearing, which the city has scheduled for September 13th.

But this schedule doesn’t suit the applicant. He has a personal business need — an expiring purchase option — and wants the city to issue a letter of intent stating that the city intends to do all the things that are the subject of the September public hearing.

The letter of intent is not binding, city officials tell us. The council will still have to hold the September public hearing and vote on the incentives the developer wants. And the list of incentives is large, amounting to many millions of dollars. Whether to issue these incentives deserves discussion and a public hearing.

But the letter of intent, in effect, circumvents the public hearing. It reduces the hearing to a meaningless exercise. No matter what information is presented at the September public hearing, no matter how strong public opinion might be against this project, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I imagine that persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?

And the developers are planning to take action based on this letter of intent. To them, the letter does have meaning. If it had no meaning, why would they ask for it?

That bears repeating: If the letter of intent is non-binding, why issue it at all?

The last time someone felt the city reneged on a letter of intent, it resulted in a court case that went all the way to the Kansas Supreme Court. I imagine the city is not anxious to repeat that experience.

Part of the purpose of public hearings and their advance notice, usually 30 days or so, is to give interested parties time to prepare for the hearing. But citizens are given just a few days notice of the proposed letter of intent. The parties who will receive the subsidies, of course, have known about this for some time. Their bureaucratic and political enablers have, too.

The issuance of the letter of intent on Tuesday, if the city council decides to do so, is an affront to the rule of law. It would be a powerful statement by the council that it intends to go ahead with the project and its subsides, public hearing — and citizens — be damned. It is a striking show of arrogance by the city and its political leadership, which is to say Mayor Carl Brewer.

After Tuesday’s meeting we will know one thing. We will know if the Wichita City Council and city staff value the rule of law more than the needs of one small group of people. We won’t really know about individual city staff, but the council members and mayor will have to vote on this item. We’ll know exactly where each of them stands. Expect waffling.

Tuesday provides citizens a chance to learn exactly how the mayor and each council members value the rule of law as compared to the needs of one person and his business partners. It is as simple as that.

The project

The project is the development of a new hotel in an existing building downtown. It sounds like a neat project and would be a great addition to Wichita. But — this project is a product of central government planning backed by massive government intervention in the form of millions of dollars of subsidy. Pretty much all the tools have been tapped in the proposed corporate welfare, even one form that will require the city to pass a special charter ordinance.

The lead developer, David Burk, is well known in Wichita and has produced a number of successful projects. (We must qualify this as “seemingly successful,” as it seems as all of Burk’s projects require some sort of taxpayer involvement and subsidy. So we don’t really know if these projects would be successful if they had to stand on their own.)

I’ve written extensively on the problems with government-directed planning and taxpayer-funded investment in downtown Wichita. See Downtown Wichita regulations on subsidy to be considered or Downtown Wichita revitalization for examples. This project suffers from all these problems.

Furthermore, we see the problems of the public choice theory of politics at play here. Perhaps most prominent is the problem of concentrated benefits and dispersed costs. In this case Burk and his partners stand to garner tremendous benefit, while everyone else pays. This is why Burk and his wife are generous campaign donors to both conservative and liberal city politicians.

Burk and past allegations

The involvement of Burk in the project, along with the city’s response, is problematic. City documents indicate that the city has investigated the backgrounds of the applicants for this project. The result is “no significant findings to report.” Evidently the city didn’t look very hard. In February 2010 the Wichita Eagle reported on the activities of David Burk with regard to property he owns in Old Town. Citizens reading these articles might have been alarmed at the actions of Burk. Certainly some city hall politicians and bureaucrats were.

The opening sentence of the Wichita Eagle article (Developer appealed taxes on city-owned property) raises the main allegation against Burk: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

A number of Wichita city hall officials were not pleased with Burk’s act.

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

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

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

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

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

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

Some of Burk’s partners have a history of dealing with the city that is illustrative of their attitudes. In 2008 the Old Town Warren Theater was failing and its owners threatened to close it and leave the city with a huge loss on a TIF district formed for the theater’s benefit. Faced with this threat, the city made a no-interest and low-interest loan to the theater. The theater’s owners included David Wells, who is one of Burk’s partners in the project being considered by the council for the letter of intent.

Entrepreneurs are not always successful. Business failure, if handled honestly and honorably, is not shameful.

But when a business is already receiving taxpayer subsidy, and the response to failure is to demand even more from the taxpayer — that is shameful.

Burk and Wells, by the way, played a role in the WaterWalk project, which has a well-deserved reputation as a failed development. In 2011 the city’s budget includes a loss of slightly over one million dollars for the TIF district that has benefited its owners to the tune of over $41 million.

Burk has been personally enriched by city hall action before. An example from the same article: “A 2003 lease agreement gave Burk use of the retail strip at the front of the parking garage for $1 a year for the first five years.” Nearly-free property that you can then lease at market rates is a sweet deal.

These gentlemen have had their bite at the taxpayer-funded apple. Now they want another bite, on their own schedule, without regard to rule of law and the public.

Wichita and its political class

The discussion at yesterday’s Wichita City Council meeting provided an opportunity for citizens to discover the difference in the thinking of the political class and those who value limited government and capitalism.

At issue was Mid-Continent Instruments, Inc., which asked the city for a forgivable loan of $10,000. It received the same last week from Sedgwick County. According to city documents, the State of Kansas through its Department of Commerce is also contributing $503,055 in forgivable loans, sales tax exemptions, training grants, and tax credits.

At the city council meeting Clinton Coen, a young man who ran for city council earlier this year, spoke against this measure, which he called corporate welfare.

In response to Coen, Council Member James Clendenin (district 3, south and southeast Wichita) asked if we should ignore companies that want to do business here, or should we allow them to leave? Implicit in the question is that the threat dangled by Mid-Continent is real: that unless the city gives them $10,000, they will expand somewhere else. How citizens and council members feel about this issue largely depends on their perceived genuineness of this threat.

When Coen recommended that the city cut spending, Clendenin said “I can guarantee you, from what I have seen, this city government has cut a tremendous amount of spending.” When pressed by Coen for examples of cuts, he demurred. Clendenin also said that the $10,000 is needed to show the city’s commitment to the company.

Perhaps coming to the rescue of her younger and less experienced colleague, Council Member Janet Miller asked City Manager Bob Layton how much has been cut from the budget, and he replied “we’ve cut over $20 million in the general fund over three years.”

In saying that, Layton is using the language and mind-set of bureaucrats and politicians. In this world, it’s a cut if spending does not rise as fast as planned or hoped for. As you can see from the accompanying chart, Wichita general fund spending has not been cut in recent years. It has risen in each of the last three years, and plans are for it to keep rising.

Wichita general fund spending

This illustrates a divide between the thinking of the political class and regular people. Blurring the distinction between plans and reality lets politicians and bureaucrats present a fiscally responsible image — they cut the budget, after all — and increase spending at the same time. It’s a message that misinforms citizens about the important facts.

Miller also praised the return on investment the city receives for its spending on economic development, citing Wichita State University Center for Economic Development and Business Research and the cost-benefit calculations it performs. These calculations take the cost of providing the incentives and compare it to the returns the city and other governmental entities receive.

What is rarely mentioned, and what I think most people would be surprised to learn, is that the “returns” used in these calculations is manifested in the form of increased tax revenue. It’s not like in the private sector, where business firms attempt to increase their sales and profits by providing a product or service that people willingly buy. No, the city increases its revenue (we can’t call it profit) by collecting more taxes.

It’s another difference between the political class and everyone else: The political class craves tax revenue.

Aside from this, the cost-benefit calculations for the city don’t include the entire cost. The cost doesn’t include the county’s contribution, the majority of which comes from residents of its largest city, which is Wichita. Then, there’s the half-million in subsidy from the state, with a large portion of that paid for by the people of Wichita.

But even if you believe these calculations, there’s the problem of right-sizing the investment. If an investment of $10,000 has such glowing returns — last week Sedgwick County Commissioner Jim Skelton called the decision a “no-brainer” — why can’t we invest more? If we really believe this investment is good, we should wonder why the city council and county commission are so timid.

Since the applicant company is located in his district, Council Member Pete Meitzner (district 2, east Wichita), praised the company and the state’s incentives, and made a motion to approve the forgivable loan. All council members except Michael O’Donnell (district 4, south and southwest Wichita) voted yes.

Going forward

While the political class praises these subsidies and the companies that apply for them, not many are willing to confront the reality of the system we’re creating. Some, like O’Donnell and Sedgwick County Commissioner Richard Ranzau, have recognized that when government is seen as eager to grant these subsidies, it prompts other companies to apply. The lure of a subsidy may cause them to arrange their business affairs so as to conform — or appear to conform — to the guidelines government has for its various subsidy programs. Companies may do this without regard to underlying economic wisdom.

We also need to recognize that besides simple greed for public money, businesses have another reason to apply for these subsidies: If a publicly-traded company doesn’t seek them, its shareholders would wonder why the company didn’t exercise its fiduciary duty to do so. But this just perpetuates the system, and so increasing amounts of economic development fall under the direction of government programs.

While most people see this rise in corporate welfare as harmful — I call it a moral hazard — the political class is pleased with this arrangement. As Meitzner said in making his motion, he was proud that Wichita “won out” over the other city Mid-Continent Instruments considered moving to.

Another harmful effect of these actions is to create a reputation for having an uncompetitive business environment. Not only must businesses of all types pay for the cost of these subsidies, some face direct competition by a government-subsidized competitor. This is the situation Wichita-area hotels face as a result of the city granting millions in subsidy to a hotel developer to build a Fairfield Inn downtown.

Even those not in direct competition face increased costs as they attempt to hire labor, buy supplies, and seek access to capital in competition with government-subsidized firms. Could this uneven competitive landscape be a factor that business firms consider in deciding where to locate and invest?

We can expect to see more government intervention in economic development and more corporate welfare. Former council member Sue Schlapp in April took a job with the Kansas Department of Commerce. Her job title is “senior constituent liaison,” which I think can be better described as “customer service agent for the corporate welfare state.” Her office is in Wichita city hall.

Increasingly we see politicians and bureaucrats making decisions based on incorrect and misleading information, such as claiming that the city’s general fund budget has been cut when spending has increased. Sometimes they are fed incorrect information, as in the case of a presentation at Sedgwick County Commission that bordered on fraudulent.

Sometimes, I think, officeholders just don’t care. It’s easiest to go along with the flow and not raise ripples. They participate in groundbreakings and get their photograph in the newspaper and on television that way. Which brings up an important question: why do none of our city’s mainstream media outlets report on these matters?

Sedgwick County, Golf Warehouse, reveal shortcomings in procedure

Wednesday’s decision by the Sedgwick County Commission to grant a forgivable loan of $48,000 to The Golf Warehouse is yet another example of local government relying on corporate welfare as economic development, and exposes how little deliberation is given to making these decisions.

This subsidy was promoted by the county and TGW’s consultant as necessary to persuade the applicant company to expand its operations in Wichita rather than Indiana, where the company has other operations and had also received an offer of subsidy. The same argument had been made to the Wichita City Council in May 10th, and it was successful in persuading all council members but one to vote in favor of granting a forgivable loan of the same amount as the county.

At the county commission meeting, commissioners received a presentation by Leslie Wagner, Director of Project Management and Development for Ginovus, an economic development and site location advisory services firm working on behalf of TGW.

While The Golf Warehouse was started in Wichita by entrepreneurs, Wagner told commissioners that the company is now owned by Redcats, a Paris, France company. That acquisition took place in 2006, she said.

A focus of Wagner’s presentation was how large and successful an enterprise Redcats is, with $4.8 billion in annual sales revenue and over 14,000 employees. As to TGW specifically, Wagner said it offers the largest and broadest selection of golf products in the world, and has expanded to included baseball, softball, and soccer products.

Right away some might be inclined to ask why, with the company so large and successful, local governments find it necessary to prop up this company with public assistance.

According to Wagner, TGW will add 105 new employees by 2015, and the company’s average annual payroll by then will be $9,995,000.

The argument for subsidy

In her presentation, Wagner listed the incentives offered to TGW by both Indiana and Kansas. But she did not supply the value of each incentive, which makes the comparison largely meaningless. Additionally, the list of the incentives and subsidies offered by the State of Kansas was not complete. Further, some of the incentives offered by Indiana are already present in Kansas.

For example, one incentive offered by Indiana was an abatement on personal property tax, which Wagner indicated was a factor in favor of that state. But Kansas does not tax business personal property, that is, business machinery and equipment newly purchased, leased, or moved into Kansas. This ranges from desks, computers, and copiers to large pieces of machinery and equipment. The incentive offered by Indiana, therefore, is already in place in Kansas without companies needing to ask for it, and Wagner should not have included this as a distinguishing factor between Indiana and Kansas.

In addition, Kansas has added “expensing,” which allows businesses to depreciate purchases in one year instead of several, which reduces Kansas state income tax. As TGW expands and makes these purchases, it will be able to take advantage of this new provision in the Kansas tax code.

Wagner also mentioned an Indiana program called EDGE (Economic Development for a Growing Economy), which rebates employees’ state income tax withholding back to the company. We have that in Kansas, too. It’s called Promoting Employment Across Kansas (PEAK), and the range of situations where this program can be applied has been expanded by this year’s legislature. This, again, is an example where an incentive offered by Indiana and promoted by Wagner as a reason as to why the county must grant a subsidy of its own to TGW is already present in Kansas.

Another part of Wagner’s presentation that deserves a second look is her analysis of the economic impact of TGW. Wagner said that over ten years the payroll — the wages paid to its employees in Wichita — of TGW would be $100,623,437, with a “conservative” apportionment to the county of $50,311,718.

She then showed the commission a slide where she computed the return on the county’s investment. For the “return,” she used the $50,311,718 figure of payroll that she attributed to the county. For the “investment,” she used $96,000, which is the sum of the forgivable loans from both Wichita and Sedgwick County. (Why she used both entity’s investment but only county payroll, I don’t know.)

Her calculations from these numbers produced a return on investment of 524 percent. “If I were making an investment, that’s a phenomenal return, and I’d make that one all day long,” she told commissioners.

But her actual calculation should have been as follows ($50,311,718 – $96,000) / $96,000 * 100 = 52,308 percent for the rate of return, if she was looking to fluff up her numbers as much as possible.

But even that calculation wouldn’t make economic or financial sense. The $50,311,718 is returned over a period of 10 years, so the receipt of that money needs to be spread over that time. Then, since long time periods are involved, the returns in future years need to be discounted, because a dollar expected to be received in ten years is not worth as much as a dollar received this year. I made a few other assumptions and used Excel’s internal rate of return function to compute a rate of return of 5,241 percent.

This tremendous rate of return, of course, makes no economic sense either. The $50,311,718 used as the “return” to the county is not that at all. This money is wages paid to workers. It belongs to them, not to the county. True, the county will get some of that in the form of sales taxes these workers pay as they make purchases within the county, and perhaps in other forms of taxes. Using an estimate of that number would make sense on some level, and that is the type of reasoning the Wichita State University Center for Economic Development and Business Research uses to compute the cost-benefit figures the city and county often rely upon in making decisions.

But the figures and calculations Wagner used to make the case for TGW make absolutely no economic or financial sense. Worse than being merely absurd, they are deceptive. Compounding the error, elected officials such as commission chair Dave Unruh cited them as a factor in making his vote in favor of granting the forgivable loan.

Completing her presentation, Wagner said “Perhaps as important, it’s goodwill. … Does the state want us to stay, does the community want us to stay, and are they willing to help us grow?” Brad Wolansky, CEO of TGW, said the loan is part of the “element of partnership” between the county and TGW, which he said was indicative of the county’s support. This is the same attitude expressed at the Wichita City Council meeting: Many of these companies requesting incentives and subsidies believe they deserve some sort of reward for investing in Wichita and creating jobs. The profits of entrepreneurs or capitalists are no longer sufficient, it seems, for some companies.

In remarks from the bench, Sedgwick County Commissioner Richard Ranzau questioned the need for this incentive, citing the recent example of a Save-A-Lot store which will be built by a developer without incentives, after the original developer failed to acquire all the incentive he asked for. Video of his remarks and an exchange with Wagner is below.

In his remarks, Commissioner Jim Skelton said this decision is a “no-brainer,” and that he was proud to do this for the community. Chairman Unruh said “we’re competing with someone else for this company.” He referenced the “great return” on the county’s investment, and that he could not find a reason not to support it.

All commissioners except Ranzau voted to grant the forgivable loan, with Karl Peterjohn absent.

City and county information not complete

The forgivable loan subsidy granted by both Wichita and Sedgwick County is not the only subsidy TGW will receive. An inquiry to the Kansas Department of Commerce indicates that from the state of Kansas, TGW will receive $125,000 from the Kansas Economic Opportunity Initiatives Fund, $125,000 in Kansas Industrial Retraining, $50,000 in Kansas Industrial Training, $96,000 in sales tax savings, $315,918 in personal property tax savings, and $623,796 from the High Performance Incentive Program, for total incentives from the state of $1,310,714.

These state incentives were not mentioned by the county. The value is also much higher than the City of Wichita reported in its material for its May 10th meeting when the city approved its forgivable loan to TGW. At that time, city documents reported the value of state subsidies at $275,000, a figure just 21 percent of the value reported by the Department of Commerce.

Corporate welfare, again

This episode, where subsidy is heaped on a company who presents a threat — real or imagined — of leaving Wichita or expanding elsewhere, represents local officials not grounding a decision on actual facts. The wild claims of return on investment made by the company’s representative simply can’t be believed. Her information about the incentives offered and available, as well as that from the City of Wichita, is incomplete or misleading.

With some time to analyze the claims made by Wagner (and others who appear in similar situations), we can expose them for what they are. But commissioners — city council members too — often don’t have time or expertise to examine the facts. Commissioner Ranzau told me that he did not receive Wagner’s slides before the meeting. The information delivered to the council by Sherdeill Breathett, Economic Development Specialist for the county, did not appear in the new agenda system the county recently implemented. During meetings there is not time to analyze calculations or examine the claims made by presenters.

We have to ask, however, if local government officials have the desire to examine these presentations and claims. Once the veneer of economic development hucksterism — thin as it is — is stripped away, we are left with what Ranzau has stated several times from his position on the commission bench: a simple transfer of one person’s money to another using the force of government as the agent. This reality of corporate welfare is something that officials would rather not recognize, and it’s not economic development in my book.

Education gap on Wichita City Council

Before Jim Skelton left the council in January, none of the four men serving on the Wichita City Council had completed a college degree. The three women serving on the council set a better example, with all three holding college degrees.

Of the candidates running in next week’s election for four council seats and the office of mayor, less than half hold college degrees.

Is it necessary to complete college in order to serve in an office like mayor or city council? Apparently none of the four men who held these offices without a degree thought so. The two running to retain their present positions — Mayor Carl Brewer and council member Jeff Longwell (district 5, west and northwest Wichita) — evidently don’t think so, or they would not be running again.

But we tell young people that college holds the key to success. We encourage schoolchildren to consider college and to take a rigorous high school curriculum in order to prepare for it. We encourage families to save for college. Our region’s economic development agency promotes the number of people with college or advanced degrees. We promote our colleges and universities as a factor that distinguishes Wichita. We hope that our elected officials will set an example we want young people to follow.

Once in office, we ask our city elected officials to attempt to grasp and understand complex sets of financial data, working with a budget of about half a billion dollars for the City of Wichita. We hope that they will be able to consider large and weighty issues such as the role of government in a free society. Members of the professional management staff — bureaucrats — that manage the city, county, and state are generally required to hold college degrees.

The irony is that elected officials often are highly reliant on the bureaucratic staff for information, data, and advice, and this professional bureaucracy is often highly educated. Does this imbalance create problems?

Elected officials compared to regular people

Amazingly, it turns out that elected officials, as a group, are less knowledgeable about civics than the general population. That’s the finding of Intercollegiate Studies Institute, which surveyed Americans and their knowledge of civics in 2008. After analyzing the data, ISI concluded: “Simply put, the more you know about American government, history, and economics the less likely you are to pursue and win elective office.”

Related: Local elections, qualifications of Wichita’s elected officials.

In Wichita, start of a solution to federal spending

At the Sedgwick County Commission, newly-elected commissioner Richard Ranzau voted three times against the county applying for grants of federal funds, showing a possible way that federal spending might be brought under control.

During the meeting, Ranzau asked staff questions about where the funding for the grant programs was coming from, which, of course, is the federal government, sometimes routed through the Kansas Department of Commerce. Sometimes local spending is required by these grants.

In opposing the programs, Ranzau said that federal government spending is too high. Also, our level of debt is too high, and that the cost of these spending programs is passed on to future generations. He also didn’t see where the U.S. Constitution authorizes activity like the commission — in partnership with the federal government — is considering undertaking.

Ranzau offered an alternative: if the commission believes these projects are important to us as a community, we could pay for them ourselves and pay for them now.

Commissioner Jim Skelton argued that if we don’t apply for and receive this money, the federal government will spend it anyway, and someone else will receive it. “I think we can end up screwing our constituency by opposing this on the philosophy that our government is too big.”

He said he doesn’t agree with the “rampant spending of stimulus money” and would like to see it end, but he didn’t see how refusing this money would make a difference.

Constitutional basis questioned

During discussion, Skelton asked county counselor Richard Euson a question: “Can you tell me about the constitutionality of this issue? How on earth can this happen if it’s not constitutional?”

Euson was flummoxed by the question, and admitted that he was not prepared to answer the question. This is not to be held against the county’s attorney, as questions like this are rarely asked — an indication of the novelty of Ranzau’s position and how infrequently elected officials and staff consider questions such as the fundamental role of government and its level of involvement.

The job of a commissioner, according to Norton

In discussion about one grant program, Commissioner Tim Norton asked a question designed to make sure that Ranzau knew that the project was located in his district. On a grant for a transportation plan, Norton again asked a question designed to make sure that Ranzau knew whose district this plan would serve, referring to former commissioner Kelly Parks’ support of the program.

These questions by Norton highlight the problem with district-based representation, where representatives of districts are expected to bring as much government largess as possible back to their districts. At the federal level this problem is illustrated by the earmarking process. Locally, we see that Sedgwick County Commissioners are assumed to be in favor of any project that benefits their districts, regardless of the overall worth of the project or its cost.

A bottom-up solution to federal spending?

At a town hall meeting on Saturday, I asked Kansas fourth district Congressman Mike Pompeo, who represents all of Sedgwick County, about his opinion of ground-up opposition to federal spending and debt, rather than waiting for Congress and the President to solve the problem from the top down.

Pompeo didn’t answer the question directly, but said that from now on, each law passed by Congress will have a section that states the constitutional authority for the legislation. He also said that the federal government is involved in many areas that it should not be involved in, adding “So many times the question is ‘should we reduce this agency’s budget by three percent,’ and the proper question is ‘why does this agency exist?’”

While the new U.S. House of Representatives is full of enthusiasm for cutting spending, here we see an example of just how difficult cutting spending will be. Local governments are addicted to grants like the three discussed above. A congressman who voted to cut programs like these will hear from the affected constituents, and would also likely hear from the Sedgwick County staff who are advocates for these projects and spending. If more elected officials would vote against these programs, that would make it easier for Congress to cut off the flow of spending.

We should also remember that Ranzau offered an alternative: fund the programs ourselves. The problem is that we are funding them ourselves, through the roundabout trip of tax dollars going to Washington, which then sends them back, in this case in the form of grants with many conditions and restrictions on the way the money can be spent. So Skelton is correct: the federal government will spend the money anyway. But to go along means that the hole is dug deeper. More crudely, the federal government says: implement this program in our way, because you’ve already paid for it, and you don’t want to piss away your taxes somewhere else.

Perhaps a coalition of forward-thinking local government officeholders like Ranzau and U.S. Congressmen like Pompeo can join together to bring the spending under control. It will take courage, especially from the local officeholders.

Kansas and Wichita quick takes: Monday January 3, 2011

This week at Wichita City Council. Roger Smith will be sworn in to take the place of Jim Skelton. Smith’s term will end in April, when the voters will select a permanent member of the council from district 3. Of course, Smith could be that person. … The council will hear from an independent fact-finder regarding the firefighters. See Wichita Eagle Wichita firefighters union stresses staffing in contract requests with city. … Also improvement of two south Wichita intersections will be considered. See Wichita City Council to consider $4 million in street work on S. Broadway.

Last meeting for two commissioners. This Wednesday will be the last meeting for two members of the Sedgwick County Commission, Gwen Welshimer and Kelly Parks. New members will be sworn on this Sunday.

Legislators to hear from citizens. The South-Central Kansas Legislative Delegation will be taking public comments Tuesday January fourth from 7:00 pm to 8:30 pm in the Jury Room of the Sedgwick County Courthouse, 525 N. Main in Wichita. (Use the north entrance to the courthouse). This is your opportunity to let local legislators know your wishes on issues that will be considered during the 2011 legislative session. In the past, each person wishing to talk has been limited to between three and five minutes depending on the number of people wishing to speak.

State GOP chief to speak in Wichita. This Friday (January 7th) Amanda Adkins, who is Chair of the Kansas Republican Party, will speak at the Wichita Pachyderm Club. The topic is “Conservative Leadership Now — 2020: Building Long-term Political Infrastructure for the State of Kansas.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers include Bob Lamke, Director of the Sedgwick County Division of Public Safety on January 14th, and Ed Flentje, Professor at the Hugo Wall School of Urban and Public Affairs at Wichita State University, will be discussing a book he co-authored titled “Kansas Politics and Government” on January 21.

Repeal of sales tax. Many of the new members of the Kansas House of Representatives ran on opposition to the statewide sales tax increase that took effect in July. I had speculated in an appearance on This Week in Kansas that the House would entertain a bill to repeal the sales tax, while another — more experienced, I might add — observer of Kansas politics felt that leadership would tamp down such an effort. Today David Klepper of The Kansas City Star takes a look at the prospects for legislative action on this issue. Some would like to repeal the sales tax right away, while others say that repeal needs to be part of a broader, long-term look at Kansas tax policy. Senate Vice President John Vratil — not a supporter of limited government and economic freedom — is quoted as saying tax reform is a “multi-year project.”

Net neutrality advances. Almost lost in all the congressional activity before Christmas was the fact that the Federal Communications Commission voted to pass new rules on net neutrality. Writing in The Wall Street Journal, John Fund says: “The Federal Communications Commission’s new ‘net neutrality’ rules, passed on a partisan 3-2 vote yesterday, represent a huge win for a slick lobbying campaign run by liberal activist groups and foundations. The losers are likely to be consumers who will see innovation and investment chilled by regulations that treat the Internet like a public utility.” Fund explains the radical political views of those behind the net neutrality campaign. He also explains that President Barack Obama is ignoring the will of Congress and court rulings, seeking to impose internet regulation through the executive branch.

Wichita noticed in Boston. A writer from the Boston Globe visits Wichita and writes on his tourist experiences. It follows a predictable template: First, put away the Toto jokes and overlook the city’s problematic reputation. Then — I found public art, lattes, and a restaurant! Wow! Who would have figured?

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

Earlier this year Robert Lawson appeared in Wichita to speak about economic freedom throughout the world. While the United States presently ranks well, that is changing. Writing this month in The Freeman, Lawson and his colleagues warn of dangerous trends — particularly the Obama Administration’s response to the recession — that pose a threat to the economic freedom that powers growth and prosperity.

While the article is focused primarily at the national economy, there are lessons to be learned locally, too. In particular, increasing intervention into the state and local economy leads to compounding the loss of economic freedom.

As an example, the Wichita City Council has just approved a plan for the revitalization of downtown Wichita that calls for public investment to be made downtown. While the plan is promoted as a market-based plan, it is, instead, a government plan to redirect investment from where people have decided it should be to where politicians, bureaucrats, and their patrons think it should be. These patrons are sometimes called “crony capitalists,” as explained in this passage from the article (James D. Gwartney, Joshua C. Hall and Robert A. Lawson:
The Decline in Economic Freedom
):

It is important to distinguish between market entrepreneurs and crony capitalists. Market entrepreneurs succeed by providing customers with better products, more reliable service, and lower prices than are available elsewhere. They succeed by creating wealth — by producing goods and services that are worth more than the value of the resources required for their production. Crony capitalists are different: They get ahead through subsidies, special tax breaks, regulatory favors, and other forms of political favoritism. Rather than providing consumers with better products at attractive prices, crony capitalists form an alliance with politicians. The crony capitalists provide the politicians with contributions, other political resources, and, in some cases, bribes in exchange for subsidies and regulations that give them an advantage relative to other firms. Rather than create wealth, crony capitalists form a coalition with political officials to plunder wealth from taxpayers and other citizens.

We are now in the midst of a great debate between the proponents of limited government and open markets on the one hand and those favoring more collectivism and political direction of the economy on the other. The outcome of this debate will determine the future of both economic freedom and the prosperity of Americans and others throughout the world.

In Wichita, “those favoring more collectivism and political direction of the economy” are winning. Not only are they winning the actual political votes, they are also winning the battles within their own minds. Astonishingly, many of the crony capitalists in Wichita have deluded themselves into believing that they are supporters of free markets and capitalism. But taxpayer-supported institutions like Wichita Downtown Development Corporation and Visioneering Wichita exist for the very purpose of directing taxpayer funds toward the crony capitalists. Even the Wichita Metro Chamber of Commerce plays a role in the plunder of the taxpayer, with its president nodding in approval as nominally conservative members of the Wichita City Council expressed their support for the collectivist, anti-market vision for downtown Wichita.

The heads of each of these organizations, along with city council members Sue Schlapp, Paul Gray, Jim Skelton, and Vice Mayor Jeff Longwell consider themselves to be conservatives. Many of these have personally assured me they are in favor of free markets.

The actions of the council members, not only their enthusiastic embrace of the downtown plan, but their interventions — at nearly every meeting, week after week — that interfere with the market economy and destroy economic freedom, show that none have even a basic understanding of the difference between the economic means and the political means. Writing in his recent book The Science of Success, Koch Industries Chairman and CEO Charles Koch explains the difference:

The economic means of profiting involves voluntarily exchanging your goods or services for the goods or services of others. Parties will not voluntarily enter into an exchange unless they both believe they will be better off. Therefore, you can only profit over time in a system of voluntary exchange (a market) by making others better off.

The political means of profiting transfers goods or services from one party to another by force or fraud. A coerced or fraudulent exchange leaves at least one of the parties worse off. Examples are stealing, committing fraud, polluting, using unsafe practices, filing baseless lawsuits, lobbying government to hamper competitors or obtain subsidies and promoting self-serving redistribution programs.

The economic means creates wealth by making each participant, and, therefore, society as a whole, better off. The political means, at best, merely distributes wealth. As a general system, it causes the overcoming majority of people to be worse off. (emphasis added)

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.

Kansas and Wichita quick takes: Monday November 22, 2010

Wichita city council this week. This week is workshop only, meaning that legislative action is limited to consent items. These items are voted on in bulk, unless a council member wants to “pull” an item for separate discussion and voting. Generally consent items are thought to be non-controversial, at least by the person who creates the agenda. This week one consent item may cause a bar to lose its license, as Hurst Laviana reports in the Wichita Eagle. Start time is 9:30 am instead of the usual 9:00 am.

Workshop to discuss Wichita trash. Tuesday’s Wichita city council meeting will have a workshop discussing a plan for a Wichita trash haulers’ cooperative and for a recycling plan. Brent Wistrom and Deb Gruver report in the Wichita Eagle. Conservatives on the council who favor big government — Jeff Longwell, Jim Skelton, and Sue Schlapp — seem to favor the proposal. I guess it is inevitable. But I worry that if we start relying on government to manage a simple thing like trash for us, the danger is that government will want to expand its realm of responsibility to providing things like water, jobs and economic development, employee training for business, housing for low-income people, golf courses, art museums and culture, transit, ice skating rinks, airports, dances for seniors, planning services, education, retirement plans, and health care.

Candidate for Wichita mayor noticed. Bob Nelson describes himself this way: “I am a 36 year old lawyer, technical consultant, and aviation industry professional. I am a long time Republican and conservative.” His website –maybe still in developmental state, but nonetheless visible to the world — is Bob Nelson for Mayor.

Former Wichita school chief in news. Former USD 259, the Wichita public school district superintendent Winston Brooks, now head of Albuquerque public schools, is in the news. An administrator alleges a hostile work environment and has been placed on leave with pay. It’s not the first time highly-paid administrators have been placed on paid leave for long periods since Brooks took over. The meaning of this to Wichita? Many of the current members of the Wichita school board loved Brooks and were sorry to see him leave Wichita.

Charter school studies examined. Carl Bialik, in a “The Numbers Guy” article in the Wall Street Journal, writes about the “confusing report cards” that charter schools have received in various studies. Some studies report glowing results for charters, and other report poor results as compared to regular public schools. Bailik does report one finding: “There is some consensus among these studies. Researchers generally have found that charter schools in low-income, urban areas boost test scores, while suburban charter schools in wealthier areas don’t.” Mentioned by one source quoted in the article is one of the best attributes of charter schools: they can’t force students to attend, so poor ones close down, unlike poor public schools.

Rasmussen polls from last week. “Talk about low expectations” was the start of the email message from Rasmussen Reports. Examples: “Just 26% of voters now think the country is heading in the right direction. This finding continues to fall since Election Day and is the lowest reading since mid-March, largely because Democrats are down but sentiments among Republicans and unaffiliated voters haven’t moved.” (Right Direction or Wrong Track) … “A plurality (47%) of voters believes America’s best days have come and gone, a number that has remained fairly constant since the beginning of the year.” … “Thirty percent (30%) of homeowners say the value of their home is less than what they still own on their mortgage.” … “Belief that a home is a good buy for a family remains at an 18-month low.” It’s all at What They Told Us: Reviewing Last Week’s Key Polls .

Kansas and Wichita quick takes: Wednesday November 3, 2010

Republican Party on probation. Noted conservative figure Richard A. Viguerie of ConservativeHQ.com expressed a common idea: “Voters have given Republicans one more chance to get it right. They are on probation, and if they mess up again, they won’t get another chance. The last time the Republicans were in charge, they became the party of big spending, Big Government, and Big Business. They abandoned the philosophy of Ronald Reagan and cozied up to lobbyists and special interests. And they paid a price at the polls.”

Limited government and economic freedom not desired. In today’s Wichita Eagle editorial assessing the election results, Rhonda Holman just can’t grasp the importance of limited government and economic freedom to prosperity. Instead, she prefers what some call “nuanced” politicians, who can be pressured by newspapers to vote for big-government boondoggles: “Incumbent Commissioner Dave Unruh and Wichita City Council member Jim Skelton already have proved to be thoughtful leaders; the same cannot be said of Richard Ranzau, whose tea party tendencies could put important county priorities at risk.” The victories of Ranzau — there were two, one in the primary over an Establishment Republican and again in the general election over a Democrat in a Democratic district — were gained the old-fashioned way: by meeting voters and letting them know what he stands for. And he was not bashful in his message of limited government. Both times, voters responded. The Wichita Eagle ought to take notice.

Future of Sedgwick County Commission. Yesterday’s defeat of incumbent Gwen Welshimer by Jim Skelton replaces a commissioner committed to low taxes and spending with someone with a less convincing record. While Skelton has sometimes voted against TIF districts — he and Paul Gray voted against the $10.3 million Exchange Place TIF district, although they were okay with it at $9.3 million — he firmly believes it is his duty — as city council member and as future county commissioner — to direct the economic development of the region.

Future of Wichita City Council. Skelton’s move to the county commission means there will be another new face on the council be fore long. Already the spring elections will bring two new faces, as members Sue Schlapp and Paul Gray will be leaving the council due to term limits. Now Skelton will be replaced, either by city council appointment or election next spring, depending on the timing of Skelton’s resignation. That’s a total of three new members. Mayor Carl Brewer and Vice Mayor Jeff Longwell must run for relection in the spring if they want to stay on the council. Brewer has already announced his intent to run.

Commission criticized as “gutless.” Because Wichita real estate developer Rob Snyder wasn’t granted some $400,000 in taxpayer subsidy because of the action of the Sedgwick County Commission, he criticized the commission as “gutless,” according to Wichita Eagle reporting. When testifying before the Wichita City Council as to the need for his developer welfare, Snyder whined about how that earmarks are now unpopular with the American public and not available to finance his proposed Save-A-Lot grocery store. An earmark — that is to say, a grant of money paid for by U.S. taxpayers — was used as a large part of the financing for the other Save-A-Lot in Wichita at 13th and Grove.

Kahn to substitute at Pachyderm. A scheduling change means Wichita State University political science professor Mel Kahn will be the presenter at this Friday’s (November 4) meeting of the Wichita Pachyderm Club. The always-interesting and entertaining Kahn will speak on the topic “Do Political Attacks Help or Harm our Republic?” This seems like a timely topic given the recent general and primary elections. The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

Sedgwick County Commission candidates to appear

On Friday October 1, 2010 at the Wichita Pachyderm Club, Republican candidates for the Sedgwick County Commission will speak. The candidates that will appear are:

Dave Unruh, District 1
Richard Ranzau, District 4
Jim Skelton, District 5

All are welcome to attend Wichita Pachyderm Club meetings. The program costs $10, which includes a delicious buffet lunch including salad, soup, two main dishes, and ice tea and coffee. The meeting starts at noon, although it’s recommended to arrive fifteen minutes early to get your lunch before the program starts.

The Wichita Petroleum Club is on the ninth floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway) in Wichita, Kansas (click for a map and directions). You may park in the garage (enter west side of Broadway between Douglas and First Streets) and use the sky walk to enter the Bank of America building. The Petroleum Club will stamp your parking ticket and the fee will be $1.00. Or, there is usually some metered and free street parking nearby.

Wichita Pachyderm speaker lineup set

The Wichita Pachyderm Club has released its lineup of speakers for the upcoming month. Everyone is welcome to attend Wichita Pachyderm Club meetings. The club meets on Friday at noon at the Wichita Petroleum Club on the top floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway). The cost for the meetings is $10, which includes a buffet lunch.

For more information, contact President John Stevens at at enersigns@sbcglobal.net or Vice President John Todd at john@johntodd.net.

September 10, 2010
Honorable Eric F. Melgren, U.S. District Judge in the District of Kansas.

September 17, 2010
A panel discussion, “How you can become involved in the process of defending liberty between now and the November 6th general election?”

Panelists:
Susan Estes, citizen activist
Lynda Tyler, founder of Kansans for Liberty
Craig Gabel, local conservative activist
Fourth panelist to be determined

September 24, 2010
South Central Kansas Republican Candidates for the Kansas House of Representatives:
John Stevens, District 86
Leslie Osterman, District 97
James Clendenin, District 98
Joseph Scapa, District 87

October 1, 2010
Republican Candidates for the Sedgwick County Commission:
Dave Unruh, District 1
Richard Ranzau, District 4
Jim Skelton, District 5

October 8, 2010
South Central Kansas Republican Candidates for the Kansas House of Representatives:
Benny Boman, District 95
James Woomack, District 92
Dan Heflin, District 84
Jim Howell, District 82

Wichita Bowllagio hearing produces only delay

Yesterday’s meeting of the Wichita City Council featured a lengthy public hearing for a proposed west-side entertainment development known as Bowllagio. Bowllagio is planned to have a bowling and entertainment center, a boutique hotel, and a restaurant owned by a celebrity television chef.

The developers of this project propose to make use of $13 million in STAR bond financing. STAR bonds are issued for the immediate benefit of the developers, with the sales tax collected in the district used to pay off the bonds. The project also proposes to be a Community Improvement District, which allows an additional two cents per dollar to be collected in sales tax, again for the benefit of the district.

The Kansas STAR bond process calls for several steps: First, a local governing body, like the City of Wichita, must approve the concept and set boundaries for the project. This is what yesterday’s agenda item called for. If approved by the council, the Kansas Secretary of Commerce would examine the project to see if it meets statutory criteria. If the Secretary approves the project, the city is then required to prepare a project plan and hold another public hearing concerning whether to adopt the project plan. The project plan must be passed by a two-thirds supermajority of the council.

One of the elements of the project plan, according to the 2010 Kansas Legislator Briefing Book, is a “marketing study conducted to examine the impact of the special bond project on similar businesses in the projected market area.” The effect of Bowllagio on existing Wichita-area businesses was a major source of concern for both council members and citizens speaking at the public hearing.

Speaking during the public hearing, Ray Baty, who is manager of a Wichita bowling center, said Bowllagio is not a new concept, but rather one that would compete with existing programs already in Wichita. The C.A.T.S. system, a training system promoted by Bowllagio developers, is actually a portable system, Baty said.

He contended that introduction of Bowllagio to the market will not grow the market for bowling, but will further divide the existing market, resulting in a loss of revenue and profit for existing bowling centers. He said that bowling centers lose six percent of their customers each year, a trend that he said is national.

Frank DeSocio, owner of several bowling centers in Wichita, told the council that the bowling training promoted by Bowllagio developers already happens in Wichita at the present. He mentioned five full-time bowling teachers and coaches already working in Wichita bowling centers.

He added that Wichita does very well in obtaining and hosting tournaments, mentioning 17 PBA live televised tournaments that took place in Wichita, 10 regional events, a BPA womens’ open, six intercollegiate championships that were televised live, and numerous Kansas state high school championships.

“Everything the Maxwell Group [developer of Bowllagio] claims they want to do is already being done in Wichita by the current bowling centers,” qualifying that he’s speaking only of the bowling side of the Bowllagio proposal, not the restaurants.

In my remarks to the council, I mentioned that Wichita has had examples of restaurants or other establishments being announced — sometimes by the mayor in his annual state of the city address — but then the development failed to materialize. I expressed concern that we might commit to a large amount of STAR bond financing based on big plans that never advance beyond some small initial stage.

Susan Estes told the council that “this is an extremely profound day” for the City of Wichita. She asked will the city help one business owner over another business owner in the same industry? She said that Bowllagio has some unique aspects, but it is a bowling alley. Its other entertainment features are also available in Wichita. We are using tax money to compete against existing businesses, she said.

In response to a question by a homeowner in the project area, the mayor, indicating he believed he speaks for the council, said the council would not support using eminent domain to remove the homeowner from his home.

During discussion by council members, a subject of controversy was whether approving project boundaries and forwarding the application to the Secretary of Commerce constitutes an endorsement of the project by the City of Wichita. Some council members wanted to pass an ordinance that would establish the boundaries of the district, and then have the Secretary decide whether the project meets the statutory requirements for a STAR bond project. Wichita economic development director Allen Bell mentioned that the council’s endorsement of the project might be a factor the Secretary would consider in determining whether to approve the project.

A question from Council Member Lavonta Williams elicited Bell’s further opinion that the Secretary is “looking for a signal from the council” regarding its support for the project. Lack of local support, he added, would be taken in a “negative way.” Council Member Paul Gray agreed with this assessment.

Vice Mayor Jeff Longwell disagreed, saying that all the Secretary needs is a geographic boundary for the proposed project. He contended that the process starts with setting the boundaries, and that other questions are difficult or impossible to answer without doing this. There are too many unknowns, he added, to give this project a formal endorsement at this time.

Longwell also mentioned a report that showed that the south-central region of Kansas, which includes Wichita, receives fewer state economic development funds, relative to population, than the northeast Kansas region. He said we needed to “equal the playing field.”

Longwell said he didn’t want to put together a package that would harm existing businesses, saying he wouldn’t vote for the project if an independent study showed that result would happen.

Council Member Jim Skelton asked about the property taxes the development would pay. Bell replied that the property taxes should increase by a large amount, as the land is vacant now and is planned to receive $95 million of development. He said that while STAR bonds and Community Improvement District financing is proposed for this development, the plan does not include property tax abatements, industrial revenue bonds, tax increment financing, or any other diversion of property taxes.

Council Member Janet Miller asked if the Kansas STAR bond statutes prohibited adding these other types of incentives to the project. The answer, according to Bell, is that these programs could be added on to this development, as has been done in some Kansas STAR bond districts.

Later Miller referred to the “lack of information to make an education decision about the project.” She wondered why the developers would not spend “one-tenth of one percent of their $50 million dollar investment” ($50,000) to produce the studies that would give the council the information it needs to decide whether to send the project to the Secretary of Commerce with its support.

When City Manager Bob Layton suggested a delay to gather more information from the developers, council members readily agreed. Layton said that city staff will visit with the developers, looking for an approach that will make council members comfortable with proceeding, addressing some of the information needs expressed today.

Due to scheduling, Layton said that this matter would need to appear on next week’s agenda, or there would be a one month delay before it could be considered at a council meeting.

The council voted unanimously to defer the item for one week, and to keep open the public hearing.

Analysis

An important issue to many council members is the potential harmful affect of Bowllagio on existing businesses, particularly bowling centers. Miller’s suggestion that the developers spend the money to have an independent assessment of this performed is entirely sensible.

But I don’t think a study of that scope can be performed in one week. As it is now, the city will probably rely on information provided by the developers. It must be recognized that they have a $13 million incentive to produce information favorable to their cause. In his remarks, Gray recognized that proof that Bowllagio will not harm existing businesses will not come from “somebody advocating for the project.” It would require a third-party, independent analysis, he said.

As of now, it is difficult to see how information that will satisfy council members can be produced by next week’s meeting.

In my opinion, the local bowling center operators are justifiably concerned that a subsidized competitor will harm their business. They were able to show that many of the purportedly unique aspects of the Bowllagio concept are already available in Wichita, and have been for some time.

Further, it’s not only direct competitors such as bowling centers that we need to be concerned for. Since the development is proposed to include a Mexican restaurant, what will its impact be on existing Mexican restaurants? And not only restaurants offering that cuisine, but all other restaurants?

In a broader sense, a subsidized business competes with all other businesses in the market for employees and other goods and services that all business firms purchase.

Longwell’s contention that we can still “kill” the project at a later date if reports come back showing negative impact on local businesses is, in my opinion, an empty promise. If the Kansas Secretary of Commerce approves this project, it would be very difficult for the council to vote against Wichita receiving $13 million in state tax dollars, especially in light of Longwell’s argument that the Wichita area doesn’t receive nearly enough of this economic development money.

While council members such as Schlapp say they’re in favor of free markets, she and the other council members nearly always vote in favor of intervention in markets. The fact that the city council members have so many questions about the proposal tells us that this plan is, in fact, a form of centralized planning by government.

As I remarked to the council, developments such as this are portrayed as a success story, in that someone has confidence in Wichita because they’re investing here. But I wonder why these people won’t invest in Wichita unless they receive millions in payments or tax forgiveness from the city, county, school board, and/or state.

Aren’t the real heroes in Wichita the people — many of them small business owners — who invest in Wichita without the benefit of TIF districts, tax abatements, STAR bonds, or other forms of subsidy or incentive?

These people, besides facing subsidized competition, additionally have to pay the taxes that make the subsidies to others possible.

Regarding the mayor’s statement that eminent domain will not be supported for this project: Kansas law does not prohibit the use of eminent domain to acquire property in a STAR bond district (K.S.A. 12-17,172).

If the city wants to assure property owners that their property will not be subject to seizure by eminent domain, the city can add language to that effect in the ordinance. With four city council positions — including the mayorship — up for election next spring, it’s possible that a future city council might not be opposed to the use of eminent domain. This change could take place during the time Bowllagio developers are acquiring property. An ordinance would help prevent this from happening.

Similarly, if it is not the intent of the developers to seek additional forms of subsidy such as tax increment financing or property tax abatements, appropriate language could be added to the authorizing ordinance.

Wichita city council signals possible change in economic development incentive policy

At today’s meeting of the Wichita City Council, discussion by council members and their vote may signal a change in the city’s stance toward economic development incentives.

At issue was a request for extension of economic development incentives for a Wichita company. Five years ago the city council approved an economic development package for the company that included a tax abatement. As is the city’s policy, the council revisits the issue in five years to see if the company has meet its goal commitments. In the case of this company, one commitment — the building of a new facility — was met. The other commitment — creation of a certain number of jobs — was met early on during the period of the tax abatement, but employment has been declining in recent years, and employment is currently 100 jobs below the goal.

Recently the city council adopted new guidelines for companies that are not meeting their goals at the time of review. These guidelines make it easier for companies to qualify for the extension of the abatement. If the WSU Current Conditions Index has declined since the awarding of the incentives, the company will qualify for an extension if a majority of the goals are met. A company will also qualify for extension if their peak job creation numbers exceeded the goal, even if the number has fallen, as is the case with the company under consideration today.

Based on the new guidelines, city staff recommended to approve the extension of the incentives.

Council member Lavonta Williams asked if it was possible if, as an company receiving an incentive, could “I hire five people today and fire them by Friday and then meet my criteria?” The answer by city economic development director Allen Bell is that the policy contains no such guideline as to minimum period of employment.

Wichita city manager Bob Layton interjected that staff’s recommendation to approve the extension is a difficult one to make, as this company is in a declining pattern of employment. Additionally, the newly calculated benefit-to-cost ratios are low, and he said he is uncomfortable with that: “We’re actually subsidizing this business, so to speak, or others are subsidizing or bearing their load for debt service.”

Council member Sue Schlapp asked a question not covered by policy: if we deny the extension today, and next year the company improves its situation, could they come back and ask for the extension of the tax abatement then? There is no definitive answer to this question at this time, according to Bell and Layton.

Schlapp added that it seems like we’re “lowering the bar all the time” as to the granting of incentives.

Council member Paul Gray remarked that the council makes itself look bad in these situations, as it always grants extensions even though the city has created policies that should hold companies accountable to their committed goals. The reason for awarding the incentives, he said, was for the increase in employment, and that employment level has not been kept. “We need to start taking a harder stand on this, as we’re going to run out of money if we keep giving it all away.” Vice mayor Jim Skelton agreed.

No one from the public was there to speak on this matter.

Wichita mayor Carl BrewerWichita Mayor Carl Brewer was on the losing end of a 6 to 1 vote.

Gray made a motion to deny the staff recommendation of approval of the extension. Mayor Carl Brewer said that this vote, if it proceeds in the direction it appears to be going, will change the direction of many things that affect businesses in Wichita. He said that the intent of the council is to start holding individuals accountable, and there’s not been a track record of that. It’s been worse since the economy entered the recession, he said. He urged council members to make sure they know which way they’re going with this action. “This will be the direction that we’ll be going as we start working on policy, and it will be effective for everyone, whether it be large or whether it be small. … Just making sure that when we press that button and we head down this path, that we know what we’re doing.”

The vote was 6 to 1 in favor of Gray’s motion, with the mayor being the lone “No” vote.

Analysis

This action by the Wichita city council, being nearly unanimous, is very much different from its action just one week ago, when it employed one new method plus several existing methods to heap millions in subsidy on a downtown hotel developer.

Today’s discussion is another illustration of just how difficult it is to pick winners and losers, and how difficult it is to choose which companies the city should invest in. This is why I have recommended that Wichita grant tax abatements on all new capital investment.

Today’s action is especially cruel to the subject company. In the past, city staff has argued that withdrawing tax abatements when a company is struggling is harmful. In December 2008, economic development director Bell said this regarding a company that had not met its performance commitments: “I don’t think it would be productive at this time to further penalize them — as the market has already penalized them — by putting them back on the tax roles at this time.” This is further evidence that taxes are harmful to business and economic growth.

Council member Williams’ question about hiring and then quickly firing employees indicates that she must not be familiar with the costs of hiring and firing. Furthermore, a company’s unemployment insurance premiums are based on its history, and actions like this would certainly raise premiums by a large amount.

Extension of EDX Tax Exemption (Sharpline Converting, Inc.)

Wichita city council discusses economic development incentives, again

At this week’s meeting of the Wichita City Council, underperforming companies that have received economic incentives was at issue.

Wichita grants incentives — usually in the form of an escape from paying property taxes — to companies. Usually there are conditions attached to the incentives, such as a certain amount of capital investment or employment targets. Recently — and in the past two or so years — several companies that received incentives have not met employment goals. Should the city rescind the tax breaks in these cases? Or should there be recognition that there’s a tough economy at the moment, and should the company be excused from meeting the goals it pledged?

During a period of questions from the bench, council member Sue Schlapp remarked: “We have to be flexible, don’t we? … Especially in today’s economy, we need to be very careful that we’re not too rigid in what we’re doing.”

Council member Jeff Longwell said he’d like to see something that rewards companies that bring in business from outside our community. Economic development head Allen Bell answered that the policy is limited to companies that bring in wealth from outside. Businesses that are here because their customers are here are not eligible for economic incentives, he said.

Longwell also expressed concern about companies that use temporary employees. Should that increase in payroll be included as a benefit, even if the employees are only temps? Bell said yes, even though these jobs are not as good as direct hire placements. Wichita City Manager Bob Layton interjected that we shouldn’t count seasonal peak employee ramp-up in benefit calculations.

Longwell added that we ought to include the fact that some companies drive up hotel occupancy rates due to the nature of their business. Bell said that this is a factor in the WSU analysis.

Vice-mayor Jim Skelton inquired about details of the model that WSU uses to calculate the economic benefit of incentives. These calculations, Bell said, are required by the Kansas Legislature. The model presently used is unique to WSU. It focuses on the fiscal impact that an economic development project has on cities, counties, school districts, and the state. It takes into account jobs created, capital that is invested, and other factors. It includes such factors as the need for additional police and other government services, additional sales and bed tax, and other revenue sources. It then performs a present value calculation and produces a ratio. A value greater than one means the benefits exceed the costs.

City manager Layton said that these incentives represent a contract between the business and the city. The business promises to grow the economy, and the city makes an investment in the company. The council presently is struggling with how to judge the performance of companies that have received incentives in a down economy. The WSU index makes sense, he said. If economic conditions are poor, we now have a tool to judge the performance of the companies that received incentives. There are now extenuating circumstances, he said.

Mayor Carl Brewer said that we recognize there are challenges, and that in an ideal world we shouldn’t have to provide incentives. But he said we have several options: Be competitive and provide incentives and fight to keep what we have, or don’t provide incentives and see what happens. He said we know what would happen in that case. Businesses will go where they can get these incentives, he said, and we can’t argue that. There will always be incentives, he said, and we have to be competitive.

The council unanimously approved a revision to the policy that recognizes down periods of economic activity. Then, it approved the extension of tax breaks to three companies that had not met all their performance goals. Passage was not unanimous in two cases, with some council members voting against the extension of the incentives. Dion Lefler’s reporting in the Wichita Eagle is at Wichita City Council eases rules on tax abatements.

Analysis

Contrary to the belief of the mayor, council members, and city hall bureaucrats, economic development incentives aren’t all they’re promoted to be. The state of Kansas spent some $1.3 billion on incentives over five years. In a recent report produced by the Kansas Legislative Division of Post Audit, one of the summary points is this: “Most studies of economic development incentives suggest these incentives don’t have a significant impact on economic growth.” See In Wichita, let’s have economic development for all for more on this report and a link to the document.

There is an interesting academic paper titled The Failures of Economic Development Incentives, published in Journal of the American Planning Association. A few quotes from the study, with emphasis added:

Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or 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 their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

On the surface of things, to the average person, it would seem that spending (or granting tax breaks, it’s the same thing) to attract new businesses makes a lot of sense. It’s a win-win deal, backers say. Everyone benefits. This is why it is so appealing to politicians. It lets them trumpet their achievements doing something that no one should reasonably disagree with. After all, who could be against jobs and prosperity? But the evidence that these schemes work is lacking, as this legislative audit and article show.

I have suggested to the city council that a broad-based tax abatement on new capital investment could propel economic growth in Wichita. See Wichita universal tax exemption could propel growth.

But a plan like this doesn’t give bureaucrats much to do, and gives politicians little to crow about to their constituents at election time. All it’s good for is the people who want economic growth.

Goody Clancy proposal for Downtown Wichita revitalization master plan

Last Friday a selection committee selected one company from four finalists to lead the planning effort for the revitalization of downtown Wichita. If some city leaders and a few citizen elites had their way, citizens of Wichita wouldn’t be able to see the company’s proposal document until after the city council makes a decision to follow — or not — the recommendation of the selection committee. But thanks to city manager Robert Layton’s decision, this document is now available for all to read. (Thanks also go to council member Jim Skelton, for his unsuccessful effort to release the documents.)

This proposal is available because I requested it (and paid for it) under the provisions of the Kansas Open Records Act. The Wichita Eagle requested it too, and as of the time I received my copy, only that newspaper and I had requested it (along with the other three proposals from the finalists).

I didn’t scan all the pages, leaving out a section about the personnel involved and an appendix of related articles. Still, there’s 109 pages to read — but there are a lot of pictures. Click on
Goody Clancy Proposal for Downtown Wichita Revitalization Master Plan
to view or print the document.

(Update: The Wichita Eagle has obtained and posted a much better version of the proposal. It’s complete and in color. Click here and here.)

There are danger signs all over this document. Under the heading “Fiscal Responsibility,” for example, we see “Know the full range of effective public-private finance tools at hand.” Which means, of course, that developers will have their hands in the pockets of taxpayers through devices such as TIF districts, grants, tax credits, abatements, and other forms of subsidy.

Another sign: as a challenge to downtown, the document cites “The impact of relatively low development costs (inexpensive land, tenant-borne special assessment districts for infrastructure) at Wichita’s perimeter have a direct impact on Downtown land value and infrastructure economics.” (emphasis added)

What’s wrong with this statement? First, inexpensive land is a good thing. It means more people can afford what they want.

Second, note that people developing on the perimeter pay their own infrastructure costs. This statement hints that downtown developments won’t be expected to pay theirs.

There are just a few hopeful signs: “Indeed, WaterWalk might be struggling to fill its space because it has, simply put, hit a ceiling: it is focusing on food and fun, and perhaps there is room for only one such district (Old Town) in Downtown Wichita. The Arena could help in this regard, but until the publicly subsidized WaterWalk is a rousing success, it might not make sense to split the pie still further.”

Indeed. While we’re at it, let’s etch the names of the developers of WaterWalk on a large monument somewhere downtown, so that they are properly excluded from any further consideration as beneficiaries of the taxpayer. (Here’s the list, in case this monument isn’t built.)

But if there’s not demand for another food and fun district in Wichita, what about the promise of all the food and fun surrounding the Intrust Bank Arena? (A campaign piece from that election reads “It [the arena] will enrich our quality of life as new restaurants, shops and clubs spring up in the area …”)

It’s unknown how seriously the city council will take the steering committee’s recommendation. The council plans to vote on October 13.

Janet Miller’s junket follow-up

At Tuesday’s meeting of the Wichita City Council, I asked a question about council member Janet Miller and her travel and got a bigger response — from the mayor, the Wichita Eagle and other news media, and the public — than I expected. Some issues are still unresolved, however.

First, I was surprised that this matter was reported on so prominently by the Wichita Eagle, as it turned into a front page story. It involves, as I noted in my testimony to the Wichita City Council, a relatively small amount of money. Furthermore, it wasn’t the most important matter I testified about that day. The secrecy surrounding the downtown redevelopment proposals is, I believe, a more important issue, as are things like TIF districts, special assessment financing, and other issues I’ve brought up before the council.

But those matters are more difficult to comprehend. Junkets are easy to understand.

Second: the behavior of council member Miller is an issue that citizens need to know about. The approval of this travel appeared on the August 18 city council agenda. I wrote to Miller on August 15, asking for the cost of the trip. Over the next several weeks, I left several telephone messages and sent at least one other email message. It was Van Williams, the city’s public information office, who promptly responded to my requests and supplied me with the figures.

Miller didn’t respond to my inquiries until I received an email message at 8:11 the morning of the council meeting. And you know what? There are some mitigating factors, such as the host organizations providing many meals and covering other expenses.

So why didn’t Miller respond to my requests earlier? I don’t live in her district, so maybe that’s a reason why. I endorsed her opponent earlier this year, so maybe that’s why.

A more cynical explanation that has been suggested to me is this: She wanted me to make my case in public, and then let Mayor Carl Brewer tell me all the ways I’m wrong — using information that I asked for, but was not given (at least not until right before the meeting). This strategy — if in fact it was used here — has been used against myself and other activists by a variety of governmental bodies.

Another observation is the bizarre analogy the mayor used, that one doesn’t get a divorce to save money just because a marriage is having trouble. Besides not making sense on any level, the mayor made these remarks as he was sitting next to Vice-Mayor Jim Skelton, who is in the process of divorce. As the mayor spoke about this, Skelton expressed astonishment. Eventually the mayor looked at Skelton and smiled. I made a motion towards my microphone, wanting to ask why he was looking at the vice-mayor. But as the mayor reminded me, he had given me my time to speak, and I could not speak again.

(I might remind the mayor that he is not a benevolent dictator who “gives” time to citizens to speak. City statute does that. He doesn’t have a choice or say in the matter.)

There are still some questions to be asked:

First, why is the city paying some expenses for Kelly Harper, president of the Wichita Sister Cities? The mayor forgot to address this.

Second, why isn’t the mayor — instead of Miller — attending the International Cities Conference?

Third: The mayor said that these conferences are important for the city’s economic development. If so, why are we sending the most junior council member, in office for just five months, on such an allegedly important mission?

Finally, the most important question I asked was not addressed at all by the mayor: why can’t citizens see the downtown redevelopment proposals? Vice-Mayor Skelton intervened on my behalf, but was not successful.

(In the video below, I didn’t include Vice-Mayor Skelton’s brief remarks due to YouTube’s ten minute length limitation.)

Wichita election results equal status quo, worse

The result of yesterday’s elections in Wichita is an endorsement for the status quo. For those interested in liberty, free markets, and education in Wichita, the election was a total disaster.

On the Wichita city council, the two incumbents running for re-election won. For the open seat, Janet Miller won. While her website talks of fiscal responsibility, it’s a safe bet that Miller is on the side of increasing the size, scope, and intrusiveness of city government.

The election of Miller doesn’t signal a huge shift on the council, as Sharon Fearey, her predecessor, favored an expansionary city government.

For the board of USD 259, the Wichita public school district, all four incumbents won. This is terrible news for Wichita schoolchildren and taxpayers. As outlined in my post Wichita school board members should not be re-elected, the Wichita school district is moving exactly in the wrong direction on many issues.

The board members have a bad attitude, too. Walt Chappell, a member of the Kansas State Board of Education, recently experienced the overbearing arrogance of this board. My post Wichita school board video shows why members should not be re-elected holds the video that exposes these attitudes.

But as reported in the Wichita Eagle, board members are pleased. Connie Dietz actually said “This wasn’t time for new people to be on the board.”

When people like Dietz believe that they — and only they — have the ability to successfully run the Wichita schools, we’re in a lot of trouble. Wichita schoolchildren now face great danger, as any possibility of meaningful reform in the Wichita school district is becoming less likely.

Wichita City Arts tech studio proposed

Randy Roebuck, in a presentation at the Wichita city council workshop, promoted the idea of a “digital oasis” in Wichita. It would be a place where people can go to get free help with technologies such as cell phones and computers.

He told of how an Apple Genius Bar does things like this. Council member Jim Skelton asked who runs an Apple Genius Bar? Apple Computer Corporation, of course.

Later council member Paul Gray continued with questions based on Skelton’s. Why not an Apple Genius Bar in Wichita? Why is the city competing with private business? City officials insist they are not trying to compete with private business. Instead, it’s a resource for training and education.

Council member Jeff Longwell said this idea is “on the right path,” as long as it doesn’t cost a lot.

Lavonta Williams said this will attract a different group of people to downtown Wichita. She said it’s something we need.

Mayor Carl Brewer mentioned that not everyone who would want to use a facility like this might not be able to afford its cost. He didn’t mention that someone else should pay for them, but that’s what this program will do.

“It’s part of creating an environment where we have everything that anybody could possibly want. … If the private sector’s really wanting to get out there and they’re willing to invest their dollars and they want to start their business, we should let them.”

This illustrates the mayor’s — and several other council members’ — vision of an expansive city government, providing for citizen needs all the way through arts, entertainment, and now computer tech support.

Then there’s the mayor’s language that we (Wichita city government) should let the private sector do something. I really hope the mayor misspoke here.

This is a bad idea. It seems to me that there may be people in Wichita city hall with too much time on their hands if they have time to come up with ideas like this.

View the video of the portion of the city council workshop where this presentation was made by clicking on Wichita city council workshop, March 24, 2009.

The slides shown to the council members aren’t available on the city’s website, to my knowledge. I captured them from video, and they may be viewed by clicking on Wichita City Arts tech studio presentation.

Read Wichita Eagle reporting by clicking on Cyber Alliance plans to offer free technical training. reporting on KWCH is at Wichita Considers “Digital Oasis”.

Wichita’s Faulty Due Diligence

In the Wichita city council meeting on December 2, 2008, council member Jim Skelton questioned Allen Bell, Wichita’s director of urban development, about developers the city is considering working with on a TIF district. Specifically, Skelton asked if there was anything in the backgound of the developers that the council should be concerned about. Bell referred specifically to Grant Gaudreau, naming him as the “principal developer.” He said that the matters in Gaudreau’s past had been “resolved,” and had “no bearing” on this project. Video is available below.

According to Wichita Eagle reporting in the story 35 suits in developer’s past, Gaudreau’s past problems include bankruptcy and lawsuits regarding bounced checks and nonpaid bills. The bankruptcy is not troubling to me, as many entrepreneurs suffer through this as part of their acceptance of risk. Bounced checks at the grocery store and pet clinic, plus a recent auto repossession, are troubling. If someone won’t make good the checks they write at the grocery store, that’s a problem. The city should not partner with such a person.

Further, the Eagle story reports that the developer has an outstanding warrant for unpaid taxes in a neighboring county. That would contradict Mr. Bell’s claim that matters have been resolved.

Here’s the problem I have, and I think many citizens share this concern: Either Allen Bell and city staff didn’t know of all these things in Gaudreau’s past, or they knew about them but didn’t think they were a problem. The first case tells us that Mr. Bell’s office is not doing a thorough job. The second case tells us that Mr. Bell’s judgment does not reflect the concerns of the citizens of Wichita. In either case, there’s a problem at city hall.

Wichita Penalizes Companies Through Taxation

Five years ago, the City of Wichita granted Big Dog Motorcycles industrial revenue bonds (IRB). The benefit of these bonds is that the company escapes paying property tax (and often sales tax) on the property purchased with the proceeds from the bonds.

At the December 2, 2008 meeting of the Wichita City Council, the council reviewed the tax abatement to see if the company had lived up to the projections and promises it made as part of its application for the IRBs. Unfortunately for this company, their fortunes have reversed, and while at one time their employment was above what they committed to, their present employment is less than half what it was five years ago.

There are two illuminating things to take from this video clip. First, council member Jim Skelton wonders why the benefit-to-cost ratio for Sedgwick County is negative, but city staff still recommends approving the tax abatement. Allen Bell, Wichita’s director of urban development, didn’t know why. No council members except for Skelton seemed to be bothered by this.

But what’s really troubling is this quote from Bell: “I don’t think it would be productive at this time to further penalize them — as the market has already penalized them — by putting them back on the tax roles at this time.”

So is taxation by the City of Wichita equivalent to a penalty? That’s what Mr. Bell seems to be saying.

Further, the fact that the council voted to extend the tax abatements because this company is going through lean times is tacit recognition that property taxes are bad for business. I wonder how many companies have gone out of business because Wichita’s taxes were too high? And how many companies are never formed, or have put off expansion plans because of Wichita’s taxes? Here’s an example of one: Wichita Taxes Cancel Development.