WichitaLiberty.TV: Kansas gubernatorial candidate Rick Kloos

In this episode of WichitaLiberty.TV: Independent candidate for Kansas governor Rick Kloos joins Bob and Karl to explain why he should be our next governor. View below, or click here to view at YouTube. Episode 210, broadcast September 23, 2018.

Shownotes

GDP by metropolitan area and component

An interactive visualization of gross domestic product by metropolitan area and industry.

The Bureau of Economic Analysis, an agency of the United States Department of Commerce, gathers data about economic output, known as gross domestic product. The visualization presented here presents this data in tabular and graphic form.

Wichita and national GDP. Click for larger.
The GDP figures are real, meaning adjusted for inflation. They are annual numbers through 2017. The release this week also includes revisions for the prior year. In the case of Wichita, the revision was significant, with a loss in GDP being revised to a gain. See Wichita economy shrinks, and a revision for details.

A nearby example from the visualization compares Wichita metro GDP growth to that of the nation’s metropolitan areas.

Click here to access this visualization.

Example from the visualization. Click for larger.
Example from the visualization. Click for larger.

Wichita economy shrinks, and a revision

The Wichita economy shrank in 2017, but revised statistics show growth in 2016.

Statistics released today by the Bureau of Economic Analysis, an agency of the United States Department of Commerce, show gross domestic product (GDP) figures for metropolitan areas. Also included are revised statistics for previous years.

For 2017, the Wichita metropolitan area GDP, in real dollars, fell by 1.4 percent. Revised statistics for 2016 indicate growth of 3.8 percent for that year. Last year BEA reported growth of -1.4 percent.

In the revised statistics released today, GDP in 2012 was 28,346 million in chained 2009 dollars. In 2017 it was 29,610 million, a change of 1,264 million or 4.4 percent. For all U.S. metropolitan areas, the same statistic increased from 13,692,212 million to 15,224,212 million, an increase of 1,532,000 million or 11.2 percent.

The nearby table shows the change in GDP for major industry groups. Non-durable goods manufacturing showed the largest increase at 0.17 percent, while durable goods manufacturing fell by 0.21 percent.

From Pachyderm: Kansas Treasurer Jake LaTurner

From the Wichita Pachyderm Club: Kansas Treasurer Jake LaTurner. This was recorded on September 14, 2018.

Shownotes

Kansas Treasurer Jake LaTurner.

Kansas tax receipts

Kansas tax receipts by category, presented in an interactive visualization.

The Kansas Division of the Budget publishes monthly statistics regarding tax collections. I’ve gathered these and present them in an interactive visualization.

In the nearby example from the visualization, we can see the rising trend in individual income taxes, due to the tax increase passed by the Kansas Legislature.

Click here to learn more and access the visualization.

Example from the visualization. Click for larger.

WichitaLiberty.TV: Kansas gubernatorial candidate Jeff Caldwell

In this episode of WichitaLiberty.TV: Libertarian Party candidate for Kansas governor Jeff Caldwell joins Bob and Karl to explain why he should be our next governor. View below, or click here to view at YouTube. Episode 209, broadcast September 16, 2018.

Shownotes

The use of sales tax proceeds in Wichita

Must the City of Wichita spend its share of Sedgwick County sales tax proceeds in a specific way?

Sedgwick County collects a one-cent per dollar retail sales tax. The county keeps some, then distributes the rest to cities. On Facebook, a question arose regarding how Wichita may spend its share of the sales tax proceeds. Couldn’t some funds that go towards building Kellogg be rerouted to, say, fund the operations of Wichita’s public library system?

A former city council member argued that “As it stands, Wichita cannot spend its allocated portion of that sales tax on anything but roads and bridges.” I posted that there was a Wichita city ordinance that said how the sales tax is to be spent in Wichita, and that ordinance could be modified or canceled. The same former council member admonished me to call a specific person in the city budget office and “he will clarify for you that the City Council doesn’t have the ability to override the Sedgwick County sales tax referendum language.”

I looked for the referendum language. The document is available in Sedgwick County’s election document system. The canvass of the special sales tax election was held on August 2, 1985, and this was reported:

The returns of the election were presented to the Board as received from the official conducting the election on the following proposition:

SHALL THE FOLLOWING BE ADOPTED?

A proposition to enact a countywide retailers’ sales tax in Sedgwick County, Kansas, in the amount of one percent (1%), such tax to take effect on October 1, 1985, pursuant to K.S.A. 1984 Supp. 12-187.

The language of the referendum is silent regarding how the tax revenue may or may not be spent.

Certificate of canvass, portion. Click for larger.
There are, however, other considerations. One, according to Mark Manning, the city’s budget officer, is that the city has borrowed money, with proceeds from the sales tax pledged for repayment.

Second, there is a Wichita city ordinance, number 41-185. It pledges half the city’s share of the sales tax towards property tax reduction. Then, it states: “… and pledges the remaining one half of the one percent (1%) of any revenues received to Wichita road, highway and bridge projects including right-of-way acquisitions.” This was adopted on August 25, 1992 and replaced an existing ordinance that said the same.

The 1992 ordinance also holds this, in section II: “It is the specific intent of the Governing Body of the City of Wichita that the City of Wichita continue to use the tax revenues as outlined in this ordinance and that this pledge be continued as a matter of faith and trust between the people and the present and future Governing Bodies of the City of Wichita.”

We often hear that half the city’s share of the sales tax is pledged for Kellogg construction. In actuality it is pledged to “Wichita road, highway and bridge projects.”

But really, it isn’t even pledged to that. The pledge is in the form of a city ordinance. It may be changed at any time at the will of four council members.

Yes, the ordinance says the city intends to continue using the tax revenues in the same way “as a matter of faith and trust.” Unfortunately, that trust has been destroyed in many ways, one being council members who tell us things that aren’t true.

State government employees in Kansas

Kansas has more state government employees per resident than most states, and the trend is rising.

Each year the United States Census Bureau surveys federal, state, and local government civilian employees. 1 The amount of payroll for a single month (March) is also recorded. In this case, I’ve made the data for state government employees available in an interactive visualization.

For 2016, Kansas had 17.90 full-time equivalent state government employees per thousand residents. This ranked 15th among the states. These employees resulted in payroll cost of $979 per resident, which is 21st among the states.

Nearby is an example from the visualization showing state government employment count (full-time equivalent) per thousand residents for Kansas and some nearby states. It shows total employment, and in addition, education employment and hospital employment. (Since nearly all employees in Kansas elementary and secondary schools are employees of local government, not the state, the employees shown are working in higher education. See below for visualizations of local government employees.)

Two things are evident: The level of employment in Kansas is generally higher than the other states, and the trend in Kansas is rising when many states are level or declining. This data counters the story often told, which is that state government employment has been slashed.

If we look at data for state and local government employees, the conclusions are nearly the same.

Click here to learn more and access the visualization.

There are separate visualizations for local government employees only, and also for state and local government employees together. Click on state and local government employment of local government employment by state and function.

Example from the visualization, showing Kansas and other states. Click for larger.


Notes

  1. United States Census Bureau. Annual Survey of Public Employment & Payroll (ASPEP). Available at https://www.census.gov/programs-surveys/apes.html.

More TIF spending in Wichita

The Wichita City Council will consider approval of a redevelopment plan in a tax increment financing (TIF) district.

This week the Wichita City Council will hold a public hearing considering approval of more tax increment financing (TIF) spending in downtown Wichita. The spending is for the second phase of redevelopment of the Union Station property on East Douglas. According to city documents, the total cost of this phase is $31,000,000, with TIF paying for $2,954,734. 1

This is a pay-as-you-go form of TIF, which means the city does not borrow funds as it would in a traditional TIF district. Instead, the eligible portion of the developer’s property taxes will be rerouted back to the development as they are paid.

The TIF district was established in 2014. The council this week considers a redevelopment plan, which authorizes spending TIF funds on a specific project. Redevelopment plans must be approved by a two-thirds majority of the council. While overlapping jurisdictions like counties and school districts can block the formation of a TIF district, they have no such role in the approval of a redevelopment plan.

Of note, this public hearing is being held after the fact, sort of. City documents state: “A development agreement was approved by the City Council on August 7, to allow for the developer to begin non-TIF eligible improvements in order to meet deadlines for a new tenant.” The city documents for the August 7 meeting hold this: 2

The Developer has requested that the development agreement be approved now, prior to adoption of the project plan, to allow work to begin on the Meade Corridor improvements in order to complete the project in time for the tenant to move in. The Development agreement is drafted to allow for the Meade Corridor improvements to occur following adoption of the agreement, however, any work or reimbursement for TIF is contingent on City Council adoption of the project plan following the September 11 public hearing.

Citizens have to wonder will the September 11 public hearing have any meaning or relevance, given that on August 7 the city gave its de facto approval of the redevelopment plan.

Following, more information about tax increment financing.

Tax increment financing disrupts the usual flow of tax dollars, routing funds away from cash-strapped cities, counties, and schools back to the TIF-financed development. TIF creates distortions in the way cities develop, and researchers find that the use of TIF means lower economic growth.

How TIF works

A TIF district is a geographically-defined area.

In Kansas, TIF takes two or more steps. The first step is that cities or counties establish the boundaries of the TIF district. After the TIF district is defined, cities then must approve one or more project plans that authorize the spending of TIF funds in specific ways. (The project plan is also called a redevelopment plan.) In Kansas, overlapping counties and school districts have an opportunity to veto the formation of the TIF district, but this rarely happens. Once the district is formed, cities and counties have no ability to object to TIF project plans.

Figure 1.
Figure 1.
Before the formation of the TIF district, the property pays taxes to the city, county, school district, and state as can be seen in figure 1. Because property considered for TIF is purportedly blighted, the amount of tax paid is usually small. Whatever it is, that level is called the “base.”

Figure 2.
Figure 2.
After approval of one or more TIF project plans the city borrows money and gives it to the project or development. The city now has additional debt in the form of TIF bonds that require annual payments. Figure 2 illustrates. (There is now another form of TIF known as “pay-as-you-go” that works differently, but produces much the same economic effect.)

Figure 3.
Figure 3.
Figure 3 shows the flow of tax revenue after the formation of the TIF district and after the completion of a project. Because buildings were built or renovated, the property is worth more, and the property tax is now higher. The development now has two streams of property tax payments that are handled in different ways. The original tax — the “base” — is handled just like before, distributed to city, state, school district, and the state, according to their mill levy rates. The difference between the new tax and the base tax — the “increment” — is handled differently. It goes to only two destinations (mostly): The State of Kansas, and repayment of the TIF bonds.

Figure 4.
Figure 4.
Figure 4 highlights the difference in the flow of tax revenues. The top portion of the illustration shows development outside of TIF. We see the flows of tax payments to city, county, school district, and the state. In the bottom portion, which shows development under TIF, the tax flows to city, county, and school district are missing. No longer does a property contribute to the support of these three units of government, although the property undoubtedly requires the services of them. This is especially true for a property in Old Town, which consumes large amounts of policing.

(Cities, counties, and school districts still receive the base tax payments, but these are usually small, much smaller than the incremental taxes. In non-TIF development, these agencies still receive the base taxes too, plus whatever taxes result from improvement of the property — the “increment,” so to speak. Or simply, all taxes.)

The Kansas law governing TIF, or redevelopment districts as they are also called, starts at K.S.A. 12-1770.

TIF and public policy

Originally most states included a “but for” test that TIF districts must meet. That is, the proposed development could not happen but for the benefits of TIF. Many states have dropped this requirement. At any rate, developers can always present proposals that show financial necessity for subsidy, and gullible government officials will believe.

Similarly, TIF was originally promoted as a way to cure blight. But cities are so creative and expansive in their interpretation of blight that this requirement, if it still exists, has little meaning.

The rerouting of property taxes under TIF goes against the grain of the way taxes are usually rationalized. We use taxation as a way to pay for services that everyone benefits from, and from which we can’t exclude people. An example would be police protection. Everyone benefits from being safe, and we can’t exclude people from benefiting from police protection.

So when we pay property tax — or any tax, for that matter — people may be comforted knowing that it goes towards police and fire protection, street lights, schools, and the like. (Of course, some is wasted, and government is not the only way these services, especially education, could be provided.)

But TIF is contrary to this justification of taxes. TIF allows property taxes to be used for one person’s (or group of persons) exclusive benefit. This violates the principle of broad-based taxation to pay for an array of services for everyone. Remember: What was the purpose of the TIF bonds? To pay for things that benefited the development. Now, the development’s property taxes are being used to repay those bonds instead of funding government.

One more thing: Defenders of TIF will say that the developers will pay all their property taxes. This is true, but only on a superficial level. We now see that the lion’s share of the property taxes paid by TIF developers are routed back to them for their own benefit.

It’s only infrastructure

In their justification of TIF in general, or specific projects, proponents may say that TIF dollars are spent only on allowable purposes. Usually a prominent portion of TIF dollars are spent on infrastructure. This allows TIF proponents to say the money isn’t really being spent for the benefit of a specific project. It’s spent on infrastructure, they say, which they contend is something that benefits everyone, not one project specifically. Therefore, everyone ought to pay.

This attitude is represented by a comment left at Voice for Liberty, which contended: “The thing is that real estate developers do not invest in public streets, sidewalks and lamp posts, because there would be no incentive to do so. Why spend millions of dollars redoing or constructing public streets when you can not get a return on investment for that”

This perception is common: that when we see developers building something, the City of Wichita builds the supporting infrastructure at no cost to the developers. But it isn’t quite so. About a decade ago a project was being developed on the east side of Wichita, the Waterfront. This project was built on vacant land. Here’s what I found when I searched for City of Wichita resolutions concerning this project:

Figure 5. Waterfront resolutions.
Figure 5. Waterfront resolutions.
Note specifically one item: $1,672,000 for the construction of Waterfront Parkway. To anyone driving or walking in this area, they would think this is just another city street — although a very nicely designed and landscaped street. But the city did not pay for this street. Private developers paid for this infrastructure. Other resolutions resulted in the same developers paying for street lights, traffic signals, sewers, water pipes, and turning lanes on major city streets. All this is infrastructure that we’re told real estate developers will not pay for. But in order to build the Waterfront development, private developers did, with a total cost of these projects being $3,334,500. (It’s likely I did not find all the resolutions and costs pertaining to this project, and more development has happened since this research.)

In a TIF district, these things are called “infrastructure” and will be paid for by the development’s own property taxes — taxes that must be paid in any case. Outside of TIF districts, developers pay for these things themselves.

If not for TIF, nothing will happen here

Generally, TIF is justified using the “but-for” argument. That is, nothing will happen within a district unless the subsidy of TIF is used. Paul F. Byrne explains:

“The but-for provision refers to the statutory requirement that an incentive cannot be awarded unless the supported economic activity would not occur but for the incentive being offered. This provision has economic importance because if a firm would locate in a particular jurisdiction with or without receiving the economic incentive, then the economic impact of offering the incentive is non-existent. … The but-for provision represents the legislature’s attempt at preventing a local jurisdiction from awarding more than the minimum incentive necessary to induce a firm to locate within the jurisdiction. However, while a firm receiving the incentive is well aware of the minimum incentive necessary, the municipality is not.”

It’s often thought that when a but-for justification is required in order to receive an economic development incentive, financial figures can be produced that show such need. Now, recent research shows that the but-for justification is problematic. In Does Chicago’s Tax Increment Financing (TIF) Programme Pass the ‘But-for’ Test? Job Creation and Economic Development Impacts Using Time-series Data, author T. William Lester looked at block-level data regarding employment growth and private real estate development. The abstract of the paper describes:

“This paper conducts a comprehensive assessment of the effectiveness of Chicago’s TIF program in creating economic opportunities and catalyzing real estate investments at the neighborhood scale. This paper uses a unique panel dataset at the block group level to analyze the impact of TIF designation and investments on employment change, business creation, and building permit activity. After controlling for potential selection bias in TIF assignment, this paper shows that TIF ultimately fails the ‘but-for’ test and shows no evidence of increasing tangible economic development benefits for local residents.” (emphasis added)

In the paper, the author clarifies:

“To clarify these findings, this analysis does not indicate that no building activity or job crea-tion occurred in TIFed block groups, or resulted from TIF projects. Rather, the level of these activities was no faster than similar areas of the city which did not receive TIF assistance. It is in this aspect of the research design that we are able to conclude that the development seen in and around Chicago’s TIF districts would have likely occurred without the TIF subsidy. In other words, on the whole, Chicago’s TIF program fails the ‘but-for’ test.

Later on, for emphasis:

“While the findings of this paper are clear and decisive, it is important to comment here on their exact extent and external validity, and to discuss the limitations of this analysis. First, the findings do not indicate that overall employment growth in the City of Chicago was negative or flat during this period. Nor does this research design enable us to claim that any given TIF-funded project did not end up creating jobs. Rather, we conclude that on-average, across the whole city, TIF was unsuccessful in jumpstarting economic development activity — relative to what would have likely occurred otherwise.” (emphasis in original)

The author notes that these conclusions are specific to Chicago’s use of TIF, but should “should serve as a cautionary tale.”

The paper reinforces the problem of using tax revenue for private purposes, rather than for public benefit: “Essentially, Chicago’s extensive use of TIF can be interpreted as the siphoning off of public revenue for largely private-sector purposes. Although, TIF proponents argue that the public receives enhanced economic opportunity in the bargain, the findings of this paper show that the bargain is in fact no bargain at all.”

TIF is social engineering

TIF represents social engineering. By using it, city government has decided that it knows best where development should be directed. In particular, the Wichita city council has decided that Old Town and downtown development is on a superior moral plane to other development. Therefore, we all have to pay higher taxes to support this development. What is the basis for saying Old Town developers don’t have to pay for their infrastructure, but developers in other parts of the city must pay?

TIF doesn’t work

Does TIF work? It depends on what the meaning of “work” is.

If by working, do we mean does TIF induce development? If so, then TIF usually works. When the city authorizes a TIF project plan, something usually gets built or renovated. But this definition of “works” must be tempered by a few considerations.

Does TIF pay for itself?
First, is the project self-sustaining? That is, is the incremental property tax revenue sufficient to repay the TIF bonds? This has not been the case with all TIF projects in Wichita. The city has had to bail out two TIFs, one with a no-interest and low-interest loan that cost city taxpayers an estimated $1.2 million.

The verge of corruption
Second, does the use of TIF promote a civil society, or does it lead to cronyism? Randal O’Toole has written:

“TIF puts city officials on the verge of corruption, favoring some developers and property owners over others. TIF creates what economists call a moral hazard for developers. If you are a developer and your competitors are getting subsidies, you may simply fold your hands and wait until someone offers you a subsidy before you make any investments in new development. In many cities, TIF is a major source of government corruption, as city leaders hand tax dollars over to developers who then make campaign contributions to re-elect those leaders.”

We see this in Wichita, where the regular recipients of TIF benefits are also regular contributors to the political campaigns of those who are in a position to give them benefits. The corruption is not illegal, but it is real and harmful, and calls out for reform. See In Wichita, the need for campaign finance reform.

The effect of TIF on everyone
Third, what about the effect of TIF on everyone, that is, the entire city or region? Economists have studied this matter, and have concluded that in most cases, the effect is negative.

An example are economists Richard F. Dye and David F. Merriman, who have studied tax increment financing extensively. Their article Tax Increment Financing: A Tool for Local Economic Development states in its conclusion:

“TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.”

So TIF districts are good for the favored development that receives the subsidy — not a surprising finding. What about the rest of the city? Continuing from the same study:

“If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

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.” (emphasis added)

In a different paper (The Effects of Tax Increment Financing on Economic Development), the same economists wrote “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not. … These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.” (emphasis added)

The Wichita city council is concerned about creating jobs, and is easily swayed by the promises of developers that their establishments will create jobs. Paul F. Byrne of Washburn University has examined the effect of TIF on jobs. His recent report is Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth, and in its abstract we find this conclusion regarding the impact of TIF on jobs:

“This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district.” (emphasis added)

These studies and others show that as a strategy for increasing the overall wellbeing of a city, TIF fails to deliver prosperity, and in fact, causes harm.


Notes

  1. Wichita city council agenda packet for September 11, 2018.
  2. Wichita city council agenda packet for August 7, 2018.

Wichita Wingnuts settlement: There are questions

It may be very expensive for the City of Wichita to terminate its agreement with the Wichita Wingnuts baseball club, and there are questions.

As the City of Wichita prepares to build a new stadium for a new baseball team, there is the issue of the old stadium and the old team. The city has decided that the old stadium will be razed. On Tuesday the city council will consider what to do about the old team.

The old team, the Wichita Wingnuts, has a lease agreement with the city. The lease is from January 2015 and is for a period of ten years. The documents, both the lease from 2015 and the proposed settlement to be considered this week, appear in full in Wichita city council agenda packets. I’ve extracted the relevant pages for easier access. Click on lease or proposed settlement.

According to the settlement, the Wingnuts will receive either $2.2 million or $1.2 million, the smaller amount applying in the case the city is “unable to reach an agreement with an affiliated minor league baseball team in the year 2018.” The payment is scheduled to be made in installments over the next several years. (Section 2c)

Reading the lease, I can’t find anything regarding the need to pay for terminating the lease. So why the need to pay up to $2.2 million to terminate?

Here’s a possible answer: City documents hold this: “This negotiated settlement resolves all claims and potential claims that the parties have or may have, including breach of the Lease, loss of revenue, injunctive relief, specific performance, other contract breaches, tort assertions, and claims for equitable relief without the uncertainly of litigation.”

So there may be disputes that need to be resolved. Now the question becomes this: What did the city do? What could be so bad that the remedy is to pay the Wingnuts up to $2.2 million? Citizens ought to know the answer to this question.

Further, why is the amount of the settlement contingent on what happens in Wichita in the future? (Remember, the settlement is $2.2 million if the city lands a new team, but only $1.2 million if it doesn’t.) If the purpose of the settlement is to compensate the Wingnuts for harm caused by the city, how and why is the magnitude of harm dependent on future events?

Such a large settlement is especially surprising given the low rent the Wingnuts paid and the city’s history with the Wingnuts as a tenant. Consider:

The Wingnuts didn’t always pay their rent. The city charged the Wingnuts just $25,000 annual rent, and the team was $77,000 behind in rent in January 2015. The proposed settlement agreement states: “As of the Effective Date, the 2018 rent payment in the amount of Twenty-five Thousand Dollars ($25,000) due and payable by WIB to the City shall be waived and no longer due and payable by WIB.” (Section 2c) (WIB is the company that owns the Wingnuts.)

There have also been disputes over utility payments. But, the city will forgive the water and sewer bill: “The City shall pay all utility payments due to the Department of Public Works and Utilities that are assessed for 2018.” (Section 2d)

It’s clear that the Wingnuts haven’t always lived up to the basics of its agreement with the city. Why, then, does the city feel such a large obligation upon termination? Paragraph 13 of the lease says “Lessor agrees not to utilize termination for convenience for the purpose of placing any professional baseball franchise at the Lawrence-Dumont Stadium site.” This is what the city is doing. But, in paragraph 23: “The parties agree that upon a violation of any provision of this lease, the aggrieved party may, at its option, terminate this lease by giving the breaching party not less than 30 days written notice of termination.” Non-payment of rent seems like it ought to be a violation of the lease, giving the city the right to terminate the lease for cause.

What is the source of the $2.2 million? City documents state the source is “management agreement payments paid by the new AAA baseball team.” The meaning of “management agreement payments” is unclear and a question that needs an answer. But presumably this is money that the city would receive from the new team. If not paid to the Wingnuts, these funds might be available for other purposes.

And: If the city is not able to land a new team, the city will have to pay the Wingnuts $1.2 million without any compensating revenue source.

Repairs, replacements, and improvements

Here’s a puzzling aspect of the settlement: How was the dollar amount determined? City documents state: “The value of the severance is based on the number of years remaining in the existing lease and the anticipated City financial cost of capital repairs, replacements and improvements over those same remaining years.” (emphasis added)

What? “Repairs, replacements and improvements” to a stadium that will be demolished soon? Why is this a consideration?

Questions, but little time

There are questions, but little time for answers. The agenda packet was posted on the city’s website on Friday September 7, at 12:03 pm. The council will consider this item Tuesday morning.

Do council members have answers to these questions? Some of these matters may have been discussed in executive session. Now that the matters have been settled, it’s time to let citizens know the details.

But if council members don’t have answers, I don’t think they can make an informed vote.

Kansas state and local taxes

Among nearby states, Kansas collects a lot of taxes, on a per-resident basis.

The United States Census Bureau collects data from the states regarding tax collections. Some data is available for each quarter subdivided by category.

From the first quarter of 2011 to the first quarter of 2018, Kansas and its local governmental units collected an average of $681 per quarter per resident in taxes. Of nearby states and a few others, Arkansas and Iowa had higher values, and Iowa is higher by only one percent.

Some states had lower values, such as Colorado at $565 per quarter per resident (17.0 percent less than Kansas), Texas and Missouri both at $486 (28.6 percent less), and Florida at $470 (31.0 percent less).

To learn more about this visualization and create your own, click here.

From Pachyderm: Sedgwick County Commission candidates

From the Wichita Pachyderm Club: Republican Candidates for Sedgwick County Commission. Appearing, in order of their initial appearance, were:

  • Richard Ranzau, District 4.
  • Pete Meitzner, District 1.
  • Jim Howell, District 5.

This was recorded September 7, 2018.

Shownotes

Wichita, not that different

We have a lot of neat stuff in Wichita. Other cities do, too.

In New York Magazine, Oriana Schwindt writes in “The Unbearable Sameness of Cities: What my journey across the United States taught me about indie cafés and Ikea lights.”

I couldn’t stop noticing. I’d go on to see the same in Colorado Springs, in Fresno, in Indianapolis, in Oklahoma City, in Nashville.

And it wasn’t just the coffee shops — bars, restaurants, even the architecture of all the new housing going up in these cities looked and felt eerily familiar. Every time I walked into one of these places, my body would give an involuntary shudder. I would read over my notes for a city I’d visited months prior and find that several of my observations could apply easily to the one I was currently in.

In his commentary on this article, Aaron M. Renn wrote: “While every company tries its hardest to convince you of how much different and better it is than every other company in its industry, every city tries its hardest to convince you that it is exactly the same as every other city that’s conventionally considered cool.”

Later in the same piece, he wrote:

A challenge these places face is that the level of improvement locally has been so high, locals aren’t aware of how much the rest of the country has also improved. So they end up with an inflated sense of how much better they are doing versus the market. … People in these Midwest cities did not even know what was going on in the next city just 100 miles down the road. They were celebrating all these downtown condos being built. But the same condos were being built everywhere. … But even today people in most cities don’t really seem to get it that every city now has this stuff. Their city has dramatically improved relative to its own recent past, but it’s unclear how much it’s improved versus peers if at all.

Does this — the sameness of everywhere — apply to Wichita? Sure. Everyone thinks Wichita is different from everywhere else. We have a flag! A warehouse district! A Frank Lloyd Wright house! The NCAA basketball tournament! We’re (probably) getting a new baseball team and stadium!

We even have, as Schwindt does in cataloging what you’ll find in every single city mid-size and above, “Public murals that dare you to pass them without posing for a pic for the ‘gram.”

So many other places have this stuff, too.

It isn’t bad that Wichita has these things. But the danger, as Renn notes, is that these things don’t distinguish Wichita. As much as we wish otherwise, these things are probably not going to reverse the course of the declining Wichita economy. If you don’t believe the Wichita economy is declining, consider that our GDP in 2016 was smaller than in the year before. Wichita metro employment growth was nonexistent during 2017, meaning it’s unlikely that GDP grew by much. (In January 2017 total non-farm employment in the Wichita MSA was 295,000. In January 2018 it was the same. See chart here.)

Even things that might really have a positive effect on the economy, like the Wichita State University Innovation Campus, are far from unique to Wichita. But developments like this are pitched to Wichitans as things that will really put Wichita on the map. A prosperous future is assured, we are told.

It’s great to love your city. But we can’t afford to be lulled into complacency — a false recognition of achievement — when all the data says otherwise.

We need a higher measure of honesty from our leaders. It might start with the mayor and the chair of the county commission, but the mayor seems terribly misinformed, as is the commission chair. Institutions that we ought to respect, like the local Chamber of Commerce, have presided over failing economic development but refuse to accept responsibility or even to acknowledge the facts. Worse, the Chamber spends huge amounts of money on blatantly dishonest campaigns against those candidates that don’t support its programs. Those programs, by the way, haven’t worked, if the goal of the Chamber is to grow the Wichita economy.

WichitaLiberty.TV: Kansas gubernatorial candidate Greg Orman

In this episode of WichitaLiberty.TV: Independent candidate for Kansas governor Greg Orman joins Bob and Karl to explain why he should be our next governor. View below, or click here to view at YouTube. Episode 208, broadcast September 9, 2018.

Shownotes

Wichita checkbook updated

Wichita spending data presented as a summary, and as a list.

As part of an ongoing transparency project, I asked the City of Wichita for check register data. I’ve made the data available in a visualization using Tableau Public. This visualization is updated with data through August 31, 2018.

To learn more about this data and use the visualization, click here.

Example from the visualization. Click for larger.

Local government employment in Kansas

Kansas has nearly the highest number of local government employees per resident, compared to other states.

Local government employment by state. Click for larger.
Local government employment in education. Click for larger.
For all local government employees, Kansas had 50.59 per thousand residents in 2016, higher than all states (and areas) but the District of Columbia and Wyoming. These employees had an annual payroll of $2,141.16 per resident. Ten states were higher.

Considering elementary and secondary education, Kansas had 30.03 such employees per thousand residents. This was higher than all states but Vermont and Wyoming. The payroll for these employees was $1,150.85 per resident, with eleven states above Kansas.

Kansas is a small state in terms of population. Might small states have higher needs for employees on a per-resident basis? A plot of employees vs. population shows nearly no relationship between the two.

These are local government employees only. State and federal government employees are not included.

Of note, Hawaii has no local employees in elementary and secondary education, as it has one school district which is run by the state. 1

The source of this data is the United States Census Bureau. I’ve gathered it and placed in in an interactive visualization. Click here to learn about the visualization and use it to make your own charts and tables.

State population vs. local government employment per resident. Click for larger.

— Notes

  1. Wikipedia. Hawai’i Department of Education. Available at https://en.wikipedia.org/wiki/Hawai%27i_Department_of_Education.

Wichita employment, July 2018

For the Wichita metropolitan area in July 2018, jobs are up, the unemployment rate is down, and the labor force is slightly larger, compared to the same month one year ago.

Data released this week by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area.

Click for larger.

The best numbers for Wichita are the total nonfarm employment series, which rose from 290,600 last July to 295,200 this July. That’s an increase of 4,600 jobs, or 1.6 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.)

Of note, the same series of data for the nation rose from 146,486,000 to 148,901,000 over the same time, an increase of 1.6 percent.

The unemployment rate fell to 4.3 percent, down from 4.8 percent from a year ago.

Considering seasonally adjusted data from the household survey, the labor force rose by 0.13 percent from June 2018, and employment rose by 0.11 percent.

Click charts for larger versions.

From Pachyderm: Kansas House of Representatives Candidates

From the Wichita Pachyderm Club: Kansas House of Representatives Candidates. These are Republican candidates appearing on the November 6, 2018 general election ballot. This was recorded on August 24, 2018.

Candidates were, in order of initial appearance:

  • Blake Carpenter, 81st District
  • Emil Bergquist, 91st District
  • Leo Delperdang, 94th District
  • Ron Howard, 98th District

Clockwise from top left: Blake Carpenter, Leo Delperdang, Ron Howard, Emil Bergquist

Wichita being sued, alleging improper handling of bond repayment savings

A lawsuit claims that when the City of Wichita refinanced its special assessment bonds, it should have passed on the savings to the affected taxpayers, and it did not do that.

A lawsuit filed in Sedgwick County District Court charges that the City of Wichita improperly handled the savings realized when it refinanced special assessment bonds at a lower interest rate. The case is 2018-CV-001567-CF, filed on July 13, 2018, and available here.

The suit names David L. Snodgrass and Leslie J. Snodgrass as plaintiffs, and a long list of defendants, namely:

  • The City of Wichita, Kansas
  • Wichita City Manager Robert Layton
  • Wichita Finance Director Shawn Henning and Former Wichita Finance Director Kelly Carpenter
  • Wichita City Clerk Karen Sublett
  • Wichita Mayor Jeff Longwell and former Wichita Mayor Carl Brewer
  • Current Wichita City Councilmembers Brandon Johnson, Pete Meitzner, James Clendenin, Jeff Blubaugh, Bryan Frye, and Cindy Claycomb
  • Former Wichita City Councilmembers Lavonta Williams, Janet Miller, Sue Schlapp, Paul Gray, Jeff Longwell, Jim Skelton, and Michael O’Donnell
  • Springsted Incorporated
  • Gilmore And Bell, A Professional Corporation
  • Kutak Rock, LLP
  • Sedgwick County Treasurer Linda Kizzire

The suit asks for a class to be created consisting of “all other affected land owners paying excess special assessments,” which would, undoubtedly, be many thousands of land owners. No specific amount of relief is requested.

The suit’s basis

The city borrows money by issuing bonds to fund improvements to (generally) new neighborhoods. These bonds pay for things like residential streets, water pipes, and sewer lines. The debt service for these bonds, that is, the money needed to make the bond payments, is charged to benefitting property owners in the form of special assessment taxes, often called “specials.” These specials are separate from the general property taxes that are charged to all property.

General property taxes are based on a property’s assessed value multiplied by a mill levy rate. Specials, however, are based on the cost of the infrastructure and the payments needed to retire the debt. This amount is determined at the time bonds are sold and the repayment schedule is established. (Bond payments depend on the amount borrowed, the length of the repayment period, and the interest rate. All this is known at the time the bonds are issued.)

These specials usually last 15 years, and after paid, no longer appear on a property’s tax bill. Sometimes special assessments are prepaid.

What the city did, and didn’t do, according to plaintiffs

During the last decade, interest rates on long-term bonds generally fell. In response, the city issued refunding bonds. These bonds took advantage of low interest rates by paying off old bonds that had higher interest rates, replacing them with bonds with lower interest rates. The lawsuit alleges that since 2009, the city has issued $216 million in refunding bonds saving $60.2 million, according to city documents cited in the lawsuit. The suit does not specify how much of this savings is attributed to special assessment bonds.

So the city refinanced special assessment debt at a lower rate, reducing the cost of the debt. That’s good. Homeowners often do this when mortgage rates are low, and it’s good that the city does this too.

The problem, according to the lawsuit, is that some of the refinanced debt was special assessment debt. The lawsuit contends that, based on Kansas law, the city should have passed on the savings to the property owners that were paying off this special assessment debt. Instead, says the suit, “the City of Wichita transferred the excess special assessment money paid by affected Wichita taxpayers to support its general fund and/or other municipal funds.” In other words, the city spent the savings on other things, when it should have directed the savings to land owners who were paying the special taxes.

Plaintiffs allege that the conduct of the city and its advisors constitutes fraud against those paying special assessment taxes:

The fraudulent actions of Defendant City of Wichita, along with the other Wichita Defendants, and Defendants Springsted, Gilmore and Bell and Kutak Rock resulted in the misappropriation of millions of dollars of “saved” tax payments that should have been returned to Plaintiffs along with all other affected land owners paying special assessments levied under the General Improvement and Assessment Laws of the State of Kansas.

Further, the suit alleges that the liability faced by many of the defendants is personal:

Because the Wichita Defendants actively participated in the fraud practiced by Defendant City of Wichita, they cannot escape personal liability for the fraudulent actions of the City of Wichita upon Plaintiffs and all other affected land owners paying special assessments.

While there is one named party as plaintiff, the suit alleges that all similarly situated persons have been harmed, and so a class action is appropriate. That would be all property owners who have paid special assessment taxes to Wichita since 2009, including myself.

WichitaLiberty.TV: Sedgwick County and Wichita issues

In this episode of WichitaLiberty.TV: The end of a Sedgwick County Commission election, the Wichita Eagle editorializes on school spending and more taxes, and Wichita Mayor Jeff Longwell seems misinformed on the Wichita economy. View below, or click here to view at YouTube. Episode 207, broadcast August 26, 2018.

Shownotes

Individual liberty, limited government, economic freedom, and free markets in Wichita and Kansas

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