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Wichita city council

Kansas tax burdens getting heavier, studies show

by Bob Weeks on August 23, 2010

While Kansas ranks in the middle of the states in total tax burden, the state’s take is getting larger, compared to other states.

This finding is important as Kansas and its largest city are increasingly using favorable tax treatment to centrally plan and manage economic development. When the state allows a company’s employee withholding taxes to be used for its own exclusive benefit — as outgoing Governor Mark Parkinson recently granted to Wichita’s Bombardier Learjet — it increases the cost of government for everyone else.

The Kansas PEAK bill that the legislature passed this year allows this practice to be extended to more and smaller companies.

In cities like Wichita, the city council routinely grants tax abatements and other favorable tax treatment to companies that it believes are deserving.

The result of all this intervention is that the tax base is narrowed, and the high cost of government is born by a smaller group of taxpayers.

To top it off, the result of this centralized planning and management of economic development is: pretty much zero.

In 2008 the Kansas Legislative Division of Post Audit looked at the use of economic development incentives in Kansas, examining some $1.3 billion in spending over five years. In examining the literature, the auditors found: “Most studies of traditional economic development incentives suggest these incentives don’t have a significant impact on economic growth.”

It also found: “The majority of research concludes there is a lack of demonstrated impact from the typical types of economic development assistance, and that incentives aren’t cost-effective.” The audit can be read at Economic Development: Determining the Amounts the State Has Spent on Economic Development Programs and the Economic Impacts on Kansas Counties. The document has an executive summary.

The concentrating of the cost of government on a shrinking tax base spells trouble. One solution that I proposed to the Wichita city council is that when tax incentives are given, the city reduce its spending by the cost of the incentive: “The harmful effect of this tax abatement is this: When someone escapes paying taxes, someone else has to make up the difference. … As long as this body is willing to grant tax abatements and other special tax favors, I propose this simple pledge: that when the City of Wichita allows a company to escape paying taxes, that it reduce city spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.”

Kansas tax burdens getting heavier, studies show

By Gene Meyer, Kansas Reporter

(KansasReporter) TOPEKA, Kan. – Kansans’ state and local sales taxes are now 12th highest in the nation, though their total tax burden is nearer the middle of the pack in 24th place, say two new reports released Thursday.

But, as investment companies always remind us when pitching their new products, your actual results may vary.

“Even within a state, it can be difficult to know what the average tax rate is when there can be hundreds of different jurisdictions charging different rates,” said Kail Padgitt, an economist at the Washington, D.C. based Tax Foundation, which calculates Kansas’ 7.95 percent average state and local sales taxes are 12th highest in the nation.

Within that average, though, actual local rates in some 790 different county, local and special tax districts across Kansas vary from 6.3 percent where only the basic state rate is charged to more than 10.5 percent in a few special taxing districts.

The ranking, one of the first nationally to include Kansas’ recently raised 6.3 percent statewide sales tax that became effective July 1, puts the 12th ranked Sunflower state higher than its neighbors in 15th ranked Missouri, 25th ranked Colorado and 29th ranked Nebraska. Only Oklahoma, where an average 8.33 percent sales tax burden clocks in at seventh highest in the nation, comes in higher.

Continue reading at Kansas Reporter

Tagged as: Economic development, Kansas Reporter, Kansas state government, Mark Parkinson, Tax abatements, Wichita city council, Wichita city government

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More intervention for Wichita proposed

by Bob Weeks on August 23, 2010

in Wichita city government

Tomorrow the Wichita City Council will consider accepting petitions for the formation of another Community Improvement District. In this case the applicant is the Broadview Hotel in downtown Wichita.

This hotel is already the recipient of potentially $4.75 million in Kansas historic preservation tax credits. Despite the name of the program, the tax credits are in effect a grant of money to the developers.

Now the hotel seeks permission to charge extra sales tax for its own benefit.

The action the council may take tomorrow is on the consent agenda, as noticed by the Wichita Eagle’s Brent Wistrom. The consent agenda is usually reserved for non-controversial items. It’s likely that many more CIDs will be proposed, so many that accepting petitions requesting their formation is now considered a routine item of business.

Each CID, however, must have a public hearing. But already council members have indicated they are ready to approve all CIDs, and council members are not receptive to opposition, if a televised overheard whispered remark by one council member is any indication.

Separately a proposed downtown Wichita grocery store gets government assistance. Announced by the Kansas Department of Commerce, the Exchange Market & Deli in downtown Wichita can receive $2.5 million in government stimulus financing. The bonds are exempt from federal income taxes, and the federal government pays 45 percent of the interest. It’s part of President Obama’s stimulus program.

The project this grocery store is attached to — Exchange Place — is the beneficiary of over $10 million in Wichita tax increment financing. That is, if the developers, Real Development, can close on their financing of a nearby project. That financing has been delayed several times.

Each of these projects is another example of increasing government intervention in the future of downtown Wichita. Each represents a loss of economic freedom to Wichitans, as the city council uses taxes to override the decisions that thousands of Wichitans have made as to where to live and locate their business. Some of the city council members that consistently vote for these interventions describe themselves as conservative.

Tagged as: Community Improvement Districts, Free markets, Interventionism, Tax abatements, Wichita city council, Wichita city government

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Wichita Community Improvement District approvals signal increased interventionism

by Bob Weeks on August 11, 2010

in Wichita city government

Yesterday’s action by the Wichita City Council in approving two Community Improvement Districts signals a new era in increased intervention in free markets by Wichita politicians and bureaucrats.

CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

Although at past city council meetings some members seemed as though they might view the districts with skepticism, there was little meaningful discussion, and no council members voted against the formation of the districts.

The mayor and city council members are unable — or unwilling — to consider the harmful effects of their interventions in creating special tax districts.

Or, it might be that some strategic campaign contributions helped city council members make up their minds. While I believe that Council Member Lavonta Williams is an honest and honorable council member, we have to be concerned when campaign contributions are made by people who know they will be asking the council for special treatment and favor, as Christian Ablah did yesterday.

He got what he wanted from the council. Wichita taxpayers lost.

The city looks silly when it jumps through hoops to conform to laws that shape the way it conducts economic development. As I urged the council:

Let’s stop distinguishing between “eligible costs” and other costs. When we use a term like “eligible costs” it makes this process seem benign. It makes it seem as though we’re not really supplying corporate welfare and subsidy to the developers.

As long as the developer has to spend money on what we call “eligible costs,” the fact that the city subsidy is restricted to these costs has no economic meaning.

Suppose I gave you $10 with the stipulation that you could spend it only on next Monday. Would you deny that I had enriched you by $10? As long as you were planning to spend $10 next Monday, or could shift your spending, this restriction has no economic meaning.

The issue of high-tax districts being a consumer protection issue didn’t resonate with the council, either. There are several council members who normally would be in favor of exposing greedy merchants who overcharge people, but not in this case. Maybe it’s the campaign contributions again.

Even pointing out how the city works at cross-purposes with itself doesn’t work. We spend millions every year subsidizing airlines so that airfares to Wichita are low. Then we turn around and add extra tax to visitors’ hotel bills, with Vice Mayor Jeff Longwell and the Wichita Eagle editorial board approving this as a wise strategy.

People remember high taxes. I don’t think it’s a good strategy to establish high-tax districts designed to capture extra tax revenue from visitors to our city.

But perhaps the simplest public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

No one at Wichita city hall wants to talk about this, at least in public.

Next month the city will hold public hearings for three proposed CIDs in addition to the two approved yesterday. I suspect that the next year will see many more proposed.

With each intervention like this — not to mention each TIF district, STAR bond, industrial revenue bond with accompanying tax abatement, forgivable loan, EDX property tax exemption, historic preservation income tax credit, and other programs — Wichita and Kansas move farther away from the principles of economic freedom that have created prosperity, and move closer to a centrally planned economy. Those have not worked out well.

Tagged as: Community Improvement Districts, Economic development, Free markets, Interventionism, Jeff Longwell, Lavonta Williams, Wichita city council, Wichita city government

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More Wichita Community Improvement Districts proposed

by Bob Weeks on August 2, 2010

in Wichita city government

Tomorrow’s meeting of the Wichita City Council will consider starting the process for the approval of three Community Improvement Districts in Wichita.

CIDs may work in one of two ways: First, the city might sell special obligation bonds, give the money to the applicant, and pay off the bonds with the extra sales tax that is collected.

The other way is “pay-as-you-go,” in which the extra sales tax is sent to the applicant as it is collected.

Tomorrow’s city council meeting will accept petitions by property owners in the proposed CIDs and set dates for public hearings, usually around 30 days in the future.

The first of the proposed CIDs is the Bowllagio project at Kellogg and Maize Road. This is proposed to be a pay-as-you-go CID, meaning that the city will not issue bonds. The applicant proposes to collect the full two cents per dollar extra tax for up to 22 years.

The second is a development in the 2600 block of north Maize Road titled Central Park Place Development. The applicant proposes collecting an additional one cent per dollar for up to 22 years on a pay-as-you-go basis.

The third project is Planeview Grocery Store Project at George Washington Blvd. and Pawnee in southeast Wichita. This applicant proposed to collect two cents per dollar extra sales tax on a pay-as-you-go basis. This applicant also proposes creating a tax increment financing (TIF) district.

According to city documents, a goal of this project is to provide “affordable access to grocery shopping to the underserved Planeview area.” But if affordability is a goal of this project, we have to question the wisdom of adding two cents per dollar spent to the grocery bills of low income people.

Community Improvement Districts and public policy

There are several public policy issues surrounding Community Improvement Districts that deserve consideration.

First, the extra sales tax collected in these districts needs to be considered from a consumer protection perspective. How will shoppers in these districts learn that they are going to be paying extra sales tax? While some shoppers may not care, certainly low-income shoppers need to stretch their grocery dollars. Asking them to spend two cents extra per dollar doesn’t seem like the city is watching out for the best interests of its citizens.

Then there’s the “tax our visitors” strategy of council member and Vice Mayor Jeff Longwell and some other council members. Since the extra sales taxes in some CIDs like a hotel will largely be paid by visitors, it’s a wise economic development strategy, they say.

We need to consider, however, the effect of these high sales tax districts on visitors to Wichita. Will they be happy with their decision to visit Wichita once they learn of the high taxes on their hotel or restaurant bill? Will they mistakenly assume that these high taxes apply to the entire city? When corporate expense accounting sees the high taxes charged in Wichita, will they want to send business here again?

No one at Wichita city hall has an answer for this question.

Tagged as: Community Improvement Districts, Economic development, Tax increment financing, Taxation, TIF districts, Wichita city council, Wichita city government

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Community Improvement Districts discussed in Wichita

by Bob Weeks on July 14, 2010

in Wichita city government

At yesterday’s meeting of the Wichita City Council, council members approved the start of the process to create two Community Improvement Districts in Wichita. Yesterday’s action sets August 10 as the date for a public hearing.

CIDs are a creation of the Kansas Legislature from last year. They allow merchants in a geographic district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID. More background may be read in the article Wichita community improvement districts should have warning signs.

In my remarks to the council, I asked the city to consider consumer protection and education regarding CIDs. I noted that just by crossing a street and shopping within the boundaries of a CID, consumers will have to pay higher sales tax. How would consumers know this in advance?

Council member Paul Gray noted that by crossing a street, consumers might enter a different municipality and have to pay more sales tax. While this is true — the neighboring city of Andover is considering a one-cent city sales tax — the Wichita city council can’t control what its neighbors do. But it can control what happens within the boundaries of Wichita.

Gray said that he didn’t want to create community improvement districts and then handicap them with further government regulation. I agree. But the proper way to avoid this extra regulation is to avoid government intervention in the first place by forging the creation of community improvement districts.

But perhaps the most important public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

City council members and city staff did not provide an answer to this question.

Gray did not vote on this measure as a family member is employed by the business seeking this CID. Council member Lavonta Williams was absent. All other council members voted to approve the petition and set a public hearing on August 10.

Wichita Eagle reporting on this issue is at Public hearings set on sales tax districts at WaterWalk and Central and Oliver. Wichita Business Journal reporting is at City Council moves forward on two CIDs.

Tagged as: Community Improvement Districts, Interventionism, Paul Gray, Taxation, Wichita city council, Wichita city government

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Wichita community improvement districts should have warning signs

by Bob Weeks on July 13, 2010

in Wichita city government

At today’s meeting of the Wichita City Council, council members may approve the start of the process to create two Community Improvement Districts in Wichita.

In Wichita, one CID is limited to a Fairfield Inn hotel being built downtown. That CID proposes to collect an additional two cents per dollar sales tax. The second is a retail and office development of about two blocks at Central and Oliver that asks to collect an additional one cent per dollar.

There are a few problems associated these CIDs. One is this: How will potential tenants of a CID know that they will have to charge their customers higher sales tax? I asked this question earlier this year at a council meeting, and no answer was given.

But more importantly, how will consumers considering purchases from a merchant located in a CID know that they’ll have to pay higher sales tax?

The City of Lawrence is considering how to deal with this problem. Normally I’m cautious of adopting ideas coming out of Lawrence, although that is where I received my university education.

In Lawrence the mayor and some city council members are concerned for the welfare of consumers, according to reporting in the Lawrence Journal-World. According to the article: “Commissioners said they have heard multiple concerns from residents who fear they may buy products at locations without knowing they are paying the extra tax.”

That’s a problem. Most people are generally aware of their state’s sales tax rate, and of that in the city where they live. But shoppers are just starting to realize that different stores in a city may charge different sales tax rates. And it’s not in the interest of merchants located in CIDs to publicize that their customers will spend more by shopping in a CID.

So mandated warning signs might be the answer to this issue of consumer protection and education.

Some might say this isn’t much of a problem, as the extra sales tax is just one or two cents. But it’s more than that. It’s an additional one or two cents per dollar spent. Since the sales tax in Wichita is now 7.3 cents per dollar, an increase of one cent per dollar is 13.7 percent more paid in sales tax.

Or, in the case of the Wichita hotel CID, it’s two cents per dollar, or 27.4 percent more sales tax.

Proponents of economic development tools like CIDs often attempt to justify their use by arguing that the proceeds can be used only for certain eligible costs. Because of this restricted use, it’s not like we’re simply giving money to the CID, they argue.

This type of doublespeak actually makes sense to some people. But as long as the CID proceeds pay for something that developers must pay for anyway, these restrictions have no meaningful economic effect.

It’s as if I gave someone $100 with the stipulation that it can be spent only on Mondays. Who could deny that I have not enriched that person by $100, even considering the restriction? As long as the person was going to spend at least $100 on any Monday, the restriction is without meaning.

Some on the Wichita city council, like council member and Vice Mayor Jeff Longwell contend that since some taxes — like the extra sales tax on hotel rooms in a CID — are paid mostly by visitors to Wichita, they’re a wise economic development strategy.

We ought to consider, however, that once visitors to Wichita examine their hotel bills and realize how much sales tax they’ve paid, they’re not going to feel happy about Wichita. The high sales tax rate expressed on the hotel bill may give visitors the impression that is the sales tax that applies to the entire city. Is that the impression we want to leave with our visitors?

Or, if visitors realize they paid extra tax by staying in a hotel located in a certain geographical district, they may regret their decision. They may also wonder why a city allows certain merchants to collect tax at such a high rate.

I have one question: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices?

Is the answer as simple as this: that it’s preferable for merchants to blame the state for high prices?

Tagged as: Interventionism, Jeff Longwell, Tax abatements, Taxation, Wichita city council, Wichita city government

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Wichita, other city elections on horizon

by Bob Weeks on June 28, 2010

in Wichita city government

Next spring Wichita and other cities in Kansas will hold elections for city council members, school board members, and perhaps mayor.

The filing deadline for candidates is January 25, 2011 at noon. The primary election is on March 1, and the general election is April 5.

These elections are non-partisan, meaning that candidates don’t run as members of a political party. Instead, the top two vote-getters in the primary advance to the general election.

The election calendar is a problem. Kansans presently have their political attention focused on our August primary, in which there are many hotly-contested battles. After that comes the November general election, which is likely to feature several races that generate intense interest and participation. Then comes the Thanksgiving and Christmas holiday season, when few want to think about politics.

Right after that is the filing deadline for city elections, and then quickly, the primary and general elections. It’s a schedule designed for incumbents.

In Wichita, there are three city council positions and the mayorship that are up for election. In district two, (click here for a map of districts), which is primarily the east side of Wichita, incumbent council member Sue Schlapp can’t run again because of the law limiting council members and the mayor to two four-year terms.

In district four — south and southwest Wichita — Paul Gray has also served two terms and can’t run again.

In district five — west and northwest Wichita — incumbent council member and Vice Mayor Jeff Longwell is in his first term and can run again if he chooses. He hasn’t revealed his plans publicly.

Mayor Carl Brewer is also in his first term and can run again. I’ve not heard him reveal his plans.

So far three candidates have publicly declared their intent to run. Former Executive Director of the Sedgwick County Democratic Party Jason Dilts has been actively running for the fourth district position for several months.

In April securities broker and tea party activist Lynda Tyler announced her intent to run in district five against Longwell.

Last week Galichia Heart Hospital CEO Steve Harris threw his hat in the ring for city council district two.

There are others — well-known and not — that are considering running.

Expect these issues to dominate the campaigns: First, downtown development — especially how to pay for it — is likely to be a dominant topic, as the Goody Clancy final plan is scheduled to be completed this fall. We can expect tremendous amounts of campaign funds to be directed to those candidates who favor taxpayer support and subsidy for politically-favored developers.

As many Wichita political and civic leaders speak admiringly of the city sales tax that has funded downtown redevelopment in Oklahoma City, we might even see a sales tax question on the primary or general election ballot.

The issue of taxpayer-funded economic development — whether downtown or elsewhere — may receive discussion too. Both Longwell and Brewer believe that Wichita doesn’t have enough “tools in the toolbox” for dishing out subsidy and tax breaks.

Water is likely to be an issue too, as Wichita’s water rates are going up.

Tagged as: Carl Brewer, Downtown Wichita revitalization, Elections, Jeff Longwell, Politics, Sue Schlapp, Wichita city council

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Letters on Wichita Bowllagio

by Bob Weeks on June 14, 2010

in Uncategorized

Letters from two friends recently appeared in the Wichita Eagle regarding the proposed Bowllagio project, a west side entertainment destination. 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.

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Property rights

Imagine paying your mortgage and taxes for many years, only to get a knock on your door one day. A real estate developer tells you he wants your land.

That’s what happened to a couple on South Maize Road in the boundaries of the proposed Bowllagio sales-tax-and-revenue (STAR) bonds district. They were offered the county-appraised value, plus 10 percent, for their home. But they don’t want to move, as they couldn’t find a comparable property for what the developer offered.

Now the homeowners are concerned they may be forced out of their home through the process of eminent domain. This forceful taking of property by government is one of the worst possible violations of private property rights.

Wichita Mayor Carl Brewer said that the city does not intend to use eminent domain for the proposed Bowllagio entertainment complex.

That’s good news. The city can and should affirm this promise by writing it into the Bowllagio authorizing ordinance. Supporting private property rights is essential; the use of public funds for private projects is bad policy.

Susan Oliver Estes
Wichita

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Let developer fill funding gap

Bowllagio’s representative told the Wichita City Council last week that the developer needed $13 million in public money to fill the projected funding shortfall for the project to be economically feasible. I believe the developer needs to dig deeper into his own pocket to fill this funding gap, or seek private venture capital.

As an experienced real estate practitioner, I am aggrieved that the Wichita mayor and City Council members lack the necessary experience to properly evaluate these projects. They have proved to be little match in protecting the public treasury against sophisticated developers accustomed to using the public purse as part of their real estate funding formulas.

The investment of public money in bowling alleys, restaurants, shops and hotels that compete with existing businesses that offer the same services is not a proper role for government to play and is wrong. It creates an unlevel playing field for those businesses that compete in the same market using their own money.

If the Bowllagio development venture is an economically feasible project, the private developer will find the private money he needs to fund it.

John R. Todd
Wichita

Tagged as: Carl Brewer, Economic development, Eminent domain, Interventionism, Property rights, Wichita city council, Wichita city government

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Wichita Bowllagio hearing produces only delay

by Bob Weeks on June 9, 2010

in Wichita city government

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 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.

Tagged as: Carl Brewer, Economic development, Interventionism, Janet Miller, Jeff Longwell, Jim Skelton, Kansas state government, Lavonta Williams, Paul Gray, STAR bonds, Subsidy, Sue Schlapp, Wichita city council, Wichita city government

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Wichita Warren Theater groundbreaking raises policy issues

by Bob Weeks on June 7, 2010

in Wichita city government

Friday’s groundbreaking of a new Warren Theater and renovation of the existing theater in west Wichita provide an opportunity to revisit some of the public policy issues surrounding Wichita city government and its intervention in the economy in the name of economic development.

Wichita Mayor Carl Brewer and Vice Mayor Jeff Longwell claim that the economic development incentives or subsidies offered to Warren do not cost Wichita taxpayers anything.

Reading comments left to stories at various media outlets, there is definitely a problem with citizens understanding the nature of the city’s industrial revenue bond program. There is no money being lent by the city, as many citizens seem to believe. Instead, the benefit of the program is the escape from paying property taxes and possibly sales taxes. The fact that tax forgiveness is mixed in with a private loan or bond purchase is definitely a source of confusion. The city should seek to simplify this program, if it intends to continue this practice.

But what about the claim that tax forgiveness does not cost other taxpayers? Will the new theater make use of city services such as fire and police protection? Will employees of the theater send their children to public schools? Vice mayor Longwell says that the city is not adding new police officers because of the new theater, so there is no additional cost for police protection. At the margin, that may be true — each additional house or building does not require a new policeman be hired. But at some time, additional city services and personnel will be required.

The city’s practice of liberally granting tax abatements goes against the constant refrain that we must “build up the tax base.” The city’s position is that by “investing” in tax breaks, the city will gain more revenue in the future.

The fallacy of the city’s investment philosophy can easily be seen. When the city grants tax abatements, there is a cost-benefit analysis that accompanies the proposal. The rationale of this analysis that by giving up tax revenue now, more will flow in at some future time.

That’s the source of the fallacy. The return to the city and other governmental units is more tax revenue. Is it the purpose of the city to generate more and more tax revenue? Is it productive to grant one taxpayer favored status so that other hapless taxpayers can be soaked instead?

When a business invests, it does so in order to increase its productive capacity so that it can earn higher future profits, those profits — or losses — being the measure of success of the investment. Government has no ability to calculate profit and loss, and therefore has no way to judge whether its investment has been wise and productive.

There is also, of course, the concept that private business investment is voluntary, while the action the city takes is not voluntary. Citizens must comply.

The companies that receive tax breaks are often prominent companies that ask for large tax abatements. It is worth considerable time and effort — and campaign contributions — for these companies to pursue these benefits. Small companies, however, often don’t fit into the various programs the city has. Instead, they face additional taxes to pay for the taxes the city doesn’t collect when it grants incentives and subsidies.

Recently Alan Cobb wrote of the harm that targeted incentives cause, using Detroit as an example: “While state and local government poured incentives into the Big Three’s trough, the marginal costs of doing business for everyone else crept up.” See Wichita targeted economic development should end.

An aspect of the incentive or subsidy package granted in this case is a fixed, negotiated, growth in property taxes the renovated theater will pay. There are a few points that deserve discussion. First, the base taxable value for the theater is the present value. The theater owner, however, is spending several million dollars on a renovation of that theater. This, according to the Sedgwick County Appraisers Office, would increase the taxable value of the theater by a large amount.

But based on the deal struck with the City of Wichita, this increase in value will not figure into the base taxable value and therefore, will not affect the taxes (PILOT, actually) the theater owner will pay.

Further, the rate of growth in value, 2.3 percent per year, is lower than what might be expected for commercial property to increase in value in many years. This fixed, predictable rate of growth is reminiscent of last year’s Proposition K proposal. The Wichita Eagle rejected this proposal, editorializing: “Over time, this system could result in significant disparities and a disconnect from actual market values, thus likely violating the Kansas Constitution’s requirement of a ‘uniform and equal basis of valuation.’”

But in this case one politically-favored business was able to receive this benefit. These special deals breed justifiable cynicism and distrust of not only City Hall politicians and bureaucrats but businesses that seek this form of pork-barrel spending through the tax system.

Finally, the payments the existing theater will make are not taxes, but payment in lieu of taxes, or PILOT. These payments are different in character from regular property taxes. Instead of falling under the Kansas property tax law regarding payment and possible sale of the property to pay taxes if the taxpayer falls behind for long enough, PILOTS are more in the form of a contract between the city and the taxpayer. If the taxpayer were to fail to pay, the city would have to sue for breach of contract. If the city should prevail in such a suit, it would stand in line with other creditors instead of taking a preferred position as in a tax sale.

This is, of course, assuming the city would choose to pursue such a lawsuit. Nothing would require it to do so. As the city has in the past bailed out this theater owner with a no-interest and low-interest loan, we could easily imagine the city deciding to let these missing or late PILOT payments slide by.

This too assumes that failure to pay PILOT payments as agreed would become public knowledge. The Sedgwick County Treasurer’s office prints lists of delinquent property taxpayers. There is no corresponding list of delinquent PILOT payments.

Tagged as: Carl Brewer, Economic development, Jeff Longwell, Subsidy, Tax abatements, Wichita city council, Wichita city government

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Southwest Airlines topic of Wichita Eagle article

by Bob Weeks on June 1, 2010

in Wichita city government

Sunday’s Wichita Eagle carried a story featuring local elected officials’ reaction to the possibility that Southwest Airlines would start service to Wichita. (City, county officials cautiously weigh subsidy for Southwest Airlines, May 30, 2010)

A source of controversy is over the payments of public funds that are thought to be necessary to acquire the service. The Eagle article quotes an unnamed source as saying it would take about $3 million in public funds to “get the service up and running.” It is not disclosed whether this is a one-time requirement, or if this is $3 million per year for some specific period, or perhaps forever.

Wichitans may want to remember that the subsidy paid to AirTran started small and was promoted as a temporary measure until the airline could establish itself in Wichita. The program, however, has grown to a combined $7 million annual payment from the state, county, and city. It seems unlikely that this number will ever drop.

At one time Wichita was a city known for its entrepreneurs. But recently the New York Times noted that Wichita is known as a “pioneer in the business of paying airlines to continue service.”

An interesting tidbit in the Eagle story is Wichita City Council Member Sue Schlapp making a distinction between a “subsidy” and an “incentive.” What we offer to Southwest would be an incentive, not a subsidy, she said.

The overall tone of the article is that Wichita City Council Members and Sedgwick County Commissioners are making a show of concern, wanting to be “realistic,” desiring more details and something “reasonable and feasible.”

Despite this show of concern and prudence, if this matter comes before these bodies, I’ll be surprised if even one member votes against it.

One thing this article did not mention is that Charleston, South Carolina was able to lure Southwest without having to pay a subsidy.

By way of comparison, the Wichita metropolitan area population is 612,683 (2009 estimate), while the Charleston-North Charleston-Summerville, metropolitan area populations is 659,191. In 2008, there were 780,756 enplanements at the Wichita airport, while there were 1,174,667 at the Charleston airport.

According to reports, the Charleston Convention and Visitors Bureau estimates a $139 million economic impact with the arrival of Southwest. An economic impact analysis has been prepared for the City of Wichita, but Wichita officials will not release it, citing an exception in the Kansas Open Records Act (KORA).

Tagged as: Economic development, Sedgwick county government, Subsidy, Sue Schlapp, Wichita city council, Wichita city government

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North Dakota TIF video informative, reminiscent of Wichita

by Bob Weeks on May 25, 2010

in Wichita city government

The North Dakota Policy Council has a video on YouTube that explains the mechanics of tax increment financing (TIF) districts and the public policy problems associated with TIF.

The video is presented in three sections. The material in the first section is different from the way TIF districts work in Kansas, but the other two sections are very similar to the way the law works in Kansas.

At the start of part 3 (“Problems with TIFs”) the narrator states the problem succinctly: “Tax increment financing negatively affects everybody’s property tax bill by taking the tax revenue from increased taxable valuations on the properties in the TIF areas and putting that into TIF accounts.”

She then presents an illustration showing how the property taxes for non-TIF properties have to rise to make up for the fact that taxes from TIF properties do not go towards paying for city, county, or school district services. While Wichita doesn’t use the term “TIF accounts” as used in this video, the economic effect is the same.

The video also mentions politically-favored developers being the beneficiaries of TIF districts, specifically mentioning “a friend of the city who might own property that is struggling.” I wonder: is the North Dakota Policy Council aware of the situation in Wichita, where many feel that the city is bailing out Real Development (also known as the “Minnesota Guys”) by not only granting TIF financing to them, but increasing the amount of TIF financing against the recommendation of its independent consultant?

When you add the fact that our city manager’s girlfriend has the Minnesota Guys as a client and the city — specifically Mayor Carl Brewer — will not forthrightly explain this situation and the city’s response to citizens, we have a problem in Wichita.

Compounding the problem is the obvious lack of understanding of the economic effects of TIF districts by members of the Wichita City Council, and possibly by city hall bureaucrats, too. Wichita vice mayor Jeff Longwell has complained to the Wichita Eagle that the public doesn’t understand tax increment financing. We should be questioning Longwell’s own understanding, and that of council member Janet Miller, too.

Longwell and Miller — the rest of the council too, for that matter — are aided by newspaper reporters like the Wichita Eagle’s Bill Wilson, who is dismissive and hostile towards free markets and those who advocate for them, calling reliance on markets “intellectually shallow” and a “thin ideological argument.”

Tagged as: Carl Brewer, Janet Miller, Jeff Longwell, Robert Layton, Tax increment financing, TIF districts, Wichita city council, Wichita city government

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Wichita mayor speaks on economic development

by Bob Weeks on April 27, 2010

in Wichita city government

At last week’s Wichita City Council meeting, Mayor Carl Brewer spoke in favor of the city’s economic development policy, specifically as it related to a downtown Wichita development partly financed with tax increment financing, or TIF.

The mayor disagreed with those who have appeared at city council meetings to testify against the use of TIF. He told of how the city called mayors’ associations and the National League of Cities, and they said that most large cities use incentives. He learned that cities use some incentives that that Wichita has not yet heard of, which undoubtedly will give city staff some additional tools in the toolbox in the future.

He said “Incentives are available, and we’re on the right track.”

The mayor mentioned that Harvard and Yale experts said that Wichita had too much parking downtown. This is in agreement with the Goody Clancy proposal presented to the city last October. Wichita selected that firm to lead the planning process for the revitalization or redevelopment of downtown Wichita.

He said that in a recent meeting of mayors he attended, he learned that the mayors of other cities are trying to figure out how to use incentives and recruit business. They’re not turning their backs on incentives, he said, adding that “What we’re doing is nothing new.”

He told the audience that “We as a city are going to have to endure change, and we as a city are going to have to understand any time there’s change, there is going to be some pain.”

He added that he appreciated input from those who oppose the various subsidies and incentives the city gives to developers, and the city did check to see if the information they provided to the city was correct.

Commentary

The National League of Cities, one of the organizations the mayor consulted with regarding the use of incentives for the purpose of economic development, promotes an expansion of the powers of cities to engage in taxpayer-funded economic development subsidies. Its mission statement sounds noble: “Its mission is to strengthen and promote cities as centers of opportunity, leadership, and governance.” But citizens should not be deceived. It promotes interventionist practices rather than economic freedom. An example is its celebration of the U.S. Supreme Court decision in Kelo v. City of New London, which the Wall Street Journal described as “one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development.”

The mayor’s refusal to embrace economic freedom — which he has described as a “philosophy” that is not viable in the real world — means that Wichita is likely to continue to engage in the same competitive practices as do almost all other cities. It means that deals like the subsidy granted to Real Development is a template for other taxpayers-funded giveaways. As Council Member Paul Gray has warned, the plans for the redevelopment of downtown Wichita are likely to require many millions — perhaps hundreds of millions of dollars — of public assistance or investment. Since there isn’t enough tax increment financing available to pay for this, we can expect to see proposals for tax increases, such as a new city sales tax of perhaps one cent on the dollar, to pay for downtown redevelopment.

A sales tax is the model for economic development in Oklahoma City. This has been promoted to Wichita and Sedgwick County leaders
as a good idea for Wichita to pursue.

What Wichita is missing out on is a way to truly distinguish itself from all the other cities and counties that are all using the same economic development tools. Presently about all we can do is offer subsidies that are larger than what other cities offer. But if we decided to forgo the use of the usual economic development subsidies and incentives, that would be something very unusual. It could really put Wichita on the map as a place to locate to.

Since these economic development incentives and subsidies require other taxpayers, both individuals and businesses, to pay for their cost, Wichita could reduce the cost of doing business in Wichita for everyone. A company considering locating to Wichita could be confident that it would be operating in a low-tax environment. It wouldn’t have to hope that it fits into the city’s economic development policy guidelines. It wouldn’t have to hope that politicians and bureaucrats view its application favorably.

Further, once a company locates here, it wouldn’t have to worry that other companies will receive incentives and subsidies that it will have to pay for. It would not need to worry about the other costs that subsidies impose, such as subsidized companies having lower overhead and are therefore better able to compete for employees.

Eliminating interventionist policies from city hall could have other benefits. Is there a “good ‘ol boy” network of insiders that use Wichita city hall as their personal piggy bank? By eliminating the practice of granting incentives and subsidies, we could reduce or eliminate the cynical attitude of many citizens towards city government.

We wouldn’t have to worry whether the campaign contributions made by those seeking favor from city hall were made in the interest of good government, or made in the hopes of getting a TIF district or other subsidy passed through the council.

These ideas, however, are not seriously considered by the mayor or any city council members, at least to my knowledge. Instead, we in Wichita are doomed to finance an escalating economic development arms race. The economic freedom of Wichitans will decline.

This is noteworthy in light of the mayor’s curious assertion in his remarks that we will have to “endure pain” caused by change. We’ve changed nothing.

Tagged as: Carl Brewer, Downtown Wichita revitalization, Economic development, Free markets, Subsidy, Tax increment financing, Taxation, TIF districts, Wichita city council, Wichita city government

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Wichita Exchange Place project passes

by Bob Weeks on April 27, 2010

in Wichita city government

At today’s meeting of the Wichita City Council, final approval of the city’s involvement in a downtown Wichita development passed.

The item, which appeared on the consent agenda, was the second reading for the ordinances that authorize the Exchange Place Project, including the expansion of its tax increment financing district.

(A consent agenda is a group of items that will be voted on in bulk with a single vote. An item on a consent agenda will be discussed only if a council member requests the item to be “pulled.” If that is done, the item will be voted on separately. Generally, consent agenda items are considered by the city to be non-controversial, but that is not always the case.)

Council Member Lavonta Williams wanted to know more about the change to the parking plan. On Saturday reporting by the Wichita Eagle’s Brent Wistrom told of how the number of parking spaces that will be available to the public has declined as the project plan has evolved: “Now the proposed garage near Douglas and Market would have only 64 spaces saved for public parking. That’s down from 103 promised earlier this month, which was down from the 149 projected in March. Meanwhile, the number of spaces reserved for apartment tenants increased from 195 to 209.”

The availability of additional public parking spaces in downtown was one of the major reasons cited by city council members as a reason for approving the Exchange Place project.

Assistant City Manager Cathy Holderman asked Pat Ayers, a former Key Construction executive, to respond to the question. He said that the unique aspects of the proposed garage actually increased the number of parking spaces available during the work day, as residents of the apartments drive their cars to work.

(City manager Bob Layton, although present at the meeting, is not able to participate in this matter due to a conflict of interest.)

Is this a deviation from what was originally planned, asked Williams? Yes, was the reply from Ayers.

Vice Mayor Jeff Longwell asked Holdeman about a safeguard in place for this project, a ten percent “retainage.” Ayers replied that this provision is in effect for this project. But Council Member Paul Gray said a retainage is common to construction contracts, and that it simply ensures that the contractor completes the job, not the sustainability of the project.

There was mention of the fact that payments will be made directly to vendors, not to Real Development, the developers of the project. This is a reminder of the peculiar arrangement where the city is placing a huge bet of the success of downtown Wichita redevelopment in the hands of the principals behind Real Development, but evidently we don’t trust them enough to write them a check and be confident they will pay their bills.

The measure passed with Gray and Jim Skelton voting against the measure, as they did last week.

Other reporting is at Downtown condo project gets final approval.

Tagged as: downtown, Tax increment financing, TIF districts, Wichita city council, Wichita city government

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On Wichita’s Exchange Place TIF, Janet Miller speaks

by Bob Weeks on April 26, 2010

in Wichita city government

Last week’s meeting of the Wichita City Council featured a message from Council Member Janet Miller that illustrated her firm belief in centralized government planning for the purposes of economic development. It also contained a material mistake in the understanding of the facts of the project.

In her remarks from the bench, Miller disagreed with those who testify at council meetings against tax increment financing (TIF). She said there is much information that says this type of economic development incentive is effective.

She said “Sometimes I wonder what city folks are living in when they talk about the negative, or the lack of results from TIFs.” She then named several Wichita TIF districts that she said performed well.

If her remarks were aimed at me and some of the other people who have testified at city council meetings against the formation of TIF districts, council member Miller may not have been listening very carefully. We do not deny that TIF districts produce results — within the district itself. Things get built, buildings get renovated. It is the effect of TIF on the city as a whole that we are concerned with.

It’s the observed effects of TIF, as economists Dye and Merriman have found and I have mentioned to the city council, including Miller, several times: “We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.”

It’s also the unobserved effects — the things that don’t happen because Wichita props up developers in politically-favored areas such as downtown. This form of centralized planning from Wichita city hall overrides the decisions that the citizens of Wichita make with their own pocketbooks, and concentrates power in the hands of bureaucrats and politicians.

As Randal O’Toole has written: “TIF today is often part of a social engineering agenda that Americans should reject.”

Miller praised the amount of office space Real Development has brought online in downtown Wichita. To the extent that this has been done without government assistance, this should be praised.

She agreed with Vice Mayor Longwell’s assessment of this project, saying “This is not a tax abatement project.” She is just as wrong as is Longwell and other council members who believe this.

In discussing the risk involved in this project, Miller told of how the disbursements from a HUD-guaranteed loan that will finance much of this project will made directly to contractors, not to Real Development. City of Wichita documents indicate that the City’s payments will be made in the same way. This is a quite peculiar arrangement: we are placing a huge bet of the success of downtown Wichita redevelopment in the hands of the principals behind Real Development, but evidently we don’t trust them enough to write them a check and be confident they will pay their bills.

Miller also spoke of the jobs that will be created by this project. Implicit in her argument is that this project, or something similar, would not occur without the city’s subsidy. Her argument also ignores what economists tell us — that TIF districts simply transfer development from one part of town to another.

What Wichitans should be most concerned about, however, is a misstatement by Miller that other council members may have relied on in making their decision on how to vote. Miller said: “The property tax increases, the increment that’s being calculated in this project, includes only the buildings in this project.”

This statement directly contradicts the facts. In the Longhofer study, other properties owned by Real Development — the Petroleum Building, Sutton Place, 105 S. Broadway, and others — are used to support the TIF loan for the Exchange Place project. In response to my question, Wichita’s urban development director Allen Bell confirmed the same.

In her message from the bench, Miller said that city staff and council members have had enough time to go over this proposal. Her mistaken remarks indicate, however, that the project is still not understood very well by the council, neither its mechanics or its economic effect.

Tagged as: Downtown Wichita revitalization, Economic development, Janet Miller, Jeff Longwell, Subsidy, Tax increment financing, Taxation, TIF districts, Wichita city council, Wichita city government

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Wichita’s Jeff Longwell on TIF districts, tax abatements

April 23, 2010

Is a tax increment financing (TIF) district a tax abatement? Wichita city council member Jeff Longwell, now Wichita’s vice-mayor, doesn’t think so. During this week’s city council meeting, Longwell said this in explaining his support of a TIF district created for the benefit of Real Development: “One of the things that people I think need to understand is that this is not a tax abatement.”

Read the full article →

Tax increment financing is not free money

April 19, 2010

Cato Institute Senior Fellow Randal O’Toole has written extensively on the subject of urban planning, development, and tax increment financing (TIF) districts. The following article contains many points that the Wichita City Council may wish to consider as it considers expansion of a downtown Wichita TIF district at tomorrow’s council meeting.

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Wichita proposed tax increment financing district subject of news

April 18, 2010

Today’s Wichita Eagle carries two news stories regarding the proposed expansion of a downtown Wichita tax increment financing (TIF) district. The front-page story Condo vote key to downtown Wichita growth and the additional story Owners report mixed views of developers provided background on the vote the Wichita City Council may make at Tuesday’s 9:00 am meeting.

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Taxpayer-funded development in Wichita opposed

April 18, 2010

After the formal presentation I personally complemented the Minnesota Guys and thanked them for what they were doing downtown. They assured me that their redevelopment work in our downtown would be completed without government incentives, and I assured them that they would have my support as long as they stayed out of the public treasury.

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Tax increment financing questions topic at Wichita city council meeting

April 15, 2010

On Tuesday the Wichita city council heard a request by Real Development for a $2.5 million increase in tax increment financing on a downtown project. Discussion during the meeting revealed how little is known about the numbers that the city uses in deciding whether to participate in the project. Numbers that don’t make sense, plus the fact that the applicant has not responded to the city’s request for new numbers, indicate that this proposal should be rejected.

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Wichita Larksfield Place bonds should not be issued

April 13, 2010

Today’s meeting of the Wichita city council will have a public hearing concerning the issuance of health care facilities revenue bonds for Larksfield Place, a decidedly high-end retirement and assisted living center in east Wichita.

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Wichita Exchange Place TIF should be rejected

April 12, 2010

Tomorrow’s meeting of the Wichita city council will feature a public hearing as to whether a tax increment financing district that benefits Real Development should be modified.

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Wichita city hall silent on handling of ethics issue

April 11, 2010

On Tuesday the Wichita city council will hold a public hearing regarding a request by Real Development for a $2.5 million increase in tax increment district financing. While this proposal should be opposed on its merits, there is reason to give extra scrutiny to this matter. That’s because Real Development employs the services of Wichita public relations executive Beth King. What matters to public policy is that last year she and Wichita City Manager Robert Layton began a dating relationship which continues to the present.

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Wichita community improvement district questions unanswered

April 8, 2010

This week the Wichita city council approved the use of Community Improvement Districts. These districts are a new creation of the Kansas legislature from last year.

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Wichita economic development incentives discussed

April 6, 2010

At today’s meeting of the Wichita city council, economic development incentives were a topic of discussion.

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Wichita targeted economic development should end

April 5, 2010

Is the City of Wichita able to choose which companies are worthy of taxpayer assistance for the purposes of economic development?

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Wichita Warren Theater IRB a TIF district in disguise

April 4, 2010

On Tuesday the Wichita City Council will consider an economic development incentive for a local business. The process the city is using to grant this incentive bypasses the scrutiny that accompanies the formation of TIF districts while providing essentially the same benefit.

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Detroit, corporate welfare and Wichita’s future

February 28, 2010

Recently The Eagle printed an article by Molly McMillin, a well-respected aviation and business reporter.

The question asked throughout the article is one that Wichita leaders and citizens have been asking for some time: What can we do to prevent Wichita from falling into the hole that is Detroit?

A simple answer is to continue throwing money and other goodies to keep the aviation companies. A better answer is we need to get rid of the notion that our elected officials and others have so much forethought to know what will or won’t be successful in 20 or 50 years. They don’t.

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David Burk, Wichita developer, overreaches

February 14, 2010

Today’s Wichita Eagle contains a story about a well-known Wichita real estate developer that, while shocking, shouldn’t really be all that unexpected.

The opening sentence of the article (Developer appealed taxes on city-owned property) tells us most of what we need to know: “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.”

Some might say it’s not surprising that Burk represented himself in the way the Eagle article reports. When a person’s been on the receiving end of so much city hall largess, it’s an occupational hazard.

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Businesses in Old Town Cinema district fought property taxes

February 9, 2010

As reported in the Wichita Eagle by Brent Wistrom: “Business owners in a special taxing district surrounding the Old Town Warren Theatre have fought to have their property taxes reduced, forcing the city to cover debts incurred when the city bought land, installed utilities and built a park to spur the development.”

I guess no one wants to pay taxes, even when those taxes go to pay off bonds that benefited your property. That’s true even though the city has made a no-interest and low-interest loan to the primary business in this TIF district. As the Eagle story reports: “The move was seen as a way to ensure the theater’s success and give the TIF district a boost.”

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Wichita city council signals possible change in economic development incentive policy

February 9, 2010

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.

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Wichita’s pursuit of convention business: a wise strategy?

February 1, 2010

One of the reasons Wichita city leaders say we need to provide subsidy to a proposed hotel in the downtown WaterWalk development is that the rooms are needed to support the city’s effort to gain convention business.

On its face, this pursuit of convention business seems like a noble effort by city leaders. Vast streams of economic development will follow if they are successful, they say. Providing subsidy to a hotel in support of this effort, they say, should be a simple decision. Especially when supporters like Wichita city council member Jeff Longwell tell us that much of the subsidy to the hotel will be paid by visitors to Wichita.

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Wichita hotel survey input requested

January 27, 2010

Wichita businessman Craig Gabel has created a survey form for citizens to express their input to the Wichita City Council

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At Wichita city council, does the field tilt?

January 25, 2010

At the January 12 meeting of the Wichita City Council, several citizens and one council member addressed the “unlevel playing field” and its implications for development in downtown Wichita.

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Concerning Wichita’s WaterWalk, I have a few questions

January 24, 2010

As the City of Wichita decides whether to offer subsidy to a hotel in the downtown WaterWalk development, there are a few questions that deserve answers. Most of these questions are my own, but some are questions that people have told me I should ask.

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Public forum on WaterWalk hotel proposal

January 20, 2010

On Monday January 25, a group of citizens will hold a public forum concerning the proposal for a hotel in the WaterWalk development in downtown Wichita.

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Waterwalk hotel issue receives public input

January 14, 2010

Tuesday’s meeting of the Wichita city council featured a lengthy discussion of a proposal that in the past, might have been passed without much public discussion. Instead, some useful information emerged, and the meeting opened the possibility of more citizen input not only on this item, but future city initiatives.

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Waterwalk hotel deal breaks new ground for Wichita subsidies

January 10, 2010

On Tuesday, the Wichita City Council will consider an agreement with a hotel developer that, besides awarding the usual subsidies to politically-favored developers, breaks new ground in the use of subsidy. Additionally, the deal contradicts recent promises made by a top city official.

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Mark Gietzen should be compensated by Wichita

January 4, 2010

In 2000, a bridge was built by the City of Wichita near Mark Gietzen’s house. Vibration from the construction process damaged Gietzen’s house. Nearly ten years later, Gietzen has not been compensated for damages.

It’s not that Gietzen hasn’t tried to receive payment for his damages. The mayor of Wichita at the time assured Gietzen that he would be compensated. There’s been a number of lawsuits. But so far, that hasn’t happened.

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