Sedgwick county government

Do economic development incentives work?

by Bob Weeks on May 22, 2013

Judging the effectiveness of economic development incentives requires looking for the unseen effects as well as what is easily seen. It’s easy to see the groundbreaking and ribbon cutting ceremonies that commemorate government intervention — politicians and bureaucrats are drawn to them, and will spend taxpayer funds to make sure you’re aware. It’s more difficult to see that the harm that government intervention causes.

That’s assuming that the incentives even work as advertised in the first place. Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. 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.

Following is the full paper, or click here.

Tagged as: Economic development, Interventionism, Kansas state government, Role of government, Sedgwick county government, Wichita city government

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Language makes a difference

by Bob Weeks on May 6, 2013

No longer is it “Sustainable Communities.” Now it’s “South Central Kansas Prosperity Plan.” Either way, the program is still centralized government planning, with great potential to harm our economy and liberties.

The newly-renamed planning initiative has a new website set to launch in a few days — Let’s Talk Prosperity.

But no matter how politicians and bureaucrats dress it up, we need to remember the roots of this program. It took from 1987 to 2012, but Sedgwick County actually adopted the language of the United Nations regarding sustainability.

Those critical of sustainability planning are concerned that engaging in the practice has the potential to import harmful policies and practices originating from the United Nations. Critics of these critics say this is nonsense and overreacting. Tin-foil hat stuff, they say. Examples as reported in the Wichita Eagle come from Commissioner Dave Unruh and Commission Chair Tim Norton:

Unruh said he sees the grant simply as an “effort to make decisions about our future for us and our future generations that will save money, conserve resources and be the best solutions for all the folks in our region.” …

Norton said he sees the grant as a way to “look to the future, try to figure out best possible outcomes and make decisions today that will be good for tomorrow.”

“We’re all in this together. You may not like the federal government. You may not like the state government. You may not even like the local government. But I like being at the table and being involved in the future.”

He dismisses any connection to Agenda 21.

“It was a non-binding agreement passed during the first Bush era,” he said of former president George H.W. Bush. “I don’t rail on President Bush because it happened on his watch. I’m not twitchy about it. I’m not worried about it.”

It’s instructive to notice, however, that the language Sedgwick County uses when considering sustainability comes directly from the United Nations. General Assembly Resolution 42/187: Report of the World Commission on Environment and Development holds this language: “Believing that sustainable development, which implies meeting the needs of the present without compromising the ability of future generations to meet their own needs, should become a central guiding principle of the United Nations, Governments and private institutions, organizations and enterprises.” (emphasis added)

Sedgwick County’s Sustainability Page holds this: Definition of Sustainability for Sedgwick County … Meeting the needs of the present without compromising the ability of future generations to meet their needs … (emphasis added)

Sedgwick County left out the word “own,” but otherwise the language is identical. This definition was repeated on the county’s 2012 Employee Sustainability Survey.

The Sedgwick County page — and other county documents — mention economic development, environmental protection, institutional and financial viability, and social equity as “the four core factors that Sedgwick County considers when making community policy and program management decisions.” These goals are often mentioned in Agenda 21 documents, especially social equity.

Tagged as: Dave Unruh, Economic development, Government planning, Sedgwick county government, Tim Norton

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Government planning, itself, is dangerous

by Bob Weeks on April 30, 2013

The very existence of a government plan is dangerous, as its construction creates powerful constituencies that have shaped it to fit their needs and are highly motivated to see it implemented.

Planning

In Sunday’s Wichita Eagle, Sedgwick County Commissioner Tim Norton defended the regional community planning initiative underway in south-central Kansas. (Tim Norton: Planning effort helps shape region’s future)

Much of the Commissioner’s article simply described the program and the need for it in vague generalities that are neither correct or incorrect, and which do little to advance understanding of what is really likely to happen.

But Norton did write something useful when he attempted to deflect the fact that this is a government plan, backed by the ability of government to compel compliance (or make it very expensive to avoid). He wrote: “This is not about any one governing body or level of government imposing or mandating what we should do. It is about what we decide collectively is best for our region and then choosing to make it happen.”

When the Sedgwick County Commission voted to participate in this HUD Sustainable Communities Regional Planning Grant, some commissioners justified their votes in favor of the plan because “it’s only a plan.” If we develop a plan, and then we find we don’t like it, we can shelve it. Problem solved.

This meme of “it’s only a plan” that can be shelved is likely to be repeated. Watch for it.

Except: By shelving time, millions will have been invested in the plan. Reputations like Norton’s will depend on adopting the plan. Bureaucratic jobs will be at stake (See Sedgwick County considers a planning grant for an explanation of how planning help make work for bureaucrats and academics.)

Besides boosting the interests of politicians and bureaucrats, 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 years.

Once the planning process begins, special interests plot to benefit themselves at the expense of the general public. We saw this at work in the first project to emerge after the Wichita downtown planning process (Project Downtown), where public policy was shaped on the fly to meet the needs of politically-connected special interests, at detriment to the public.

Most importantly: The very existence of a government plan is dangerous, as the plan itself becomes a reason to proceed, contrary to reason and harm to liberty and economic freedom.

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. This likely to be the argument to follow whatever emerges from Commissioner Norton’s planning process.

Tagged as: Climate change, Economic development, Economics, Eminent domain, Government planning, Sedgwick county government, Tim Norton

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Intrust Bank Arena depreciation expense is important, even today

by Bob Weeks on April 30, 2013

Proper attention given to the depreciation expense of Intrust Bank Arena in downtown Wichita recognizes and accounts for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena.

Sedgwick County Working for You

The true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena.

There are at least two ways of looking at the finance of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

This agreement specifies a revenue sharing mechanism between the county and SMG. For 2102, the accounting method used in this agreement produced a profit of $703,000, to be split (not equally) between SMG and the county.

While described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

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

A much better reckoning of the economics of the Intrust Bank Arena can be found in the county’s Comprehensive Annual Financial Report for 2012. It states: “The Arena had an operating loss of $4.8 million. The loss can be attributed to $5.3 million in depreciation expense.”

Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for the $5.3 million in depreciation expense. Instead, it provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

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

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

Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct in that depreciation expense is not a cash expense that affects cash flow, it is an economic fact that can’t be ignored — except by politicians, apparently.

Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information. This is especially important as civic leaders such as Wichita Mayor Carl Brewer ask for a dedicated revenue stream for economic development, or for another sales tax or other taxes to pay for more public investment.

Tagged as: Carl Brewer, Dave Unruh, Intrust Bank arena, Sedgwick county government

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As Southwest arrives in Wichita, something else happens

by Bob Weeks on April 30, 2013

Wichita officials are proud that Southwest Airlines is starting service in Wichita soon. Great economic benefit is anticipated. But at the same time Southwest arrives, AirTran Airways leaves.

It’s true that Southwest is adding five new flights, as Wichita officials are quick to remind. (City officials are equally diligent at overlooking the end of the AirTran flights.) But it’s unknown what impact the loss of the Atlanta AirTran flights will have on Wichita travelers.

In 2012, 73,980 passengers enplaned AirTran jets in Wichita. In total, there were 147,101 AirTran passengers in Wichita, out of 1,509,206 total passengers in Wichita. This means that the routes that 9.7 percent of Wichita passengers used will no longer be available after June 2.

Whatever the impact, it’s difficult to see Southwest producing the touted economic benefits. The city has a report prepared by Wichita State University Center for Economic Development and Business Research that forecasts traffic increases of around 35 percent and the creation of 7,000 jobs.

That’s a lot, and it would be great if it happened. But we have to remember that at the same time Southwest arrives, AirTran leaves. It’s difficult to see how merely a different discount carrier could make such a difference.

We have to be very careful when evaluating job creation projections such as the one prepared by CEDBR for the arrival of Southwest. Consider the 2003 study prepared by CEDBR (Wichita Mid-Continent Airport Economic Impact) on the economic impact of the Wichita airport, which concluded that the airport had an impact on employment of 41,634 jobs, with payroll of $1,630,079,797.

In its calculations, the report included all the employees of Cessna and Bombardier — 12,134 in total — in determining the economic impact of the airport. Why? To quote the study: “While it might appear that manufacturing businesses could be based anywhere in the area, both Cessna and Bombardier require a location with runways and instrumentation structures that allow for flights and flight testing of business jet airplanes.” This is true, but it is quite a stretch to attribute all the economic impact of these employees solely to the airport.

For one thing, if we count the economic impact of the income of these employees as belonging to the airport, what then do we say about the economic impact of Cessna and Bombardier? We would have to count it as very little, because the impact of their employees’ earnings has been assigned to the airport. This is, of course, assuming that we count the impact of these employees only once.

This double-counting of the economic impact is a problem. Since this report was released, both Cessna and Bombardier have asked the state, city, and county for incentives and subsidies. Companies use the economic impact of their employee payroll as justification for the subsidies. But these dollars will have already been used, as they were attributed to the airport.

Does anyone at city hall track this, that the purported economic impact of employees has already been claimed by the airport?

Further: Suppose that Cessna tires of being on the west side of town, so it moves east and starts using Jabara Airport. Would Cessna’s economic impact on the City of Wichita, Sedgwick County, or State of Kansas be any different? I think it wouldn’t. But its impact on the Wichita airport would now be zero, or very nearly so.

The CEDBR study does provide some figures with the manufacturing employees excluded. The impact without the manufacturing employees included is estimated at $183 million, or about 11 percent of the $1.6 billion claimed earlier.

It is a convenient circumstance that these two manufacturers happen to be located near the airport. To credit the airport with the economic impact of these companies — as though the airport was involved in the actual manufacture of airplanes instead of providing an incidental (but important) service — is to grossly overstate the airport’s role and its economic importance.

Of course the airport is important to Wichita. We should seek to measure its impact sensibly instead of stretching to attribute every dollar possible to it. When advocates of any cause manufacture figures like the $1.6 billion economic impact, it casts doubt on other arguments they advance.

Similarly, we need to be realistic about the economic impact of Southwest Airlines in Wichita.

Tagged as: Cronyism, Economic development, Interventionism, Kansas state government, Sedgwick county government, Wichita city government

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In Wichita, community needn’t be government

by Guest Author on April 29, 2013

Kansas Policy Institute offers commentary on the Wichita/Sedgwick County Community Investment Plan.

In The Righteous Mind: Why Good People Differ on Politics and Religion, renowned psychologist Jonathan Haidt describes how the human mind is dual in nature: “We live most of our lives in the ordinary world, but we achieve our greatest joys in those brief moments of transit to the sacred world, in which we become ‘simply a part of a whole.’”

A recent survey by the City of Wichita capitalized on this innate human tendency by equating community with government. Our natural desire to become “simply a part of a whole” manifests itself in our jobs, churches, softball leagues, clubs, dinner parties and recently pride in WSU’s success in the NCAA tournament. Our citizenship in Wichita is one of many communities that define us as individuals, one of many communities we make sacrifices for, one of many communities we call upon to solve problems.

The survey respondents provide a list of wishes, all with the goal of improving our lives, many of which can and should be provided by city and county governments. Allowing businesses to openly compete to build water and street infrastructure, with competitive bidding for contracts, would strengthen the community by precluding any unfairness that weakens trust in the city.

Survey respondents showed a plea for business formation and young talent. The city could promote a sense of community by creating a welcoming culture for all businesses, one that does not pick favorites. 71.8 percent of respondents do not have faith that most people are willing to put community interests above personal interest — perhaps because so often city hall is called upon to hand out special tax treatment.

The survey also tries to identify challenges to the community; respondents were asked one question about Boeing and two questions about political divisions. Overwhelmingly respondents believe political divisions are negatively impacting our community’s ability to respond to global challenges.

We live in the biggest city in the state which brings with it many challenges; solutions to those challenges come in many forms, giving rise to the vast diversity of opinion borne out in the survey. That diversity may be trying but we should not allow the aspiration for political unity to squelch debate. Ultimately it is our ability to engage and debate these issues that unites us as a community.

Tagged as: Free markets, Government planning, Interventionism, Kansas Policy Institute, Politics, Sedgwick county government, Wichita city government

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Wichita survey questions based on false premises

by Bob Weeks on April 24, 2013

The recently-released Wichita/Sedgwick County Community Investment Plan survey results provide another opportunity to look at the survey process to see if the results will be useful as our city looks to the future.

(Good luck trying to find this document on the newly-redesigned City of Wichita website. I’ve placed it here for your convenience.)

Here are two examples of questions that have such severe problems that the results are not likely to be a reliable indicator of what citizens believe and what they want government to do.

One problematic question survey participants answered is this: “Local government should … continue to use public resources to encourage airlines to increase the number and reduce the cost of flights through Wichita Mid-Continent Airport.”

Reading this question, you would assume that public resources have increased the number of flights, wouldn’t you?

Another related question: “Recommended Change in Investment [to] Increase the number of flights and decrease the cost to fly into and out of the Wichita Mid-Continent Airport.”

Again, it would be natural for survey respondents to assume that investment has been successful in increasing the number of flights.

Here’s the problem: If we consider the number of monthly departing flights, Wichita isn’t doing well compared to the nation. The chart at the end of this article illustrates.

(Since this data is highly seasonal, I present a 12-month moving average, so that each point plotted is the average of the previous 12 months data. Also, I index January 2000 to 100.)

Of particular note is that over the past two or three years, the trend of flights nationally is level, while the trend of flights available in Wichita is declining.

This trend is an example of unintended consequences of government intervention and regulation. The Affordable Airfares program imposes a rough form of price control on airfares in Wichita. If the program didn’t do that — and it appears it succeeds at this goal — then there would be no point in having the program. The inevitable effect of price controls is that less is supplied, compared to what would have been supplied. This economic phenomenon is reliable and predictable.

While travelers prefer low air fares to high, this is not the only consideration. For those who need to travel on short notice, the availability of flights is very important.

The problem we have regarding the survey is that the questions would lead survey participants to assume that the city has been successful in increasing the number of flights available in Wichita. But the data doesn’t support the premises to these two questions. The questions are based on inaccurate facts. This, in turn, casts doubt over the reliability and usefulness of these questions.

(For more about flights in Wichita, see In Wichita, confusion over air traffic statistics.)

(For a critique of the survey instrument by Sedgwick County Commissioner Karl Peterjohn, click here.)

Monthly flights, Wichita Airport and nationally.

Tagged as: Interventionism, Sedgwick county government, Wichita city government

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Sedgwick County begins legislative updates sharing

by Bob Weeks on March 6, 2013

In a move sure to help citizens learn more about government, Sedgwick County has started posting legislative updates from its lobbyist in Topeka. Correction: These reports are from our taxpayer-funded lobbyist.

The reports can be found on the Government Relations page.

This program was started at the initiative of Commissioner Karl Peterjohn. Other local units of government should follow this example. These reports, after all, are paid for by taxpayers.

Download (PDF, Unknown)

Tagged as: Kansas legislature, Kansas state government, Karl Peterjohn, Sedgwick county government

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Taxpayer-funded lobbying discussed

by Bob Weeks on February 20, 2013

Sedgwick County Working for You

Taxpayer-funded lobbying was a subject of discussion at today’s meeting of the Sedgwick County Commission, with the commission passing by a vote of three to two a resolution expressing the commission’s opposition to a bill under consideration in the Kansas Legislature. Video is here or at the end of this article.

The bill of interest is SB 109, described here. It states “No public funds may be used directly or indirectly for lobbying. No public funds may be used to pay membership dues to an association that is engaged in lobbying the state. Public funds shall not be used for the purpose of employing or contracting for the service of any person whose duty and responsibility includes lobbying.”

But if we must have taxpayer-funded lobbying, let’s make the best of it. Communications to and from a local governmental body and its lobbyist are open to the public under the Kansas Open Records Act. The documents might be testimony the lobbyist will deliver, reports covering the status and impact of bills, and other matters.

As these documents are open under the Kansas Open Records Act, I propose this: Instead of requiring citizens to ask for these records, possibly paying fees to obtain what they’re already paying for, why don’t local governments post these documents immediately on their websites?

Citizens could then benefit from the activities of the lobbyists they’re paying for. They could learn more about legislation as it works its way through the process.

Very importantly, citizens could judge whether the positions taken by the government lobbyists are aligned with their policy preferences.

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

If any local governmental units feel that posting documents on a website is too much of a burden, here’s my offer: When your lobbyist sends you an email with testimony, legislative reports, or anything else, just forward the email to me (bob.weeks@gmail.com). I’ll take care of the rest.

Here’s one such example: Kansas Legislative Session 2013 — Week 5: An update on the Kansas Legislature from Sedgwick County’s lobbyist.

Tagged as: Government spending, Kansas legislature, Kansas Open Records Act, Sedgwick county government, Taxation

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Kansas local office campaign finance reports

February 4, 2013

It’s hard to obtain and use local office campaign finance reports in Kansas.

Tagged as: Elections, Government transparency, Sedgwick county government, Wichita campaign finance reform

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