Tag Archives: Wichita city government

Spirit Aerosystems tax relief

Wichita’s largest employer asks to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through.

This week the Wichita City Council will consider offering Spirit Aerosystems economic development incentives that will allow the company to avoid paying some $45 million in taxes. This will be accomplished through the authorization of $280 million of Industrial Revenue Bonds. 1

Industrial Revenue Bonds are a vehicle for generating and conveying tax exemptions. 2 In the IRB program, government is not lending money, and Wichita taxpayers are not at risk if the bonds are not repaid. In fact, in the present case the applicant company plans to purchase the bonds itself, according to city documents. Instead, the purpose of the IRB process is to allow Spirit to escape paying property taxes and sales taxes.

Cost of Spirit Aerosystems incentives.
Cost of Spirit Aerosystems incentives.
Usually the agenda packet the city prepares for council members and the public contains the amount of tax expected to be foregone. For this item that summary is missing, and the sales tax exemption is not mentioned. I have prepared a table summarizing data from the analysis prepared for the city by the Center for Economic Development and Business Research at Wichita State University.

Of note, the share of the cost of the incentives born by the City of Wichita is small, slightly less than one percent. The bulk of the cost is born by the State of Kansas, with the Derby School District and Sedgwick County facing smaller shares of the cost.

Also, the city is forcing a decision on a neighboring jurisdiction that it would not accept for itself, unless it uses one of many exceptions or loopholes. This adverse decision is forced upon the Derby School District. It faces a benefit-cost ratio of 1.16 to 1, which is below the city’s standard of 1.30 to 1, unless an exception is cited. 3 The Derby School District is not involved in this action and has no ability to affect the issuance of these bonds, should it desire to.

Besides this, the granting of these tax breaks calls into question the validity of taxation. If a company can be excused from tens of millions of dollars in taxes, can we say there is equal treatment under law?

Effect on young companies

When large companies receive tax abatements and exemptions, others must pay the cost of government. In particular, small and young business firms are usually not eligible for incentive programs like that being offered to Spirit, and therefore must bear a disproportional share of the cost of government. This is an important consideration, as Wichita is relying on entrepreneurship as a principle method of growing its economy.

The cost of these tax abatements burdens a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. This action — the award of incentives to an established company — is harmful to the Wichita economy for its strangling effect on entrepreneurship and young companies. As this company and others receive incentives and escape paying taxes, others have to pay.

There’s plenty of evidence that entrepreneurship, in particular young business firms, are the key to economic growth. But Wichita’s economic development policies, as evidenced by this action, are definitely stacked against the entrepreneur. As Wichita props up its established industries, it makes it more difficult for young firms to thrive.

Additionally, Wichita relies on targeted investment in our future. Our elected officials and bureaucrats believe they have the ability to select which companies are worthy of public investment, and which are not. But as we’ve seen in the unfortunate news emanating from several local companies, this is not the case. (See Kansas economic growth policy should embrace dynamism and How to grow the Kansas economy.)

Taxes for you, but not for me

Based on documents supplied by the city, Spirit will avoid paying $6,620,025 in sales tax through its participation in the IRB program. Kansans should be aware that our state has one of the highest sales taxes in the nation on groceries. The effect of this falls disproportionally on low-income households. 4

Spirit Aerosystems contribution to Yes Wichita

While Spirit seeks to avoid paying millions in sales tax, it campaigned for ordinary Wichitans to pay more sales tax. When Wichita placed a one cent city sales tax on the ballot in November 2014, Spirit Aerosystems contributed $10,000 to the group campaigning in favor of the sales tax. 5 Spirit’s immediate past president contributed $10,000 to the same effort.

Small business

This week American City Business Journals presented the results of a study of small business vitality in cities. 6 Wichita ranked at number 104 out of 106 cities studied. Awarding incentives to large companies places small business at a disadvantage. Not only must small business pay for the cost of government that incentivized companies avoid, small companies must also compete with subsidized companies for inputs such as capital and labor.

Finally, research has found that the pursuit of large companies doesn’t produce the desired growth: “The results show that large firms fail to produce significant net benefits for their host communities, calling into question the high-stakes bidding war over jobs and investment.” 7


Notes

  1. City of Wichita. Agenda for May 3, 2016. Available at wichita.gov/Government/Council/Agendas/05-03-2016%20City%20Council%20Agenda%20Packet.pdf.
  2. Weeks, Bob. Industrial revenue bonds in Kansas. Available at wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  3. Sedgwick County/City of Wichita Economic Development Policy. Available at www.wichita.gov/Government/Departments/Economic/EconomicDevelopmentDocuments/City%20of%20Wichita%20Economic%20Development%20Policy.pdf.
  4. Weeks, Bob. Wichita sales tax hike harms low income families most severely. Available at wichitaliberty.org/wichita-government/wichita-sales-tax-hike-harms-low-income-families-severely/.
  5. YES WICHITA INC. Receipts and Expenditures Report. December 30, 2014. On file at Sedgwick County Election Office.
  6. Wichita Business Journal. The State of Small Business: Wichita scores low in small biz vitality. Available at www.bizjournals.com/wichita/print-edition/2016/04/29/the-state-of-small-business-wichita-scores-low-in.html.
  7. William F. Fox and Matthew N. Murray, “Do Economic Effects Justify the Use of Fiscal Incentives?” Southern Economic Journal, Vol. 71, No. 1, 2004, p. 79.

Wichita property tax rate: Up again

The City of Wichita says it hasn’t raised its property mill levy in many years. But data shows the mill levy has risen, and its use has shifted from debt service to current consumption.

Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
In 1994 the City of Wichita mill levy rate was 31.290. In 2015 it was 32.686, based on the city’s Comprehensive Annual Financial Report and the Sedgwick County Clerk. That’s an increase of 1.396 mills, or 4.46 percent, since 1994. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)

The Wichita City Council did not take explicit action to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.

Wichita mill levy rates. Click for larger version.
Wichita mill levy rates. Click for larger version.
While the city doesn’t have control over the assessed value of property, it does have control over the amount it decides to spend.

Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Also, while some may argue that an increase of 4.46 percent over two decades is not very much, this is an increase in a rate of taxation, not actual tax revenue. As property values rise, and as the mill levy rises, property tax bills rise rapidly.

The total amount of property tax levied is the mill levy rate multiplied by the assessed value of taxable property. This amount has risen, due to these factors:

  • Appreciation in the value of property
  • An increase in the amount of property
  • Spending decisions made by the Wichita City Council

Application of tax revenue has shifted

Wichita mill levy, percent dedicated to debt service. Click for larger version.
Wichita mill levy, percent dedicated to debt service. Click for larger version.
The allocation of city property tax revenue has shifted over the years. According to the 2010 City Manager’s Policy Message, page CM-2, “One mill of property tax revenue will be shifted from the Debt Service Fund to the General Fund. In 2011 and 2012, one mill of property tax will be shifted to the General Fund to provide supplemental financing. The shift will last two years, and in 2013, one mill will be shifted back to the Debt Service Fund. The additional millage will provide a combined $5 million for economic development opportunities.”

In 2005 the mill levy dedicated to debt service was 10.022. In 2015 it was 8.509. That’s a reduction of 1.513 mills (15.1 percent) of property tax revenue dedicated for paying off debt. Another interpretation of this is that in 2005, 31.4 percent of Wichita property tax revenue was dedicated to debt service. In 2015 it was 26.0 percent.

This shift has not caused the city to delay paying off debt. This city is making its scheduled payments. But we should recognize that property tax revenue that could have been used to retire debt has instead been shifted to support current spending. Instead of spending this money on current consumption — including economic development spending that has produced little result — we could have, for example, used that money to purchase some of our outstanding bonds.

Despite the data that is readily available in the city’s comprehensive annual financial reports, some choose to remain misinformed and/or uninformed. The following video from 2012 provides insight into the level of knowledge of some former elected officials and city staff. Based on recent discussions with city officials, things have not improved regarding present staff.

WichitaLiberty.TV: Trump and the Wichita Eagle, property rights and blight, teachers union, and capitalism

In this episode of WichitaLiberty.TV: Was it “Trump” or “Bernie” that incited a fight, and how does the Wichita Eagle opine? Economic development in Wichita. Blight and property rights. Teachers unions. Explaining capitalism. View below, or click here to view at YouTube. Episode 117, broadcast April 24, 2016.

Wichita doesn’t have this

A small Kansas city provides an example of what Wichita should do.

For several years, the Kansas city of Lawrence has published an economic development report letting citizens know about the activities of the city in this area. The most recent edition may be viewed here.

The Lawrence report contains enough detail and length that an executive summary is provided. This is the type of information that cities should be providing, but the City of Wichita does not do this.

It’s not like the City of Wichita does not realize the desirability of providing citizens with information. In fact, Wichitans have been teased with the promise of more information in order to induce them to vote for higher taxes. During the campaign for the one cent per dollar Wichita city sales tax in 2014, a city document promised this information regarding economic development spending if the tax passed: “The process will be transparent, with reports posted online outlining expenditures and expected outcomes.” (This is what Lawrence has been doing for several years.)

The “Yes Wichita” campaign promised, “Reports will be measured and reported publicly.” (But “Yes Wichita” was a campaign group and not an entity whose promises can be relied on, and can’t be held accountable for failure to perform.)

These are good ideas. The city should implement them even though the sales tax did not pass. If it’s good for citizens to have this type of information if the sales tax had passed, it’s good for them to know in any circumstance, because the city (and other overlapping governmental jurisdictions) still spends a lot on economic development.

Why is this information not available? Is the communications staff overwhelmed, with no time to provide this type of information?

During the sales tax campaign Wichita city staff had time to prepare news releases with titles like “City to Compete in Chili Cook-off” and “Jerry Seinfeld Returns to Century II.”

Since then the city has hired additional communications staff, adding a Strategic Communications Director last spring.

Wichitans need to know that besides living in a city that doesn’t provide much information about its operations, the city believes it is doing a good job. Here is a Wichita city news release from 2013:

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

When I’ve expressed frustration with the process of asking for information from the city, communications staff told me this: “I should note that the City has won multiple awards for openness and citizen participation, but City leaders recognize this work is never done. They strive each and every day to become more open and transparent and will continue to do so.”

Wichitans need to wonder:

  • Why can’t we have the same information about our city government that residents of Lawrence have?

  • Was transparency promised only to get people to vote for the sales tax?

  • Is transparency really a governing principle of our city?

What else can Wichita do for downtown companies?

With all Wichita has done, it may not be enough.

Within a month, these two headlines appeared in the opinion pages of the Wichita Eagle:

Investment in downtown Wichita is impressive 1

State and local leaders need to help meet Cargill’s needs 2

The second headline was in response to the news story “Cargill plans to move its Wichita headquarters — but where?” 3 In this story, Carrie Rengers reports “Cargill is looking to move its Wichita headquarters, but whether that’s within downtown, where it already is, or outside of it or even outside of Kansas is unclear. … City and state officials are working in full gear to make sure Wichita — downtown specifically — is the option Cargill selects.”

Rengers reports that Wichita city officials say no specific incentives have been offered to Cargill, but “any incentives likely would involve infrastructure help, such as with parking, or assistance with easing the process for a new building, such as with permitting.” Wichita Mayor Jeff Longwell says “cash incentive won’t be an option,” according to Rengers.

A Cargill official says that the company needs to attract millennials and younger people, who are not attracted to “traditional office space and office-type buildings.”

Now, consider the first opinion headline: “Investment in downtown Wichita is impressive.” In this op-ed, Phillip Brownlee writes “It’s encouraging that investment in downtown Wichita is continuing — and that it is mostly privately funded. A vibrant downtown is important to the city’s image and to attracting and retaining young adults. More than $1 billion in private and public investment has occurred downtown in the past decade. About $675 million of that investment has been privately funded, and $411 million has been public projects, according to Wichita Downtown Development Corp.”

Brownlee goes on to note other investments, such as 800 new apartment units “in the works.”

On the importance of downtown, Brownlee writes “City leaders have long recognized the value of a healthy downtown. Besides the symbolic importance of not having a lot of empty buildings, many young adults prefer an urban environment. That makes downtown important even for businesses not located there, because it can help or hurt their ability to recruit and retain young professionals.”

I see a discontinuity. Our city’s leaders — opinion, elected, and bureaucratic — brag about all the investment in downtown Wichita, public and private, yet it doesn’t seem to be enough to retain a major Wichita employer in downtown.

At least editorialist Rhonda Holman recognizes the problem in her column: “It’s concerning that Cargill’s stated intentions to relocate and consolidate have not included a commitment to remain downtown or even in Wichita or Kansas.” What is her solution? “Elected and business leaders need to be creative and assertive in helping Cargill meet its needs.”

I share Holman’s concern. It’s very troubling that with $411 million in private investment over the past decade, downtown Wichita still isn’t attractive enough to retain Cargill, if the company’s intent to move is real and genuine. And advising the same group of people who have been in power during the decline of the Wichita economy to be “creative and assertive” is a solution?

What’s even more disconcerting is that the person who has overseen much of this downtown spending has been promoted. Now Jeff Fluhr of Wichita Downtown Development Corporation is president of Greater Wichita Partnership, with responsibility “to grow the regional economy.”

Forgive me if I’m underwhelmed.

Regulation
One of the things that may be offered to Cargill, according to Rengers, is “assistance with easing the process for a new building, such as with permitting.” This is a big red flag on a very tall flagpole. If the city has regulations so onerous that they are a consideration as to whether to locate in Wichita, this is something that must be fixed immediately. But the instinct of the Wichita City Council and city bureaucrats is to create more regulations covering everything from the striping of parking lots to the personal hygiene of taxi drivers.

Cash incentives
Mayor Longwell says there will be no cash incentives offered to Cargill. Instead, something like help with parking may be offered. This might take the form of building a parking garage for Cargill. We should ask: What is the difference between giving cash to Cargill and building a parking garage for Cargill’s use? There really isn’t a meaningful difference, except for Cargill. That’s because cash incentives are taxable income. Free use of a parking garage isn’t taxable. 4 5

Further, Cargill may qualify for PEAK, or Promoting Employment Across Kansas.6 This program allows companies to retain 95 percent of the payroll withholding tax of employees. The original intent of this program was to lure companies to locate in Kansas, but in recent years the program has been expanded to include incentivizing companies to remain in Kansas. While this is a state program and not a city program under the mayor’s control, PEAK benefits are more valuable than cash.


Notes

  1. Brownlee, Phillip. Investment in downtown Wichita is impressive. Wichita Eagle. March 5, 2016. Available at www.kansas.com/opinion/editorials/article64129977.html.
  2. Holman, Rhonda. State and local leaders need to help meet Cargill’s needs. Wichita Eagle. April 1, 2016. Available at www.kansas.com/opinion/opn-columns-blogs/now-consider-this/article69534982.html.
  3. Rengers, Carrie. Cargill plans to move its Wichita headquarters — but where? Wichita Eagle. March 29, 2016. Available at www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article68700517.html.
  4. Journal of Accountancy, (2009). Location Tax Incentive Not Federal Taxable Income. Available at: www.journalofaccountancy.com/issues/2009/apr/locationtaxincentive.html.
  5. American Institute of CPAs, (2015). Federal Treatment of State and Local Tax Incentives. Available at: www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpTax/Federaltreat.jsp.
  6. Weeks, Bob. In Kansas, PEAK has a leak. Voice For Liberty in Wichita. Available at wichitaliberty.org/kansas-government/kansas-peak-leak/.

In Wichita, revealing discussion of property rights

Reaction to the veto of a bill in Kansas reveals the instincts of many government officials, which is to grab more power whenever possible.

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it.
— Frederic Bastiat

Kansas Governor Sam Brownback’s veto of a bill that gives cities additional means to take blighted property has produced reaction from local officials in Wichita. The bill is Senate Bill 338.

As has been noted in numerous sources, cities in Kansas have many tools available to address blight. 1 What is the purported need for additional power?

In remarks from the bench, Wichita City Council Member Pete Meitzner (district 2, east Wichita) said there is no intent to be “aggressive in taking people’s property.” 2 But expanding the power of government — aggression, in other words — is what the bill does. Otherwise, why the need for the bill with its new methods and powers of taking property?

And once government is granted new powers, government nearly always finds ways to expand the power and put it to new uses. Even if we believe Meitzner — and we should not — he will not always be in office. Others will follow him who may not claim to be so wise and restrained in the use of government power.

In particular, government finds new ways to expand its powers through enabling concepts like blight. Did you know the entire suburban town of Andover is blighted? 3 Across the country, when governments find they can take property with novel and creative interpretations of blight, they do so. 4

It’s easy to sense the frustration of government officials like Wichita Mayor Jeff Longwell. In his remarks, he asked opponents of SB 338 “what they would do” when confronted with blight. That is a weak argument, but is often advanced nonetheless. Everyone has the right — the duty — to oppose bad legislation even if they do not have an alternate solution. Just because someone doesn’t have a solution, that doesn’t mean their criticism is not valid. This is especially true in this matter, as cities already have many tools to deal with blight.

Proponents of SB 338 also make unfounded accusations about the motivation of opponents of the law. Because someone opposes this law, it doesn’t mean they are in favor of more blight. Those who fight for freedom and liberty are used to this. Advocating for the right to do something doesn’t necessarily mean that one is in favor of actually doing it.

The nature of rights

Much of the discussion this issue concerns the rights of people who live near blighted property. People do have certain rights, but rights have limits. Regarding property, Roger Pilon writes: “Thus, uses that injure a neighbor through various forms of pollution (e.g., by particulate matter, noises, odors, vibrations, etc.) or through exposure to excessive risk count as classic common-law nuisances because they violate the neighbor’s rights. They can be prohibited, with no compensation owing to those who are thus restricted.” 5

Note that Pilon mentions “excessive risk” as something that injures a neighbor. Some of the activities the city wants to control are things like drug dealing, drug usage, and prostitution that may take place on blighted property. And, I suppose it is a risk to have gangs dealing drugs out of the house across the street, blighted or not. But these activities are illegal everywhere, and there are many laws the city can use to control these problems. There is no need for new laws.

It is important to draw a bright line as to where property rights end. Pilon: “By contrast, uses that ‘injure’ one’s neighbor through economic competition, say, or by blocking ‘his’ view (which runs over your property) or offending his aesthetic sensibilities are not nuisances because they violate no rights the neighbor can claim. Nor will it do to simply declare, through positive law, that such goods are ‘rights.'” 6

In today’s world, however, where new rights are seemingly created from thin air, people want to exercise their purported right to control how their neighbor’s property looks. But we have no such right, writes Pilon: “The principle, in fact, is just this: People may use their property in any way they wish, provided only that in the process they do not take what belongs free and clear to others. My neighbor’s view that runs over my property does not belong free and clear to him.” 7

Opposition in the Legislature

When the Kansas House of Representatives and Senate voted on this bill, several House members submitted explanations of their vote. In the Senate, David Haley filed a protest and message explaining his opposition to the bill. These statements follow.

Explanation of vote in the House of Representatives

MR. SPEAKER: I VOTE NO ON SB 338. KANSAS ALREADY HAS SUFFICIENT TOOLS IN PLACE TO ADDRESS BLIGHT. SB 338 circumvents our current eminent domain statutes by redefining “abandoned property” and by allowing our local governments to expeditiously confiscate, seize or destroy law abiding citizens’ private property without compensation, adequate notice, and a legal property title. This is an egregious overreach that deprives some citizens of their private property rights without sufficient due process and it will cause irreparable harm to our most vulnerable citizens that do not have the resources to protect their property.
— GAIL FINNEY, BRODERICK HENDERSON, RODERICK HOUSTON, BEN SCOTT, VALDENIA WINN, JOHN CARMICHAEL, KASHA KELLEY, BILL SUTTON, JERRY LUNN, CHARLES MACHEERS

Protest of Senator David Haley against Senate Bill 338

February 23, 2016

In Accordance with Article 2, Section 10 of the Constitution of Kansas, I, David Haley, a duly elected Senator representing the Fourth District of Kansas, herein PROTEST the action of this Legislature in the promulgation and passage of Senate Bill 338: An Act pertaining to Cities.

In my 23 years as a Kansas Legislator and as but one of only three attorneys in the Senate, this is the first PROTEST I have ever lodged on any measure of the thousands I have considered.

This Chamber now further denigrates real property rights to which every Kansan should be heir.

SB 338 which purports to grant authority to cities and nonprofit organizations to petition courts to possess vacant property for rehabilitation purposes will, simply, but legalize grand theft.

The Senate Commerce committee as is its charge (and not the Senate Local Government committee where, justifiably, similar language as SB 338 had over many years failed time and time again) recognizes and advances business and financial opportunities for our State.

First, the question of a city, redefining definitions of “abandonment” and “blight” as these terms apply to real property, land and or improvements, is the expertise of deliberations of a committee membership dedicated to the auspices of municipalities not the principles of profit.

The principles of real property ownership should always inure to the rights of the citizen not to a developer’s bottom line or even a desire to enhance appraised valuations for tax purposes.

Diabolical in its spawning, methodical and tenacious in its steady lurch forward, SB 338 adheres to two tiered definitions of “abandoned property;” both ingenuous and neither accurate. One definition of “abandoned property”: vacant for 365 days and having a “blighting influence” on surrounding properties; the other definition vacant for 90 days and 2 years tax delinquent.

There are numerous every day scenarios whereby a real property owner has in no way “abandoned” their property though that same property may be vacant for 90 to 365 days, be tax delinquent for 2 years or may have need of rehabilitation to conform to a local standard, real or perceived. But SB 338 alleges “abandonment” and triggers governmental intrusion, harassment and potentially leads to a taking of real property by the government for the benefit of an organization which profits from the taking and kick back higher taxes to the city.

“Commerce,” yes, but a shameful way to run a citizen responsive “Local Government.”

The specious argument in favor of this legislation portends neighborhood beautification, tax viability and repopulation of or demolition and rebuilding of older houses. By eradicating “blight,” the entire community, even the city, is greatly enhanced.

With that premise, I, David Haley, could not agree more.

Today, with no need for warping and putting into statute time-honored definitions of “blight” and “abandonment” or presupposes new postulates for passages of time periods to correlate to real property owners’ interests or genuine concern with their legally owned land(s), there are tools already available to every municipality to address blight. “Code enforcement” departments can post notice and bring to environmental and district court negligent property owners. Subsequent to insufficient response, steep fines and even jail time can be issued now. Today in current statute, a property with two or more years of delinquent property taxes may be sold by the Sheriff of each Kansas County in a “Delinquent Property Tax Sale” also known as a “Sheriff’s” sale or as property “sold on the Courthouse steps.” Again, these are current tools available to curb or cure blight and to put real property into fiscally responsive ownership.

The property rights of legal property owners should not be infringed upon by this Legislature.

Marginal or fragile property owners (traditionally average income or poor property owners attempting to hold on to inherited property or an entrepreneurial hope structure as often found in inner cities) will be set upon by keen-eyed, out of county based developers sheltered by an industrious “not-for-profit” which uses the city and district court as the leverage to harass and ultimately take the land, all in the name of “civic pride” or “community betterment.” Theft.

The late Kansas City, Missouri civil rights leader Bernard Powell (1947-1979) envisioned and warned of the transfer of inner city property back into the same hands of those who fled the same a half century or more ago to the sanctity of the suburbs. Bernard Powell predicted the day would come when government, and the tools they elect and hire, will work hand-in-hand with “robber barons” to turn those out; those who have despaired in neglected, under represented, often high crime, poorly educated neighborhoods, those who have weathered poverty, hard times, civic and civil harassment but yet held a real property interest, a “piece of the pie” … to force them out. Bernard Powell spoke of prosperity returning to the inner city and nothing being tendered to the people who had paid the price for the most sought after of land.

He called it government assisting the turning of the “ghetto into a goldmine.” How prophetic.

Here I sit, practically alone in my opposition to this expansion of eminent domain targeted at poorer property owners ill equipped to “fight City Hall,” in this Kansas Senate and watch this unfold. Again, SB 338 came out of the Commerce committee as well it should.

Government has redefined terms before to shape shift often dastardly need to justify ill deeds.

I remember efforts to redefine “blight” for economic purposes in another eminent domain taking for use in building the Kansas Speedway and Legends in Wyandotte County. Succinctly, the new definition of “blight” was the ability for exponentially more taxes to be levied against the future use of the land than that which the owner who it was being taken from could be expected to pay in its current use. Remnants of that economically fascist philosophy resonate in SB 338. As more people flee the “golden ghettos” of suburbia, the inner city “ghettos” will be repopulated and turned into “goldmines” at the expense I fear, once again, of the poor and unsuspecting. Ironically, we celebrated and honored some of our Korean and Vietnam War heroes today in the Senate Chamber. Was the freedom to own real property without fear of unwarranted government intrusion something for which they fought?

I protest the passage of Senate Bill 338 as is my Constitutional right as a Kansas State Senator under Article Two, Section 10 of the Kansas Constitution for reasons, beliefs afore-listed as well as others not so and hereby vow to continue to assist unnecessarily embattled real property owners in my home District as we together will face the challenges that this bill, when signed into law, will undoubtedly bring.


Notes

  1. Todd, John. Power of Kansas cities to take property may be expanded. Voice For Liberty in Wichita. Available at wichitaliberty.org/kansas-government/power-kansas-cities-take-property-may-expanded/.
  2. Video. Wichita City Council speaks on blight. Available at wichitaliberty.org/wichita-government/wichita-city-council-speaks-blight/.
  3. Weeks, B. (2012). Andover, a Kansas city overtaken by blight. Voice For Liberty in Wichita. Available at wichitaliberty.org/economics/andover-a-kansas-city-overtaken-by-blight/.
  4. Nicole Gelinas, Eminent Domain as Central Planning. (2015). City Journal. Available at www.city-journal.org/html/eminent-domain-central-planning-13253.html.
  5. Pilon, Roger. Protecting Private Property Rights from Regulatory Takings. (1995). Cato Institute. Available at www.cato.org/publications/congressional-testimony/protecting-private-property-rights-regulatory-takings.
  6. ibid
  7. ibid

Wichita City Council speaks on blight

Wichita City Council members speak in opposition to Kansas Governor Sam Brownback’s veto of Senate Bill 338, which would have given cities additional power to take property. April 12, 2016. View below, or click here to view at YouTube. For more on this issue, see Governor Brownback, please veto this harmful bill.

Wichita economic development and capacity

An expansion fueled by incentives is welcome, but illustrates a larger problem with Wichita-area economic development.

Last week a Wichita company received economic development incentives in conjunction with an expansion. This is the third incentive the company has received in four years. The incentives are forgiven property taxes and sales taxes. 1 Simply, the company is allowed to skip paying many of the same taxes that everyone else must pay, including low-income households paying sales tax on groceries.

While the expansion of this company is welcome news, the hoopla surrounding it shows how we can’t rely on government intervention to pull Wichita out of its slump. Here are some figures.

According to the Bureau of Labor Statistics, Wichita metropolitan area employment is 14,500 less than its peak in 2008. Manufacturing jobs are down by 23,600 from the peak in 1998, or down by 15,400 from 2008. 2

In 2012 when this company requested an incentive, its employment was given as 110. 3 Current employment is given as 130, and by 2021, the company is required to employee 188 people. 4

So if everything goes as planned, 5 three economic development incentives programs will boost a company’s employment from 110 to 188. That’s an increase of 78 jobs over nine years, or about nine jobs per year.

If we look at these jobs in the larger context, we see that these jobs represent 0.5 percent of the jobs lost in the Wichita area since 2008. If we are relying on these jobs to spur a renaissance of manufacturing in Wichita, they represent 0.3 percent of manufacturing jobs lost since its peak.

This company and these three economic development incentives are not the only efforts the city has made. Other incentives to other companies have created jobs. But this company is considered a significant and major success. The awarding of this inventive was evidently such an uncommon event that it merited a large article in the Wichita Eagle. In his remarks, according to meeting minutes, Wichita Mayor Jeff Longwell said “this is how we move Wichita forward” and “this is how we grow our businesses here in Wichita and help them be successful.”

The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We need to be creating nine jobs every day in order to make any significant progress in economic growth. If it takes this much effort to create 78 jobs over nine years, how much effort will it take to create the many thousands of jobs we need to create every year?

A related problem is that we don’t know how many jobs are created by the city’s economic development efforts. As part of a campaign for a city sales tax in 2014, the city promised a web site to track the progress of jobs created. The sales tax didn’t pass, but the city still engages in economic development, and still does not track results. At least not publicly, and when I’ve asked, the results provided have been sketchy and incomplete.

On top of this, we don’t know if the incentives were necessary to enable the company to expand. Usually city documents state that incentives are necessary to make economic activity “viable.” No such claim was made in the documents supporting this incentive.

The large amount of bureaucratic effort and cost spent to obtain a relatively small number of jobs lets us know that we need to do something else in order to grow our local economy. We need to create a dynamic economy, focusing our efforts on creating an environment where growth can occur organically without management by government. Dr. Art Hall’s paper
Embracing Dynamism: The Next Phase in Kansas Economic Development Policy provides much more information on the need for this.

Another thing we can do to help organically grow our economy and jobs is to reform our local regulatory regime. Recently Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as they usually focus on regulation at the federal level.

Business Perceptions of the Economic Impact of State and Local Government Regulation coverThe study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.

Our civic leaders say that our economic development efforts must be reformed. Will the path forward be a dynamic economy and reformed regulation? Or will it be more bureaucracy, handfuls of jobs at a time?


Notes

  1. Wichita City Council meeting agenda, April 5, 2016, p. 12.
  2. According to the Bureau of Labor Statistics, the peak of nonfarm employment in the Wichita metropolitan area was in 2008, where employment averaged 310,500. For 2015, employment averaged 296,000. That’s a loss of 14,500 jobs. For manufacturing jobs, the peak was 1998, when employment in this field was 75,900. In 2008 the figure was 67,700 jobs, and in 2015, 52,300 jobs. This is a loss of 23,600 jobs from manufacturing’s peak, or of 15,400 jobs from Wichita peak employment in 2008.
  3. Wichita City Council meeting agenda, September 11, 2012, p. 45
  4. Wichita City Council meeting agenda, April 5, 2016, p. 12.
  5. So far, employment is not progressing as planned. In the 2012 agenda item, it was said that employment would rise by 50 jobs over the next five years, which you by 2017. Current employment, according to the current city council agenda, is 130, which is 30 jobs short. The deadline for this projection has not yet arrived.

Wichita on verge of new regulatory regime

The Wichita City Council is likely to create a new regulatory regime for massage businesses in response to a problem that is already addressed by strict laws.

During a presentation to the Wichita City Council on February 23, 2016, police officials reported on a number of investigations and arrests. In 2015, there were 22 arrests for human trafficking and other violations. The presentation did not include what comprised “other violations,” nor did it contain any information about the disposition of these cases.

If the city is concerned about prostitution and child trafficking, the latter being a serious crime, we already have strong laws concerning this. As far as the two crimes being related: Prostitutes and pimps are already criminals, according to the law. Committing more crimes like child trafficking is just another step down the path they’ve already chosen.

A solution is to bring prostitution out of the shadows. Stop making consensual behavior between adults a crime. Then police can focus on actual and serious crime, like child trafficking.

But the zeal of the Wichita City Council for creating new regulatory regime is likely to overwhelm any rational thought about the problem. Now Wichita massage business owners and therapists are likely to be saddled with onerous licensing requirements. To become a newly-licensed therapist, you must possess one of several educational credentials, one of which is 500 hours of training. Existing therapists must meet similar requirements.

City officials note that the existing local massage industry requested this regulation. That’s not surprising. The purpose of nearly all occupational licensure laws is to restrict entry to the industry so that existing practitioners can charge higher rates. That is a scam, especially against low-income people that need a masseuse or a plumber. It is also a burden to people who want to become plumbers, barbers, massage therapists, or one of the many other licensed occupations.

It is both shocking and disappointing to realize that Wichita city bureaucrats and council members do not realize these economic realities. Another economic reality is that when licensing requirements are strict, the quality of service that many people receive declines. When investigating the demand for licensed plumbers, researchers found this:1

This proxy assumes that the more stringent are the barriers the higher will be the cost of licensed service and the smaller will be its quantity. These two effects increase the motivation of consumers to substitute their own services for those of trained professionals. This substitution process should show up in rising retail sales of plumbing supplies in more tightly restrictive states since licensed plumbers will generally purchase supplies wholesale. The implicit assumption is this causal chain is that self-service is on the average of lower quality than could be obtained from even a marginally trained journeyman plumber.

When presented with a convincing but fake credential, how diligently with Wichita officials investigate?
When presented with a convincing but fake credential, how diligently with Wichita officials investigate?
In other words, when strict licensure requirements make plumbers expensive, more people do their plumbing work themselves, and this work is likely to be of lower quality. It’s quite a stretch (literally and figuratively) to apply this reasoning to do-it-yourself massage, but here’s another economic reality: The more difficult it is to achieve a credential, the greater is the incentive to cheat. You don’t have to search very far before you find vendors advertising their services like this:

We are one of the oldest and most trusted seller of fake diplomas on the web. We use real diploma paper, the same paper that most major universities and high schools use. We also use professional security paper for our fake transcripts. We have more than 12 years experience in printing fake diplomas. You can rest assured that your fake diploma or fake transcript will look very authentic. We offer many different types of fake diplomas and fake certificates such as, FAKE GEDs, fake college diploma, fake university degree, fake high school diploma, fake college degree, or fake high school transcripts and fake skill certificate.

How diligently will Wichita’s bureaucratic machinery investigate when presented with a fake diploma certificate and transcript? The city’s record is not good. After the city passed new taxicab regulations, somehow the regulation that prohibited convicted sex offenders from receiving licenses was not implemented effectively. The city granted a taxi driver license to a man who was on the state sex offender registry. He raped a passenger.

The city council should reject these regulations and devote the city’s resources to protecting people from actual crime.

Limiting economic opportunity

Kansas occupational license requirements, with proposed Wichita massage therapists. Click for larger.
Kansas occupational license requirements, with proposed Wichita massage therapists. Click for larger.
The Wichita City Council is concerned about human trafficking for the purposes of prostitution. That’s good. But the response the council is considering — which is licensing massage therapists — is not needed. We have strict laws already on the books that make human trafficking a serious criminal offense, which it is. The proposed Wichita regulations will simply make it more difficult for honest people to become massage therapists. Criminals will operate illegally. They are criminals, after all. Or, they will easily obtain false credentials.

Kansas already has many burdensome occupational licensure requirements that limit economic opportunity and protect entrenched interests. Nearby is a chart of the number of days training or experience required to obtain a license to work in various fields, according to Institute for Justice in 2012. 2 I’ve added the proposed Wichita massage therapist requirements. As you can see, it will require more than twice as much education to become a massage therapist as is required to become an emergency medical technician. How does that make sense?

Comparing the proposed Wichita requirements to the nation, we find that the Wichita standard is quite lax. 39 states license massage therapists, with the average education or training requirement being 139 days, with the range being from 117 days to 327 days3. Wichita is proposing 83 days, which might inspire one to ask this question: If the Wichita City Council is truly concerned about protecting Wichitans from getting a bad massage, why is it proposing such minimal requirements, compared to other states?

In reality, the high barriers to becoming a massage therapist in many states is testimony to the massage industry’s success in erecting barriers to entry. By making it difficult to become a massage therapist, the supply is lower than it could be, and prices are higher. Consumers lose. Upward economic opportunity is lost.

The purpose of nearly all occupational licensure laws is to restrict entry to the industry so that existing practitioners can charge higher rates. That is a scam, especially against low-income people that need a masseuse or a plumber. It is also a burden to people who want to become plumbers, barbers, massage therapists, or one of the many other licensed occupations.


Notes

  1. Carroll, Sidney L., and Robert J. Gaston. “Occupational Restrictions and the Quality of Service Received: Some Evidence.” Southern Economic Journal 47.4 (1981): 959–976.
  2. Institute for Justice, (2012). License to Work. Available at: ij.org/report/license-to-work/ Accessed 29 Feb. 2016.
  3. ibid

WichitaLiberty.TV: Bob’s shaking his head, Wichita water woes, and the harm of teachers unions

In this episode of WichitaLiberty.TV: There are a few things that make Bob wonder. Then, a troubling episode for Wichita government and news media. Finally, the harm of teachers unions. View below, or click here to view at YouTube. Episode 114, broadcast March 27, 2016.

Wichita Eagle, where are you?

The state’s largest newspaper has no good reason to avoid reporting and editorializing on an important issue. But that’s what the Wichita Eagle has done.

In November 2014 Wichita voters rejected a proposed Wichita city sales tax. The largest portion of that tax, $250 million, would have gone towards expanding the capacity of the Aquifer Storage and Recharge, or ASR, project.

The Wichita Eagle editorial board urged voters to approve the tax. It told readers that spending $250 million on ASR would “assure a future for Wichita with enough water.” “The needs are clear,” the editors wrote, adding “Investing in the aquifer project seems the best thing to do to anticipate and meet Wichita’s water needs.” The Eagle warned of “much higher water rates” if the sales tax is not passed.

Since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot. But you wouldn’t know that by reading the Wichita Eagle or by relying on our city’s other mainstream news media.

If you viewed a Wichita City Council workshop on December 1, however, you’d have learned that the city can provide adequate water for much less than $250 million. The rise in water bills will also be much less than what the Eagle and the city used to frighten voters into approving the sales tax.

So why hasn’t the Wichita Eagle reported on the December 1, 2015 workshop, in which Director of Public Works and Utilities Alan King presented the new plans — plans which will cost much less? Why have there been no editorials celebrating that we can provide adequate water at much less expense?

I can understand the editorial writers not wanting to admit they had been duped. That’s human nature. But for the news division of the Eagle: Why no reporting on this?

As it happens, the newsroom of the Eagle was also a cheerleader for the sales tax and ASR project. As an example, the Eagle printed a fact check article that disputed claims made by opponents of the tax. When asked why there was not a similar fact check article on the proponents, the reporter said there were no errors to be found. Nothing. That was incredulous — unbelievable — at the time. There were many questionable claims made by sales tax proponents. In hindsight, we are even more certain of that.

Tubs of ink the Wichita Eagle could be using to tell us what we need to know.
Tubs of ink the Wichita Eagle could be using to tell us what we need to know.
The Eagle has plenty of reporting capacity, barrels of ink, and lots of online bandwith to report and editorialize on issues like who gets free parking at the Wichita airport. That’s important, perhaps, but trivial in terms of financial impact. But on this issue involving over $100 million in savings, there is silence.

The state’s largest newspaper has no good reason to avoid reporting and editorializing on an important issue. But that’s what the Wichita Eagle has done. We wonder why.

In Wichita, the phased approach to water supply can save a bundle

In 2014 the City of Wichita recommended voters spend $250 million on a new water supply. But since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot.

The events surrounding the need for a new water supply is a troubling episode in the history of Wichita government. During the prelude to the November 2014 election, citizens were presented with a gloomy scenario that could be fixed only with a sales tax and the spending of $250 million. After voters said no to that, new plans emerged that are much less expensive. Lily Tomlin once said “No matter how cynical you become, it’s never enough to keep up.” This episode shows Wichita city leaders — both in and out of government — reinforcing the truth of Tomlin’s observation.

On December 1, 2015, the Wichita City Council held a workshop on the topic “Phased Approach for New Water Supply.”1 Alan King, Director of Public Works and Utilities, was the presenter. King emphasized that the impetus for a new water supply was for drought protection: “We presently have enough water with our current water resources to last us through our planning period of 2060, without drought.”

He continued: “When we come and talk to you about additional water resources, it is really only for one purpose, and that is drought protection. If there was no drought, we have no need. The water resources that we come in and are talking to you about, the only value they have for us is in drought protection.”

But a city document leading up to the sales tax election presented a different scenario. It threatened a lack of water for even residential use: “Building a new supply, along with conservation efforts, is the lowest cost option for providing sufficient water through 2060. Significant conservation will be needed if the current supplies are the sole sources of water for the coming decades; sever [sic] conservation requirements could be harmful to local businesses and quality of life. Adding a new water supply would provide enough water for future growth for the community’s residential, commercial, and industrial base.”2

This is an important point. We have sufficient water except for a period of extended drought. Even in that case, there is sufficient water for residential, commercial, and industrial use. The purpose of a new water supply is to avoid restrictions on outdoor watering, and in the most extreme drought, a savings of 15 percent of indoor water usage.

In his December presentation to the council, King presented several phases that the city can take. The first three have no cost, and King said these are underway.

After that, the city can spend $23 million for new wells and rehabilitation of existing wells at the ASR site.

After that, there is the possibility of “operational credits,” which involve a change to state regulations. If the state approves, the city can receive credits for sending ASR water directly to Wichita instead of recharging it in the Equus Beds. If not approved, the city could spend $47.2 million for new recharge wells in 2022. If these wells are built, the cost rises to $70.2 million. (On January 22 King made a presentation to the Equus-Walnut Regional Advisory Committee on this topic.3)

Phased Approach for New Water Supply. Click for larger.
Phased Approach for New Water Supply. Click for larger.
There is also the matter of the parallel pipeline. The existing pipeline from the Equus Beds and ASR to the city’s downtown water plant is old and won’t support higher rates of water transmission. The proposed parallel pipeline provides not only redundancy of a major part of our water infrastructure, but also increased capacity. The cost of this, estimated in 2014 at $86 million, was included in the $250 million price tag for ASR expansion. If the parallel pipeline cost is added to the previous phase costs, the cost rises to either $109 million or $156.2 million, depending on the fate of the operational credits regulation reform.

Either way, the cost is much less than the $250 million the city asked voters to consider in November 2014. And I think I’m being charitable of motives when I say “consider.” The clear and revealed preference of the city council and the city’s political class was passage of the sales tax, meaning the city would spend $250 million to achieve something the city now says can be provided for $109 million or $156.2 million. (Well, everyone except then-city council member and now-mayor Jeff Longwell, but his vote against placing the sales tax on the ballot was a naked political calculation.)

In information the city presented to voters in the run up to the November 2014 election, the city promised large water bill increases if the sales tax vote failed, writing: “If a new water supply is funded only through water rate increases, the capital cost portion of the rate will increase an estimated 24%. This is in addition to anticipated annual rate increases.”4

Possible water bill increases. Click for larger.
Possible water bill increases. Click for larger.
King’s 2015 presentation to the council showed increases of nine percent for residential, commercial, and industrial customers.5

Citizens ought to wonder what lessons may be learned from this. Furthermore, I don’t believe there has been any coverage of this in the city’s mainstream news media. That is a problem, too. For more on this problem, see Wichita Eagle, where are you?


Notes

  1. City of Wichita workshop. Phased Approach for New Water Supply. Video available at https://youtu.be/mNQ26-VZBSA.
  2. Building A Better Future: A Proposed Sales Tax for Basic Services, City of Wichita, June 13, 2014. Available at http://www.wichita.gov/Government/Departments/Finance/FinancialDocuments/Sales%20Tax%20Proposal%20for%20Basic%20Services.pdf.
  3. Equus-Walnut Regional Advisory Committee Meeting Notes. Available at http://www.kwo.org/RACs/2016_RAC%20Notes/doc_EQW_Min_January_012216_mu.pdf.
  4. Plans & Background on Proposed 1¢ Sales Tax, City of Wichita, 2014. Available at https://drive.google.com/file/d/0B97azj3TSm9MS0lCQncxQkp4ODg/.
  5. Phased Approach for New Water Supply, Presentation to Wichita City Council, December 1, 2015, page 30. Available at http://wichita.gov/Government/Council/Agendas/2015-12-01%20Phased%20Approach%20for%20New%20Water%20Supply.pdf.

Wichita TIF district disbands; taxpayers on the hook

A real estate development in College Hill was not successful. What does this mean for city taxpayers?

ParkstoneSeeking to promote the redevelopment of land northeast of Douglas and Hillside, the City of Wichita entered into agreements with Loveland Properties, LLC, College Hill Urban Village LLC, and CHUV Inc. The original plans were grand: A Northeast Brownstone Complex located at the northeast corner of Victor and Rutan, a Condominium Tower and Brownstone Complex, a West Brownstone Complex, and the South Retail/Residential Complex. A city analysis in 2007 projected that by 2010 the value of these projects would be $61,817,932.

Unfortunately, this project did not proceed as planned. The Northeast Brownstone Complex was built, and nothing else. Those brownstone condominiums proved difficult to sell. The project held great promise, but for whatever reasons things did not work as planned, and the city has lost an opportunity for progress.

The questions now are: What is the impact on taxpayers? Is there anything to learn as the city moves forward with other public-private partnerships?

City documents tell the story of this project, if you know how to read between the lines. 1

City document says: “The City financed $3,685,000 in TIF bonds in 2014.”
What it means to you: Tax increment financing, or TIF, is a method of economic development financing whereby additional property taxes (the “increment”) are redirected back to a real estate development. In this case, the city sold these bonds and gave the proceeds to the developer. Then — according to plan — as property values rose, the correspondingly higher property taxes generated by the development would pay off the bonds. Except, property values did not rise. So who pays? According to the bond documents, 2 “The full faith, credit and resources of the Issuer are hereby pledged for the payment of the principal of and interest on this Bond.” The Issuer is the City of Wichita, and the resources the city has to pledge are taxes it collects from its taxpayers.

ParkstoneCity document says: “An additional amount of tax exempt expenses related to the project, totaling $1,785,000, were paid off by the Finance Department using cash from the Debt Service Fund.”
What it means to you: These costs were to be paid by the developer, but the developer did not pay. So, the city’s Debt Service Fund was used. The Debt Service Fund gets its money from taxpayers, and this money is being used to pay off a debt owed by a private person. This is necessary because the debt payment is guaranteed by the city, which in turns means it is guaranteed by the taxpayers. If not spent to satisfy the debt for this project, this money might have been used to pay off other city debt, reduce taxes, pay for more police and firemen, fix streets, and satisfy other needs.

City document says: “The City will be responsible for maintenance and property taxes for the property until the property can be sold.”
What it means to you: More expense for city taxpayers.

ParkstoneCity document says: “Any tax increment generated from existing and future development will be used to repay TIF bonds. Staff does not expect remaining TIF revenue to be sufficient to repay the outstanding debt.”
What it means to you: As explained above, taxpayers are on the hook for these bonds.

The original agreement with the developer says: “In addition to all the terms, conditions and procedures for fulfilling these obligations, the Development Agreement also provides for a Tax Increment Shortfall Guaranty in which the developer and other private entities with ownership interest in the project are required to pay the City any shortfall in TIF revenue available to pay debt service on TIF bonds.”
What it means to you: Nothing. It should mean something. The city tells us its participation in these ventures is free of risk to citizens. That’s because recipients of incentives like TIF pledge to hold the city harmless if things don’t work out as planned. In this case, if the TIF district revenue is not enough to pay the TIF district bonds, the developer has pledged to pay the difference. But it is unlikely that the city will be able to collect on the promise made by this developer.

But there may be good news: The first phase of the project, the brownstones, is now owned by Legacy Bank. Hopefully, the city will be able to collect the TIF shortfall from this new owner so that taxpayers don’t have to pay.

The project plan formulated by the city says: “Net tax increment revenue is available to pay debt service on outstanding general obligation bonds issued to finance eligible project costs.” This statement is true if everything works as planned. But real estate development is risky. Things may not work out as planned. City documents don’t tell taxpayers this. Instead, city leaders present these projects as though everything will work out as planned.

There is some undeveloped land that was to be used in future phases of the project. But even empty land is harmful to city taxpayers, as city documents state: “The developer has not paid property taxes on the parcels from 2010 to 2015, resulting in $400,080 in current and delinquent taxes owed. The City will now be responsible for the taxes.”


Notes

  1. Wichita City Council Agenda Packet, March 15, 2016. Available here.
  2. From the Additional Provisions of the series 813 bonds: General Obligations. The Bonds constitute general obligations of the Issuer payable as to both principal and interest, in part from special assessments levied upon the property benefited by the construction of the Improvements (as said term is described in the Bond Resolution), in part from incremental property tax revenues derived in certain tax increment financing districts within the Issuer and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer, the balance being payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are hereby pledged for the payment of the principal of and interest on this Bond and the issue of which it is a part as the same respectively become due

Power of Kansas cities to take property may be expanded

A bill working its way through the Kansas Legislature will give cities additional means to seize property.

The bill is SB 338, titled “Rehabilitation of abandoned property by cities.” This bill has passed the Senate by a vote of 32 to eight. It has had a hearing in the House of Representatives.

Wichitan John Todd is opposed to this bill and provided oral and written testimony this week to a House committee. In his testimony, Todd made these points, among others:

  • Senate Bill 338 appears to provide local governmental units with additional tools that they don’t need to “take” properties in a manner that circumvents the eminent domain statutes that private property rights advocates fought so hard to achieve in 2006.
  • The total lack of compensation to the property owner for the deprivation or taking of his or her property is missing in the bill.
  • Allowing a city or their third party take possession of vacant property they do not own and have not obtained legal title to is wrong.
  • Please take a look at a comparison between a free-market private sector solution as contrasted to a government mandated program to achieving affordable housing and the impact highly subsidized government housing solutions are having on adjacent home owners.

Instead of being a problem, houses like these can present economic opportunity, says John Todd.
Instead of being a problem, houses like these can present economic opportunity, says John Todd.
In closing his testimony, Todd remarked: “In summary, cities in Kansas clearly have all the powers they need to deal with property issues through current law. By enhancing the power of cities and their appointed non-profit community redevelopment organizations to ‘take’ privately owned properties without compensation in an involuntary manner violates the individual private property rights that are essential for the rule of law and liberty to prevail.”

Click here to view Todd’s written testimony and visual exhibits.

Empty lots in northeast Wichita. Click for larger version.
Empty lots in northeast Wichita. Click for larger version.
Separately, Todd supplied a map of a portion of northeast Wichita. He remarked:

I am told that there are over 100 vacant lots in this neighborhood represented by green color. It also shows “Poor” and “Very Poor to Unsound” properties in tan and yellow. SB 338 was touted to provide a tool to deal with blight. The point of this map is to demonstrate how the City of Wichita has been using existing law to deal with blighted properties, and how this law has facilitated the destruction of huge numbers of houses. Many had economic value, but there was no compensation to the property owners. My conclusion was that given the existing law, coupled with tax foreclosure sales, there was no need to give cities additional tools.

What we have under existing law is actually a regulatory taking of private property with no compensation to property owners. Passage of SB 338 would expand those tools to allow cities or their chosen non-profit entities to seize vacant properties they do not have legal title to. The result for a property owner is a “regulatory taking,” ordered by the Kansas Courts with no compensation, allowing the city or the non-profit time to seek title through a mandated court order and judicial deed. Both are methods of forced government transfer and are wrong.

WichitaLiberty.TV: The caucus and the presidency, Wichita prepares a new regulatory regime

In this episode of WichitaLiberty.TV: Looking back at the Kansas presidential caucus and should it matter who becomes president. A new regulatory regime in Wichita probably won’t help its stated purpose, but will be harmful. Then, more about regulation. View below, or click here to view at YouTube. Episode 113, broadcast March 13, 2016.

Wichita: A conversation for a positive community and city agenda

Wichita City Manager Robert Layton held a discussion titled “What are Wichita’s Strengths and Weaknesses: A Conversation for a Positive Community and City Agenda” at the February 26, 2016 luncheon of the Wichita Pachyderm Club. Notes were taken by an assistant and can be viewed here.

View below, or click here to view in high definition at YouTube. Videography and production by Paul Soutar.

Wichita economic development items this week

Two economic development items on tap in Wichita this week illustrate failures or shortcomings of the regime.

Update: Both items passed by seven to zero votes at the March 1, 2016 council meeting.

This week the Wichita City Council will consider two economic development items.

The first item concerns a company named Epic Sports. In 2012 this company received property tax abatements from the City of Wichita in exchange for a 100 percent property tax exemption. The measure passed by a vote of six to one, with former council member Michael O’Donnell voting no.

Now Epic Sports has found greener pastures, it seems. Well, it didn’t just find them, it sought them, according to city documents: “The company approached economic development professionals in Butler County regarding incentives.” The same documents note “[Butler County] professionals did not target Epic Sports as a prospect for relocation.” With the new focus on regionalism, we can’t have one county poaching companies from another, it seems.

The city has negotiated that Epic Sports will repay 55 percent of the forgiven property taxes.

Here’s what is notable about this incident. Epic Sports has 110 employees and says it has outgrown its Wichita facility. City documents state the company has “searched for new facilities or land in the Wichita area but could not find a suitable property.” That is remarkable, if true. Wichita does not have any warehouse space suitable for a company of 110 employees? What, may I ask, have Wichita’s many economic development professionals been doing if we have no space for such a modestly-sized company? (On the other hand, with the focus on regionalism, and with Wichita and Butler County in the same region, why should we care?)

The second item the council will consider concerns a company that received a property tax exemption based on a commitment to invest a certain amount of capital and create a certain number of jobs. While the capital investment was made, the company has not met the jobs goal. In this case the city is invoking a portion of its economic development policy which allows modification of an incentive agreement based on poor economic conditions. If the Current Conditions Index, a product of the Center for Economic Development and Business Research at Wichita State University, drops by five or more points during the term of an incentive agreement, the city can make a modification. Based on this, the city is extending the deadline for the company to meet the jobs goal. Repayment of forgiven property taxes could be required if the company does not meet the deadline.

Wichita to impose burdensome occupational requirements

The proposed massage therapist regulations in Wichita are likely to be ineffective, but will limit economic opportunity and harm consumers.

Kansas occupational license requirements, with proposed Wichita massage therapists. Click for larger.
Kansas occupational license requirements, with proposed Wichita massage therapists. Click for larger.
The Wichita City Council is concerned about human trafficking for the purposes of prostitution. That’s good. But the response the council is considering — which is licensing massage therapists — is not needed. We have strict laws already on the books that make human trafficking a serious criminal offense, which it is. The proposed Wichita regulations will simply make it more difficult for honest people to become massage therapists. Criminals will operate illegally. They are criminals, after all. Or, they will easily obtain false credentials.

Kansas already has many burdensome occupational licensure requirements that limit economic opportunity and protect entrenched interests. Nearby is a chart of the number of days training or experience required to obtain a license if various fields, according to Institute for Justice in 2012. 1 I’ve added the proposed Wichita massage therapist requirements. As you can see, it will require more than twice as much education to become a massage therapist as is required to become an emergency medical technician. How does that make sense?

Comparing the proposed Wichita requirements to the nation, we find that the Wichita standard is quite lax. 39 states license massage therapists, with the average education or training requirement being 139 days, with the range being from 117 days to 327 days2. Wichita is proposing 83 days, which might inspire one to ask this question: If the Wichita City Council is truly concerned about protecting Wichitans from getting a bad massage, why is it proposing such minimal requirements, compared to other states?

In reality, the high barriers to becoming a massage therapist in many states is testimony to the massage industry’s success in erecting barriers to entry. By making it difficult to become a massage therapist, the supply is lower than it could be, and prices are higher. Consumers lose.

As has been observed by myself: “City officials note that the existing local massage industry requested this regulation. That’s not surprising. The purpose of nearly all occupational licensure laws is to restrict entry to the industry so that existing practitioners can charge higher rates. That is a scam, especially against low-income people that need a masseuse or a plumber. It is also a burden to people who want to become plumbers, barbers, massage therapists, or one of the many other licensed occupations.” 3


Notes

  1. Institute for Justice, (2012). License to Work. Available at: ij.org/report/license-to-work/ Accessed 29 Feb. 2016.
  2. ibid
  3. Weeks, B. (2016). Massage business regulations likely to be ineffective, but will be onerous. Voice For Liberty in Wichita. Available at: wichitaliberty.org/wichita-government/massage-business-regulations-likely-ineffective-but-will-be-onerous/ .

Brookings Metro Monitor and Wichita

A research project by The Brookings Institution illustrates the poor performance of the Wichita-area economy.

Metro Monitor from The Brookings Institution rates metropolitan areas on a number of indicators.

Brookings Metro Monitor, Wichita, Map 2016-02On the map of metropolitan areas, blue means faster growth, and orange means slowest. You can see that Wichita has the economic growth of a typical rust belt city. (Click charts for larger versions.)

Brookings Metro Monitor, Wichita, Indicators 2016-02The table showing changes in indicators over the past decade shows Wichita almost always below the middle.

Brookings Metro Monitor, Wichita, Trends 2016-02The charts of trends over time shows Wichita falling behind the nation, then catching up in 2007 and 2008, but falling behind since then. As time goes on, the gap between the nation and Wichita widens, not narrows.

These unfortunate facts about the Wichita economy are old news, if we’ve been paying attention. See, for example Employment by metropolitan area, Wichita’s growth in gross domestic product, and Wichita per capita income not moving in a good direction.

The response of Wichita political, bureaucratic, and civic leaders is, by any measure, new paint on an old barn, or just keeping pace with other cities. The Greater Wichita Partnership is just a new name for the same old collection of institutions and people who have been responsible for the dismal performance shown in Brooking’s Metro Monitor. In fact, if you visit greaterwichitapartnership.org and click on “Economic Development” you’re taken to the same old page for Greater Wichita Economic Development Coalition, although with a new logo. Same old barn; new paint.

While we have to hope that the Wichita State University Innovation Campus works as advertised, we also must realize that dozens and dozens of major and minor universities across the country already have similar initiatives up and running.