All posts by Bob Weeks

Kansas state government

A Taxpayer Bill of Rights for Kansas, Please

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Taxes in Kansas are high, and may increase this year. The recent school finance ruling by the Kansas Supreme Court and the passage of the downtown arena sales tax referendum in Sedgwick County are just two reasons why.

We should act now to restrain the growth of state government spending. The Taxpayer Bill of Rights, or TABOR, has shown to be effective in Colorado. We in Kansas could have this, too.

The law is quite simple: state spending and debt could not grow faster than the rate of annual population growth plus inflation. It doesn’t prescribe how the state should raise or spend money, just that real (inflation-adjusted) spending can’t grow faster than the state’s population grows.

On the Americans for Prosperity web site there is an excellent analysis of what could happen in Kansas if we adopt such a law. You may read about it at this link: A Taxpayer’s Bill of Rights for Kansas.

Other helpful information is at the Cato Institute: Fiscal Trail Blazer: Colorado’s Taxpayer Bill of Rights is leading the way, Reforming TABOR in Colorado, and States Face Fiscal Crunch after 1990s Spending Surge.

As our state legislature prepares to start the 2005 session, I urge you to contact your representatives and make them aware of your support for this important law.

Role of government

End Corporate Welfare, Starting with Industrial Revenue Bonds

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“While corporate welfare has attracted critics from both the left and the right, there is no uniform definition. By TIME’s definition, it is this: any action by local, state or federal government that gives a corporation or an entire industry a benefit not offered to others. It can be an outright subsidy, a grant, real estate, a low-interest loan or a government service. It can also be a tax break — a credit, exemption, deferral or deduction, or a tax rate lower than the one others pay.” (Time Magazine, Nov. 9, 1998)

States and localities aggressively compete with each other to see which can put together the grandest package of benefits to induce companies to locate there. Or, as becoming increasingly common, a company threatens to move away from a city or state unless it receives incentives. Often these incentives are given in the form of industrial revenue bonds. IRB supporters are quick to remind citizens that the local government is merely helping the company to borrow the money — it is not giving the bond money to the company. Therefore, it doesn’t really cost the taxpayers to offer these IRBs.

In fact, issuing IRBs does cost local taxpayers. Here’s some information about IRBs in the City of Wichita. Quoting from the City of Wichita’s IRB Overview web page, located at http://www.wichitagov.org/Business/EconomicDevelopment/IRB/IRBOverview.htm:

“IRB’s [sic] require a governmental entity to act as the ‘Issuer’ of the bonds, who will hold an ownership interest in the property for as long as the IRBs are outstanding. The Issuer leases the property to the business ‘Tenant’ on a triple-net basis for a term that matches the term of the IRBs, with lease payments which are sufficient to pay the principal and interest payments on the IRBs.”

In my analysis, it is the City of Wichita that owns the financed property for the duration of the bond lifetime. What if the business fails? It appears that the city owns the property then, and is responsible for paying the remainder of the bond balance. So, the taxpayers of the city assume credit risk.

Continuing from the same page: “The issuer can provide property tax abatement for up to ten years for property financed with IRBs.” The city, county, and state don’t receive property taxes from the business, yet they must provide services such as police and fire protection to the business. The cost of these services is born by the rest of the taxpayers.

Continuing further: “Generally, property and services acquired with the proceeds of IRBs are eligible for sales tax exemption.” Again, the government does not receive tax revenue it would otherwise have received, if not for the IRBs. The remainder of the taxpayers must make up the difference.

It appears, then, that issuing IRBs costs everyone but the firm that receives the benefits.

There are other issues with IRBs and other forms of corporate welfare, importantly involving the disruption of the free market allocation of resources. When governments instead of markets act to allocate resources, resources are allocated unproductively. These points come from “Ending Corporate Welfare As We Know It,” a Cato Institute Policy Analysis by by Stephen Moore and Dean Stansel, May 12, 1995, available at this url http://www.cato.org/pubs/pas/pa225.html:

1. Government is not good at picking winners and losers. “The function of private capital markets is to direct billions of dollars of capital to industries and firms that offer the highest potential rate of return. The capital markets, in effect, are in the business of selecting corporate winners and losers. The underlying premise of federal business subsidies is that the government can direct the limited pool of capital funds more effectively than can venture capitalists and private money managers. But decades of experience prove that government agencies have a much less successful track record than do private money managers of correctly selecting winners.”

2. Corporate welfare is very expensive considering the few benefits it produces. “Corporate welfare is supposed to offer a positive long-term economic return for taxpayers. But the evidence shows that government “investments” have a low or negative rate of return.”

3. Corporate welfare rewards those companies who look to government for help, rather than concentrating on satisfying market needs. “Business subsidies, which are often said to be justified because they correct distortions in the marketplace, create huge market distortions of their own. The major effect of corporate subsidies is to divert credit and capital to politically well-connected firms at the expense of their politically less influential competitors. Those subsidies are thus inherently unfair.”

4. “Corporate welfare fosters an incestuous relationship between business and government.”

5. Many corporate welfare programs increase the costs to consumers. Trade restrictions do this. Subsidy programs may reduce the cost to a small few at the cost of everyone else. Tax breaks increase the tax burden for those who don’t receive the breaks.

6. “The most efficient way to promote business in America is to reduce the overall cost and regulatory burden of government. Corporate welfare is predicated on the misguided notion that the best way to enhance business profitability in America is to do so one firm at a time. But a much more effective way to enhance the competitiveness and productivity of American industry is to create a level playing field, which minimizes government interference in the marketplace and substantially reduces tax rates and regulatory burdens.”

7. “Corporate welfare is anti-capitalist. Corporate welfare converts the American businessman from a capitalist into a lobbyist.” What a sad waste of time and effort — courting politicians instead of developing products and services the market wants.

I disagree with the Cato analysis on one point. The analysis states: “Nonetheless, we reject the notion that allowing a company to keep its earnings and pay less in taxes is somehow a ‘subsidy.'” I, however, contend that reducing a company’s taxes is the same as giving them money outright, as the impact on the bottom line is the same. I do agree with Cato that it is better if firms and individuals pay less taxes rather than more. But often corporate welfare measures like industrial revenue bonds are given to one company at the exclusion of its competitors. This, whether it is giving money to a company or reducing its taxes, is unfair to the company’s competitors. It is a distortion of the free market allocation of resources.

Supporters of corporate welfare claim that we in the United States must subsidize our corporations because other countries subsidize theirs. But the more corporate welfare we have, the more we have a socialized economy, and the more we become like European economies. This we do not want.

Other corporate welfare supporters claim that without incentives, businesses will not invest and create jobs. First, if taxpayers did not have to bear the cost of providing incentives, we would have more money to spend and invest ourselves as we see fit, not as politicians desire. Second, and most important, if a company does not believe in itself strongly enough to invest its own capital in itself, or if the capital markets have decided not to invest in a company, why should the taxpayers then have to invest in the company? It would seem like the taxpayers get to make only the most unproductive investments.

Finally, if we in Wichita or Kansas were to stop issuing IRBs and other forms of incentives, we would place ourselves at a disadvantage in competing with other states and cities. Therefore, I believe that the leadership to stop these types of corporate welfare incentives must start in Washington, so that it is ended nationwide. Then, localities can compete for jobs in meaningful ways.

Sedgwick county government

Guest post: The Sedgwick County Downtown Arena Sales Tax

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(It has been suggested that the following message, which I have sent as email to all Kansas State Senators and Representatives, may be of interest to you.

The article, as written and sent, does contain some minor inaccuracies, both in fact and in interpretation; but this merely shows that those of us who relied on the Wichita Eagle, my primary news source, for information prior to the arena tax vote were denied needed information and were, probably deliberately, given false, incomplete, and/or misleading information. I have made no effort to update it since a week or two after the election.

John A. Robinson
Wichita, KS)

The Kansas Legislature will be asked soon to approve a special sales tax for construction of a Downtown Arena in Wichita.

The recent “Arena Vote” in Wichita is a classic example of an election rigged by special interests, and does not represent an informed consent of the people of Wichita and Sedgwick County.

A vote was taken approximately a year prior to this vote in which the people of Wichita voted NOT to build a “downtown arena.” A main reason for the failure to support such a construction in that vote was the almost total inability of those favoring the arena to provide verifiable information in support of their claims that an arena would “do great things for Wichita,” a complete lack of any assessment of adverse related effects, denial, without examination, of any and all obvious problems, and a total lack of any coherent PLAN for the proposed arena. Those advocating this project were essentially unable to demonstrate that they had the best interests of the people of the community in mind, and made it clear that their real objective was their own personal profit and interest.

The people of Wichita voted NO to a downtown arena.

Subsequent to that vote, in which Wichita rejected the “arena,” the special interests who wanted one made NO EFFORT to respond to objections to the previous proposal. They made NO EFFORT to develop and show to the people any new plan for what was to be built, where it would be placed, how traffic and parking would be addressed, what REAL economic benefit the community could expect, and what REAL costs would be incurred.

They simply decided they didn’t like the result of that vote, and decided to take another one and get a different result.

Instead of examining the need, costs, and benefits, of their “plan” the special interests who favored the arena for their own personal gain determined that they “only needed about 15% more votes.” They did an apparently accurate assessment of what specific demographic groups would likely vote blindly for their “party place” if they could get them to vote, and could “work up enough enthusiasm.” It was perhaps also of interest that as persons not previously inclined to vote, their major demographic group, principally young college students, would be unlikely to affect any “substantive issues” affecting their other interests.

Very shortly before the election, a SINGLE announcement was made that “one of the County Commissioners” had talked to the Mayor, and the Mayor decided he was in favor of “the downtown arena.” No reason for the change in the mayor’s position was ever offered to the public, but “The Mayor is in favor of the Arena” became a slogan for the campaign.

Almost immediately, the extortionist threat was advanced by a County Commissioner that failure to vote for the Arena would mean a permanent and burdensome property tax. No substantiation for this claim was ever provided, but it was repeated incessantly.

Those with special interest, and intent to profit (or profiteer) from the arena, appeared with a “war chest” of several hundred thousand dollars a very few weeks before the election. They sponsored a few “pep rallies” at which they repeated their “the arena will be great” slogans, their “the mayor wants it” and their extortionate lie that “it’s already been decided that property taxes will go up if you vote against it.” By carefully refusing to offer any PLAN for examination, they made it difficult for more rational persons to speak against their campaign, simply because there was nothing to object to. Any objection was met with “that’s not part of our plan,” and couldn’t be countered since THERE WAS NO PLAN.

By appearing, unexpected, fully funded and organized at the last minute, they forclosed any opportunity for competing opinions to organize, fund, and carry out any effective counter campaign. It must be assumed, from the unexplained “instant switch” to favor of the arena that City and County officials were aware of and/or part of this plan to “silence the opposition.”

The “pep rallys” were well attended by those profiteers who wanted the arena, and were carefully advertised and “pushed” to the selected demographic groups that they had chosen to get the few votes needed to “vote their way.”

At NO TIME during this campaign was there EVER any discussion of what they planned to do, what other things would be affected, exactly how much it would cost, or what the peripheral impacts on the community would be and how they would be handled.

During the campaign, there was no discussion of a “plan” because there WAS NO PLAN. The entire campaign was based on “lets have a party.” The astonishingly large turnout for this election was ENTIRELY the result of a well funded, well planned recruitment of carefully selected groups likely to vote for the result that the “Arena Interests” wanted.

The threat to raise property taxes, made by the one “interested” Co. Commissioner, was clearly only for publicity. It was based on the costs to renovate the existing Colliseum, but it was never revealed whether, or how, the plans for the Colliseum would change if the arena was approved. It SPECIFICALLY was not revealed that those making this pseudo-plan fully intended the complete demolition of the Colliseum if the arena was approved. Since the Colliseum would compete with “their” arena, they have obviously decided, without consulting the public, that it will be demolished. NO SUGGESTION of any alternative use will be considered. THEY DO NOT HAVE PUBLIC APPROVAL TO DEMOLISH THE COLLISEUM.

Immediately after the election (less than two weeks) it was announced that the “arena plan” would “require cost estimates” for the demolition of the Colliseum. The people were NEVER given the choice of whether to find alternative use for the Colliseum, and were never told that DEMOLISHING the Colliseum was part of the “plan.” If it was part of the “arena plan,” the failure to have in hand an estimate of this major cost is only one more indication that THERE WAS NO PLAN EXCEPT FOR PROFIT FOR A FEW SPECIAL INTERESTS.

The passage of this “tax approval” was obtained by carefully selecting a demographic group susceptible to false and misleading publicity, massive publicity based on “let’s have a party,” false and misleading claims about fictitious benefits, vague but cheerful promises that “everything will be wonderful,” blatent lies, distortions, and mistruths bordering on extortion, and willful concealment of the “real” intent of those pushing the arena.

A physician who lies to a patient in order to get permission for a questionable procedure would not be likely to get by with an “informed consent” defense of his malpractice. This vote for the “arena tax” DOES NOT REPRESENT THE INFORMED CONSENT OF THE PEOPLE.

The Legislature should NOT APPROVE this tax. To do so is to reward EXTORTION by the persistent special interests who continue to believe they have a “right” to take whatever they want from the people as long as “they’ve got a good lie.”

Personal Observation:

The announcement that “the mayor is in favor of the arena” was made by the County Commissioner who “visited the mayor.” The Commissioner was not named in that report, and has not been clearly identified in the few subsequently published reports. So far as has been reported in the Wichita Eagle, my prinicipal source of local news, the mayor never appeared to publicly affirm his change in opinion about the arena. No explanation for his change in position has been published. Given the frequency with which he freely commented on city government and was quoted in local news, it is also noteworthy that since that announcement there have been NO REPORTS of his existence or of any participation in the affairs of the city.

Given the potential impact on the City of Wichita and on Sedgwick County, it would be reasonable that the news should be full of plans and analyses of the Arena; but the ONLY substantive report in the Wichita Eagle has been a rather weakly stated “The VOTE is OVER, shut up and take it” in one masthead editorial. “Opinion Line” comments, a feature of the Eagle, have contained the same terse “The Vote Passed, Shut Up and Take It” at approximately 2-day intervals since the election; but NO SUBSTANTIVE NEGATIVE COMMENTS have been published in the same column.

The Mayor and the Wichita Eagle, have been effectively SILENCED, whether by coercion or by collusion, on this matter.

Historical Note:

When Kellogg Avenue (US 54 Highway) was paved through the middle of Wichita in the 50’s, our public officials yielded to Cronyism and at the demand of the “special interests” in “Downtown Wichita” refused to make it a throughway. For nearly 50 years Wichita contended with 23 stoplights in a stretch of about 10 miles of what should have been a major trafficway. Since they made it impossible to travel conveniently between the East and West sides of town on that trafficway, major traffic flow continued through the downtown, at densities which required removal of all on-street parking, a maze of one way streets, and significant deterioration of road surfaces, never maintained, of most of the downtown area. Due to the high traffic densities diverted through the downtown, it was impossible to stop and do business there. By yielding to the “special interests,” they KILLED the downtown as a place of business.

For more than 50 years, our “leaders” have come up with one plan after another to “save” a downtown that IS DEAD so far as the majority of the people of this community are concerned. They have done so at the expense of other parts of the city, and at the expense of the community as a whole.

We have a “pretty” walkway along the side of the river, a few garish “art works” and have already dumped millions into “saving downtown” with subsidies for empty hotels and “startup money” for “botique shops” and bars. We have good hotels and motels, adquate for any visible needs, OUTSIDE the downtown area, but they get no support, and are ignored by our “planners.” This all for the benefit of the half dozen commissioners who meet “downtown,” the owners of the empty hotels “downtown,” the lawyers who wish to be near the courthouse “downtown,” and a whole lot of drunks who frequent the overpriced bars that would not exist “downtown” without frequent infusions of City Bond money.

In the meantime, half our city population is required to traverse the “Big Ditch” in fewer than a dozen traffic lanes twice daily, because Wichita cannot afford improvements to major traffic arteries “until we finish saving downtown.” Our tapwater occasionally STINKS because we can’t afford proper treatment until “we finish saving downtown.” We truck our trash out of state, because special interests must be placated who object to every plan for disposal. We can’t recycle with our trash, because special interests believe it will reduce their profitable trash service. We can’t have a beer at a neighborhood bar because the subsidized “entertainment” downtown has driven most of them out of business or very close to it.

Once again, by carefully selecting “which of the people to survey,” by whipping up enthusiasm with a selected minority demographic, and by concealing their intent from the population at large, the Council got the answer they wanted; but it IS NOT THE INFORMED CONSENT OF THE PEOPLE. IT IS A FRAUD. IT IS EXTORTION.

It is a rigged election, bought and paid for, by special interests, with the cooperation of City and County officials. A vote was taken, and ignored. A vote was RIGGED, bought and paid for, and should be ignored by the Legislature.

They are asking to DOUBLE the city sales tax. Not a trivial action. A vote for this tax will make it very much more difficult to ask for additional sales tax if a need for additional school funding is determined to exist.

There is no tyranny like the tyranny of a rigged “democratic election.”

Please VOTE NO to the Sedgwick County Arena Sales Tax.

John A. Robinson
Wichita, KS 67218

Liberty

Let free markets, not laws, regulate smoking

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Today, in the town of Hutchinson, Kansas, an indoor smoking ban takes effect. I hope Wichita does not pass the same law. I believe the evidence that shows smoking is tremendously harmful to the health of the smoker, and also dangerous to those around the smoker. Personally, I don’t care to be around smokers and I take measures to avoid places where I will be exposed to cigarette smoke. So shouldn’t I favor a smoking ban in Wichita?

We should let free markets instead of the government decide whether there will be smoking in places like restaurants and bars. In this way, people will be able to smoke or avoid smoke as they see fit. If restaurant owners sense non-smokers don’t like eating in smoky restaurants, they can either eliminate smoking (at the risk of losing smoking customers), or they can build effective separation between smoking and non-smoking sections of the restaurant. Or, if they choose to cater to smokers, they can create all-smoking section establishments. The choice is theirs.

People, through their free selection of where they choose to spend their dollars, will let bar and restaurant owners know their preferences. After some time we will have the optimal mix of smoking and non-smoking establishments based on what people actually do, not what politicians think they should do. Isn’t that a better way?

Liberty

Vioxx and personal liberty

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A recent column by Thomas Sowell titled Free lunch ‘safety’: Part II (a link to part one is here) started with this paragraph:

“The government will allow you to risk your life for the sake of recreation by sky-diving, mountain climbing or any number of other dangerous activities. But it will not allow you to risk your life for the sake of avoiding arthritis pain by taking Vioxx.”

I was quite astonished to see the issue of Vioxx framed this way, but it is perfectly valid to do so.

It appears that taking large doses of Vioxx increased the risk of a cardiovascular event by a factor of two. In other words, people taking large doses are twice as likely to be afflicted as those who were on placebo.

That may seem like a large increase in risk. Consider, however, the risk of some other common activities. The death rate for motorcyclists in 2001 was 33.4 deaths per 100 million miles traveled. Passenger car riders have a death rate of 1.3 per 100 million miles traveled, a rate just 4% of that for motorcyclists. Yet riding a motorcycle is perfectly legal. The success of Harley-Davidson in manufacturing and selling them is saluted.

Now compare the value of the pleasure of riding a motorcycle with relief from the pain of arthritis. And it’s not just a little ache in the knee once in a while. Many arthritis sufferers are in constant misery, and Vioxx helped some. An informed decision by the patient and doctor to accept an increase in the risk of a cardiovascular event in exchange for relief from miserable pain should be allowed. (That is, unless patients start to feel so well that they take up motorcycling.) But the hysterical media coverage of events like this, along with swarms of attorneys advertising for plaintiffs, eliminates this choice for patients and their doctors.

Dr. Sowell’s article makes the point that drug companies like the makers of Vioxx are “denounced for ‘corporate greed’ by making money at the risk of other people’s lives.” But what about the motorcycle manufacturers and companies that promote dangerous recreational activity? Are they similarly denounced?

Sedgwick county government

Prepare for sales tax-induced job effects now

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Collecting the sales tax to pay for the downtown Wichita arena may produce unintended consequences.

A paper titled “An Assessment of the Economic Impact of a Multipurpose Arena” by Ronald John Hy and R. Lawson Veasey, both of the University of Central Arkansas, (Public Administration & Management: An Interactive Journal 5, 2, 2000, pp. 86-98) looked at the effect of jobs and economic activity during the construction of the Alltel Arena in Pulaski County, Arkansas. This arena cost $50 million. It was funded in part by a one percent increase in the county sales tax for one year (1998). The sales tax generated $20 million.

In the net, considering both jobs lost and jobs gained due to sales tax and construction effects, workers in the wholesale and retail trades lost 60 jobs, and service workers lost 52 jobs. There was a net increase of 198 jobs in construction.

The fact that jobs were lost in retail should not be a surprise. When a sales tax makes nearly everything sold at retail more expensive, the supply curve shifts to the left, and less is demanded. It may be difficult to estimate the magnitude of the change in demand, but it is certain that it does change.

Workers in these sectors, should the sales tax increase take effect, may want to reconsider their career plans. How many retail and service workers can make the transition to construction work is unknown. It is certain, however, that when workers lose their jobs it imposes benefits costs on the government — and the taxpayers.

The population of Pulaski County in 2000 was 361,474, while Sedgwick County’s population at the same time was 452,869, so Sedgwick County is a somewhat larger. Our sales tax will last 2.5 times as long, and our proposed arena is about three times as expensive. How these factors will impact the number of jobs is unknown, but I feel that the number of jobs lost in Sedgwick County in retail and services will be larger that what Pulaski County experienced.

It is interesting to note that the authors of this study, while measuring a positive net economic impact for the Alltel Arena, make this conclusion:

“The primary reason for this positive economic impact is that the state of Arkansas contributed $20 million to the construction of the arena. As a result, the economic impact of building the arena in Pulaski County is greater than it would be if the county had funded the arena by itself. A vast majority of the jobs that will be created will be in the service sector that frequently offers lower wages than jobs in other sectors of the economy.”

The proposed downtown Wichita arena does not have the advantage of having 40% of its cost paid for by outsiders. It may be that we feel even more strongly the negative impacts of the sales tax.

Kansas state government

Tom Daschle’s Defeat, Media Filters, and Kansas

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(Reprinted with the permission of the author, Karl Peterjohn, of Kansas Taxpayers Network.)

Enclosed is a December 13, 2004 Wall Street Journal opinion piece by John Fund (How Daschle Got Blogged) demonstrating how the bloggers went past the media filters in South Dakota to help knock off Tom Daschle last month.

This is relevant to Kansas for several reasons: This state has a similar one party news media like South Dakota’s that provides unbalanced information — as was well demonstrated by the critical letter to the editor that appeared in the Wichita Eagle December 13 criticizing an Americans For Prosperity report that the Kansas press — with one exception in the Lawrence Journal World — had not bothered to mention in print.

The Eagle editorial page found it worthwhile to publish a letter from Wisconsin blasting AFP-KS’ position on TABOR without bothering to report on the basic study or mention it in their editorial page. In fact, the Eagle has an unpublished editorial piece from Alan Cobb on TABOR.

Ironically, despite this recent flaw in their coverage, I consider the Eagle to have the least bad level of imbalance in both its editorial and news coverage when compared with the major newspapers in this state.

There are even worse examples coming out of the Kansas City area as well as the Topeka newspaper. The smaller dailies, lead by the Harris chain as well as Dave Seaton’s two Cowley County papers are usually even worse.

Second, these media filters allow distortions, like the 2002 Sebelius campaign, to get away with remarkable prevarication on their position concerning key issues, like taxes. Another example of flawed Kansas media coverage is the non reporting of the Missouri money flowing into Kansas campaigns at many levels. See the last minute, third-party hit pieces that occur at the end of the campaign and get no negative coverage if the Left blasts Phill Kline in the last week of his campaign but is major news if the conservatives find a 527 vehicle that runs paid media ads in this state.

In the 2002 campaign Sebelius kept claiming that she was not supportive of raising taxes. No one in the mainstream press bothered to ask her about her repeated legislative votes for raising taxes while serving in the Kansas house in the 1980’s and early 1990’s. Now that she has spent the last year proposing numerous, large tax hikes it would seem worthwhile for someone in this state’s news media to bother to mention her flip-flop. I’ve complained about it in my editorials that I post on KTN’s web site and I send out on-line but I believe that the statehouse press corps is concerned about losing access inside her office if they press her on this as well as other key issues.

Third, there are already a few good bloggers at work in this state. “The Kansas Meadowlark” is regularly providing excellent public document information that is regularly ignored in the “mainstream” Kansas press. We need more Meadowlarks and we need ways to disseminate his work more widely to Kansas netizens. There was another blogger, I believe it was “Kansas Citizen” operating out of Johnson County too.

Fourth, I’m tired of the rotating door between the media and its sources and the political Left in this state. Jim MacLean leaves the Topeka Capital-Journal for the Sebelius administration. This occurred only a year or so after the head of the KS Associated Press statehouse office “retires” and is then appointed to the Kansas Board of Regents as well as serving on other boards appointed by the governor.

More recently the most commonly quoted-by-the-press academic in this state, Burdett Loomis, takes a position with the Sebelius administration without fully leaving his position at KU! I was recently surprised to find out from the Kansas Meadowlark that his son had been active in the 2002 Sebelius campaign as well as joining her staff after Sebelius became governor. I wonder who the media will find to become the next Burdett Loomis to quote in “news” stories or if they will continue to quote him since he still is part time at KU’s Dole center.

Fifth, this is a national as well as statewide problem. Tom Daschle’s wife is a Washington lobbyist. Could a Dennis Hastert or Bill Frist spouse do this? Of course not, the media would howl. Newt Gingrich was forced by the news media to surrender book royalties after he became speaker while HIllary Clinton had no problem taking her book royalties to her bank. Fortunately there are several groups like the Media Resource Center and Accuracy in Media as well as numerous bloggers operating in Washington. Unfortunately, the only methodical effort to hold the media accountable in this state that I know of is through bloggers like the Kansas Meadowlark.

Many of you receiving this email distribute your own material and others to your own lists. This effort needs to expand and grow. If you have a web site, I strongly urge you to link up with the Kansas Meadowlark’s. If you find other web sites, please spread the word. I’m sending this to you not in the belief that I have all of the answers, but only because I think I know some of the questions and you need to read Fund’s editorial.

Liberty

On Seatbelts and Helmets

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I believe there is little doubt that it is foolhardy to be in an automobile without wearing seatbelts, or to ride a motorcycle without wearing a helmet. Someone inevitably claims that it is better to be thrown clear of the wreckage than to be trapped inside. But ask any race car driver — they who witness crashes all the time and may have even been in several — if they would dare take to the track without making use of their extensive belting systems.

I believe it would be nice if we had the right to drive automobiles without wearing seatbelts, and to ride motorcycles without wearing helmets. These acts, while dangerous to the actor, don’t pose any real threat to others. If the person who crashes into my car isn’t wearing their seatbelt, it doesn’t change my likelihood of injury to my body. It does, however, greatly increase the danger to my wallet, and that’s where I draw the line.

The economist Walter E. Williams, in a column titled Click it or ticket makes this conclusion:

“Some might argue, but falsely so, that the problem with people exercising their liberty to drive without seatbelts, ride motorcycles without helmets or eat in unhealthy ways is that if they become injured or sick, society will be burdened with higher health-care costs. That’s not a problem of liberty but one of socialism.

There’s no liberty-based argument for forcing one person to care for the needs of another. Under socialism, one is obliged to care for another. A parent-child relationship emerges between the citizen and the government. That was not the vision of our Founders.”

He is correct that those who are injured often receive care that they don’t pay for themselves, either out-of-pocket or through their insurance carriers. Therefore, the rest of society pays. That reduces the liberty of others because they have to pay so that a few can enjoy their rights. Dr. Williams makes the call in favor of the rights of the seatbeltless, while I argue in favor of those who pay. Not wearing seatbelts or wearing a helmet is a small gratification. Having to pay the healthcare costs — and they are huge — to support those small liberties is oppressive. Until we can limit the economic damage of not wearing seatbelts or wearing helmets to those who cause it, I support laws requiring their use.

Wichita city government

The Real Scandal at City Hall

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In 2003, local Wichita news media devoted extensive news coverage to two officials in the City of Wichita’s finance department. They were accused of improperly spending between $52,000 and $73,800 on travel. While I don’t condone this waste and I’m glad that our local news media uncovered it, the amount involved is relatively small. Furthermore, the people who wasted this money are no longer in a position to repeat.

The real scandal, however, is the ongoing lack of care exercised when spending our money. Time and time again we read in the newspaper how the mayor or city council members are surprised by facts and circumstances arising after a decision has been made.

For example, in an article titled “Kolb goal: full facts in future city deals” (Wichita Eagle, September 26, 2004) we read this:

“Due diligence should have been done,” Mayor Carlos Mayans said when he learned of the losses: “We expect the staff to provide us with information that helps us make sound decisions.”

In the same article, council member Paul Gray, upon hearing of bad financial news at the city-owned ice rink, is quoted as saying “Why is it just now coming to us?”

Continuing in the same article, council members were described as being surprised upon learning that the industrial revenue bonds and property tax abatement awarded to a local business also included a sales tax break. How could they be surprised? The City of Wichita website contains a nicely-done page titled “Industrial Revenue Bonds” (located at http://www.wichitagov.org/Business/EconomicDevelopment/IRB) (This is the first result that appears when you use the wildly popular Google search engine and search for “Wichita IRB.”) The first link on this page is titled “IRB Overview: Industrial Revenue Bond Issuance in the State of Kansas,” and you don’t have to read very far before you come to the sentence reading “Generally, property and services acquired with the proceeds of IRBs are eligible for sales tax exemption.”

Is it asking too much that someone at City Hall read the City’s own website? Or, is it possible that they knew this, but decided to overlook inconvenient facts?

Recently, in an article titled “Plaza falls short” (Wichita Eagle, November 14, 2004), we read this:

The cinema plaza is the latest in a series of public and public-private projects that have underperformed compared with projections. Others include the Hyatt Regency Wichita, Ice Sports Wichita and Auburn Hills Golf Course.

Mayans said he’s getting tired of such surprises and is working with City Manager George Kolb to make changes.

“We need to find out why we have so many projects (from) previous years that are having financial difficulties,” he said. “From now on, we have to make sure that we are not using anyone else’s numbers and we are doing our own due diligence.”

In fairness to Mayor Mayans, I emphasize that these decisions were made before he took office.

Now as we undertake spending even more money on projects such as the Waterwalk and the downtown Wichita arena, how can we restore confidence in our local government officials?

The best thing to do would be to stop spending on projects that are better handled by the private sector. It seems like the City of Wichita, when partnering with private developers, often assumes most of the risk but is not in position to received the rewards the private developers earn (and rightly deserve to earn) if the project succeeds.

A recent editorial by Phillip Brownlee in the November 21, 2004 Wichita Eagle illustrates the risk involved in these dealings. The editorial, when recommending how to avoid future mistakes like the Old Town Square tax shortfall, states there should be “Better communication between the developers and the city, especially if the project changes.” The key idea in this sentence is change. Things always seem to change. Private developers, being close to the ground and having their own money at risk, sense the need for change earliest. If they are spending their own money, they have the perfect right to change as they see fit. But if they have agreed with the government on a course of action, and now that course needs correction, they have to go back to the government and ask permission to change. That can take a long time — maybe too long to respond adequately to the changing markets.

The editorial also recommends “Clearer expectations (and in writing) about what the developers will build and what occupancy rates likely will be.” First, this sentence illustrates the element of risk again, what the rates likely will be. No one knows. There is risk in developing a business of any type. It seems like the City assumes the risk, however. Also, I am wondering why Mr. Brownlee seems to imply that expectations have not been given in writing. Furthermore, what recourse does the City have if expectations are not met?

Finally, the editorial reads “Closer City Council scrutiny before projects are approved (members at the time now say they didn’t know who all the Old Town development partners were, and they seemed to accept on faith the assurances by city staff that the project would exceed revenue projections).” I first note that it seems like city staff are acting as cheerleaders for these projects, when they should provide a sober assessment. Furthermore, if the project would exceed revenue projections, why not adjust the projections so that they accurately reflect what we believe the future will hold?

The City of Wichita can do a better job. At one time it seemed like our mayor would be better. From an article titled “Mayans takes on WaterWalk” (May 30, 2003 Wichita Business Journal):

One area Mayans says he’s concerned about is a “leasehold mortgage” referred to in the agreement. That means the city is allowing the developer to place a first lien on the ground owned by the city and leased to the developers for the project, Mayans says. Later, the agreement specifies that the city agrees that their ownership of the ground is to be “subordinated” to a loan obtained by the developer to build the improvements.

“If the project is unsuccessful, the lender then has the right to take not only the improvements, but also the city’s land,” Mayans says.

This is the type of thorough analysis and due diligence needed before the City enters into agreements of any type. Why is the city staff not providing this, and why are the Mayor and City Council members not demanding it?

Free markets

Why I don’t listen to Rush Limbaugh

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There have been periods when I listened to Rush Limbaugh, but it has been many years since I listened regularly. Now I hear his show only when I happen to be driving while it is on the air. When I do hear it, I realize that I don’t miss it.

I think the people who criticize Mr. Limbaugh as being merely an entertainer are correct. He provides entertainment to people who enjoy his style of humor and satire. I decided that I didn’t like it anymore, and I stopped listening. As serious political commentary, though, his show falls short in several ways.

He often makes fun of people because of their name. I remember during the California electricity crisis he referred to Governor Gray Davis as “Gray-out” Davis. There are many more examples of this type of name-calling and ridicule. These are funny the first time or two that you hear them, but using them repeatedly, whenever you refer to the person, reminds me more of schoolyard teasing than of reasoned argument.

His hypocrisy concerning his drug use troubles me. In the past, he has been quite harsh on drugs and drug users. His admission of his addiction was hailed as a courageous act, but he admitted it only as it was about to be revealed in the news media. He has used his wealth to defend himself in ways that few others would be able to, which is his absolute right. But the way he has acted for his own benefit is very different from what he has advocated for others in the same situation.

Limbaugh seems to value education, but he never graduated from college. It seems like he didn’t make a serious attempt at college. I think he would say that he doesn’t need a college education, that he educated himself. Many people who fail to graduate from college say this. I wonder how they know what they missed.

His boastfulness — “talent on loan from God” — is tiresome. I realize that much of it is playful, but to me, it becomes old very quickly. I’m glad I don’t hear it much anymore.

Wichita city government

Remarks to City Council, May 11, 2004, Regarding AirTran Airways Subsidy

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I delivered these remarks to the Wichita City Council as they were preparing to vote on extending AirTran Airway’s subsidy for another two years. The extension passed with only one dissenting vote.

Mr. Mayor, Members of the Council:

I speak today in opposition to the continuation of the subsidy the City is paying to AirTran Airways.

There are several reasons why I believe this subsidy should not be continued. The primary reason is that the subsidy, since it is paid to one company and one company only, is not fair to the other companies. Yes, it is true that fares are lower. But is that a legitimate reason to enrich one company at the expense of others?

If creating an environment of unfair competition is good and correct, why should we not do this in other markets?

If we feel that gasoline prices are too high, why not select a chain of gasoline stations and pay it a subsidy so that it could lower its prices?

If we feel that a chain of grocery stores has too much market power and their prices are too high, why not create and subsidize stores to compete with them?

If we feel that the commissions that real estate companies charge are too high, why not pay one of Wichita’s major firms a subsidy so that they could reduce their commissions?

Let us all hope, then, that we do not find ourselves running, or being an employee of, a business whose prices the City believes are too high.

But the situation is even worse. Through the Fair Fares program, the City has organized the potential customers of the subsidized business to ensure that they purchase from it. For the companies that pledged to Fair Fares: How would they feel if the government started a public body for the purpose of organizing their customers, and then used its powers of persuasion to compel them to buy from a competitor at the same time the City is subsidizing the competitor?

All of this is in direct opposition to the American principles of limited government, individual liberty, and fair markets.

The distortion of the market that the subsidy creates has another aspect: By creating an environment of unfair competition, we make it unlikely that any airline will consider starting service to Wichita unless they too receive a subsidy.

If the Council feels that we must subsidize an airline, consider this alternative: why not subsidize one of the other established airlines, one that that flies to many destinations? Or, why not rotate the subsidy every year to a different airline? After all, if fares can be lowered if any airline reduces their fares, it shouldn’t matter which airline does it.

Free markets

Political decision-making increases conflict

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A recent column by economist Walter E. Williams (Why we’re a divided nation) strongly makes the case for more decision-making by free markets rather than by the government through the political process.

When decisions are made through free markets, Dr. Williams says, both parties win, because in a free market, parties voluntarily enter into only those transactions that benefit them.

When decisions are made for us by the government, however, it is almost always the case that one party’s gain is someone else’s loss. Therefore, there is conflict. The more decisions made through politics, the more potential for conflict. Coalitions arise in order to try to get more from the government, and the most effective coalitions “are those with a proven record of being the most divisive — those based on race, ethnicity, religion and region.”

The final paragraph of the column is this: “The best thing the president and Congress can do to heal our country is to reduce the impact of government on our lives. Doing so will not only produce a less divided country and greater economic efficiency but bear greater faith and allegiance to the vision of America held by our founders — a country of limited government.”

In an earlier post, I mentioned some columns by Dr. Williams that I thought were important. This column is certainly one of his best, as it very simply, in one short page, shows us a major fault in our current political landscape.

Wichita news media

Columnist Confuses Government and Individual, Again

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In the November 7, 2004 Wichita Eagle, columnist Mark McCormick again confuses the proper role of government and individual.

He starts by talking about the spirit of the people in Wichita, how they will help you push your car, how they will hold open the door for you, etc. He refers to this as “neighborliness.” He labels Karl Peterjohn, Executive Director of the Kansas Taxpayers Network, as not belonging to this group, because of his opposition to tax increases.

Because Peterjohn opposed the arena and a school bond issue a few years ago, McCormick thinks he also opposed the wheel and fire. This type of ridicule does not advance Mr. McCormick’s argument.

I would ask Mr. McCormick if it is neighborly to vote for something that if passed, would require that your neighbor pay to subsidize your pleasure. That’s what the downtown arena tax does. It requires everyone to pay for something that benefits only a few.

The things that Mr. McCormick labels as being neighborly are things we do because we want to. Many people want to give of themselves to make things better for others. When we do that, either by holding open a door for someone or by giving substantially of our time and money, we are directly engaged in the noble act of charity. The givers of charity directly receive the benefits of having donated, and because it is our own resources we are giving, we make sure that our effort is not wasted.

When the government, however, taxes us and gives the money to those it does not belong to, it is not an act of charity. It is not neighborly, as we don’t even know those who received the benefit. The givers do not receive the benefit of having donated, because the taxes were taken from them by force.

The arguments Mr. McCormick makes, much like in his column from earlier in the week, refer to someone being “creative” and “taking a risk” and how Wichita might become “place where dreams and ideas usually die.”

How is it being “creative” for Sedgwick County to tax its citizens and build the same type of arena that all the other cities — the cities we are supposed to compete with — have already built?

How is it “taking a risk” for government officials to tax citizens to build an arena? If the arena fails to generate revenue sufficient to cover its costs, will the politicians be responsible? Of course they won’t. They will simply ask the citizens for more taxes, as is happening right now with Wichita’s Old Town special tax district.

Furthermore, I contend that the more government there is, the less “dreams and ideas” there will be, whether they live or die. For example, downtown arena supporters claim that the arena will attract bars and restaurants to its vicinity. What, then, should entrepreneurs do right now, if they are interested in opening bars or restaurants? Should they wait several years to see if the arena is built, and if it does in fact attract customers? Or should they build elsewhere, and then hope that the arena doesn’t detract too much from its business? This is not the type of climate that encourages individual risk-taking.

The same week that this column appeared Walter E. Williams wrote in a column titled “Why We’re a Divided Nation” these words: “The prime feature of political decision-making is that it’s a zero-sum game. One person or group’s gain is of necessity another person or group’s loss. As such, political allocation of resources is conflict enhancing while market allocation is conflict reducing. The greater the number of decisions made in the political arena, the greater is the potential for conflict.”

When we say “yes” to the things Mr. McCormick advocates, we rely on politicians and government to make our decisions, thereby increasing conflict. We should say “no” more often to government and let individuals and free markets make more decisions. We will have less conflict.

Wichita news media

Columnist Confuses Government and Individual

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Writing in the November 3, 2004 Wichita Eagle, columnist Mark McCormick labels the vote in favor of a taxpayer-funded, government-owned arena a “rebirth of city’s pioneering spirit.” In this column, Mr. McCormick mentions our famous entrepreneurs and aerospace industry pioneers. Although he explicitly denies comparing the building of a downtown arena to the genius of Beech and Cessna, this article claims that the downtown arena will somehow lead to a rebirth of Wichita.

What I think Mr. McCormick has overlooked is that the people who in the past made Wichita great were people working as individuals, not as governments. Now, when we look to get something done, we look first to the government, and we seem to think that’s a good thing. The entrepreneurs and risk-takers of the past were investing their own money, their own sweat and toil. Our government leaders invest none of this.

The effect of the downtown arena vote is that instead of trusting the individual, or on organizations that individuals freely enter in to, we invest our hope and future in politicians and government bureaucrats. Instead of letting free competitive markets work, we rely on increasing government interference in the market. Is this the pioneering spirit that made Wichita great that Mr. McCormick refers to?

Sedgwick county government

Downtown Wichita arena as a public good

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The streets and highways, and certainly the public parks, are examples of public goods. Public goods are characterized by two things: nonexcludability, meaning that non-payers can’t be excluded from enjoying and using the good, and nonrivalrous consumption, meaning that consumption of the good by one person doesn’t reduce the availability of the good to others. Neither applies to an arena.

Roads and highways, to a large extent, are paid for by those who use them. As far as I know, I paid for the entire cost of street in front of my house through special tax assessments. It is reasonable that I pay for that street, as I use it extensively. In the broader case, a large source of funding for roads and highways is the gasoline tax, which is an attempt to ask those who use and benefit from the resource to pay for it.

Some roads, such as toll roads, require their users, and potentially only their users, to pay for them.

The proposed downtown Wichita arena or Kansas Coliseum benefits only those who actually attend events. This is especially so in the case of the Coliseum, as downtown arena supporters readily point out that there has been no development surrounding it. We can easily identify those who benefit from an arena or stadium because they rent the facility or buy tickets to attend events. So it is very easy to ask them, and no one else, to pay.

Sedgwick county government

Arenas’ Financial Statements Not Complete

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The WSU Center for Economic Development and Business Research study (reported by Fred Mann in the September 5 Wichita Eagle), showing a small loss for the proposed downtown arena, does not account for the cost of building the arena. Neither do the Qwest Center in Omaha nor the Alltel Arena in Arkansas when they report their profits. How do I know? I wrote to each of these facilities and asked. None include any expense for depreciation, debt service, lease payments, or anything that recognizes the tremendous amount of capital consumed by building these arenas. Yet, these facilities report a profit, or perhaps a negligibly small loss.

I have found that the arenas I have looked at (Qwest, Alltel, and the proposed Wichita) don’t account for the cost of the capital consumed in building them. For example, the projected profit (actually a small loss) for the proposed Wichita downtown arena includes no expense taken for depreciation. Now it is true, that being a government entity, the downtown arena wouldn’t pay taxes, and therefore depreciation expense doesn’t help it reduce its income taxes. But an allowance for depreciation helps us to recognize that a large amount of money was spent to build this arena, and that money has a correspondingly large opportunity cost. Indeed, GASB 34 requires governments to start depreciating their assets, and Mr. Chris Chronis, the Chief Financial Officer of Sedgwick County, has told me that the county will take depreciation expense for the downtown arena, or for a remodeled Kansas Coliseum, for that matter.

My investigation and a series of email messages with Mr. Ed Wolverton revealed that the WSU center that prepared the estimate of profitability for the proposed downtown arena wasn’t aware that the county would be required to calculate depreciation expense.

Sedgwick county government

WSU Study on Downtown Wichita Arena Not Complete

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Government Accounting Standards Board Statement 34 requires governments to account for the cost of their assets, usually by stating depreciation expense each year. Through a series of email exchanges with Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, I have learned that the WSU Center for Economic Development and Business Research was not aware of this requirement when they prepared their forecast. Mr. Wolverton admitted this after checking with the study authors.

Mr. Chris Chronis, Chief Financial Officer of Sedgwick County, in an email conversation told me that the county will take depreciation expense for the downtown arena, or for a renovated Kansas Coliseum, for that matter.

I appeared in a story on a local television station where I presented research I had read showing that if new development occurs around a downtown arena, it would likely be economic activity that formerly took place somewhere else in town. This is the “substitution effect.” Mr. Wolverton appeared in the same story and state that due to time constraints, the WSU study did not study these effects.

Sedgwick county government

The leadership of our local government officials regarding the downtown Wichita arena

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It is clear that our local government leaders want a downtown arena in Wichita. Just read their remarks in the Wichita Eaglenewspaper. Since the Sedgwick County Commission has promised that they will proceed with renovation of the Kansas Coliseum if the downtown arena vote fails, it is in their interest to make the Coliseum renovation option look as bad as possible. In my opinion, they’ve done a pretty good job of this.

If you do the math on what it costs to borrow $55 million, paying it back at $6.1 million a year for 20 years, the interest rate is 9.17%, which is a terribly high interest rate for a government to pay. Yet, if we believe the county commissioners, they are ready to pay this much if we don’t agree to the arena.

Arena supporters cite economic benefit to the community as a reason to build the downtown arena, and they concede no such benefit is likely near a renovated Coliseum. Yet they are willing to spend millions there if we don’t give them a downtown arena.

Arena supporters cast the Coliseum renovation in the worst possible light. Consider a homebuyer who just bought a $100,000 home, financing it at 5% for 30 years. The total payments would be about $193,000. Do these people, having just bought the $100,000 home, go about saying they just moved into a $193,000 home? Of course they don’t. The total financed cost, to be sure, is an important fact, and a bad financing decision is a handy fact for arena supporters to use as they portray the Coliseum renovations in the worst possible light.

Arena supporters claim that there are only two decisions, the new downtown arena or the renovation of the Coliseum. Framing the debate this way, especially when one decision outcome is so distasteful, is a good strategy for downtown arena supporters to use, but not good public policy.

The Sedgwick County Commission has said that if the downtown arena fails, Coliseum renovation will start. We, as the citizens of Sedgwick County, should not allow this coercion to affect our decision on the downtown arena. We do not have to stand for this type of bad government.

Sedgwick county government

Economic justification of arenas and the downtown Wichita arena

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It seems that the best argument that arena supporters have for asking the entire community to pay for the Downtown Wichita arena is that it will somehow pay for itself through spillover economic benefit. That is, through increased economic development around a downtown arena, the citizens of Sedgwick County will somehow be repaid for their investment in the arena through the taxes they paid.

Current economic research indicates otherwise, as follows.

A review of the book “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums” by Roger G. Noll and Andrew Zimbalist, available at this url at the Brookings Institution: https://www.brookings.edu/press/books/sports.htm states in part: “The primary conclusions are: first, sports teams and facilities are not a source of local economic growth and employment; second, the magnitude of the net subsidy exceeds the financial benefit of a new stadium to a team; and, third, the most plausible reasons that cities are willing to subsidize sports teams are the intense popularity of sports among a substantial proportion of voters and businesses and the leverage that teams enjoy from the monopoly position of professional sports leagues.”

Another important paper, “Identifying the Real Costs and Benefits of Sports Facilities” is available at this url: http://www.lincolninst.edu/pubs/dl/671_chapin-web.pdf. This is from the conclusion: “A pro-facility argument that rests solely on the magnitude of the economic benefits conferred by a new facility is unsustainable. The economic impact literature has ended once and for all the argument that the economic impact of these projects justifies public subsidies for new sports facilities.”

From a paper titled “Professional Sports Facilities, Franchises and Urban Economic Development (UMBC Economics Department Working Paper 03-103)” available at http://www.umbc.edu/economics/wpapers/wp_03_103.pdf we can read this about the impact of sports facilities:

Siegfried and Zimbalist (2000) recently surveyed the growing literature on retrospective studies of the economic impact of sports facilities and franchises on local economies. The literature published in peer-reviewed academic journals differs strikingly from the predictions in “economic impact studies.” No retrospective econometric study found any evidence of positive economic impact from professional sports facilities or franchises on urban economies. While evidence exists suggesting that narrowly defined occupational groups, like workers employed in the sports industry (SIC Code industry 79 — Recreation and Amusements), benefit from the construction of new sports facilities, building new sports facilities and attracting new professional sports teams did not raise income per capita or total employment in any US city. In fact, some research has found a negative economic impact of professional sports on urban economies.

Later, from the same paper:

Coates and Humphreys (2003) extended this research to examine the earnings and employment in narrowly-defined occupational groups in US cities with professional sports teams. In this study, the earnings and employment in the SIC-code industry containing sports facilities and teams — SIC-code 79, Amusements and Recreation — were higher but the earnings and employment in other important sectors like Retail Trade, Hotels, and Eating and Drinking Establishments were lower. The economic benefit from sports facilities and franchises appears to be concentrated in a small sector of the economy and comes at the expense of other sectors of urban economies.

If, then, it appears that the community-wide economic benefit that arena supports claim will not materialize, the people who benefit from the arena are quite easy to identify. They buy tickets to events, or they rent the arena. These are the people who should pay its cost.

Sedgwick county government

The value of economic impact studies

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One of the factors that usually plays a part in an economic impact study like that used to promote the Downtown Wichita arena is the “multiplier,” which accounts for the fact that money spent once is spent again, and maybe yet again.

To quote from “Economic Impact Multipliers for Kansas” published in “Kansas Business Review” Vol 12, No. 3, Spring 1989, and available at http://www.ku.edu/pri/publicat/multipliers/multipliers.htm:

It sometimes seems that the bigger a multiplier is, the more often it is quoted. (1) In any case, some distinctly one-sided political and economic motives encourage the propagation of exaggerated multipliers.

In particular, economic multipliers are used to justify public concessions to private industry. Such assistance for business may include land acquisition, new roads and sewers, job training programs, subsidized loans, and tax incentives.(2) The extent of public concessions is determined through bargaining between government and industry, and in the course of the bargaining those who stand to gain most from the new enterprise have a natural tendency to inflate the relevant multipliers.(3)

The inflation of multipliers may stem less from venality than from an innate optimism, which seems to be necessary in the risky business of development. Since multipliers are costly to measure, of uncertain accuracy, varied in their meanings, and multifarious in their origins, a convenient range of multiplier values is always available; discriminating users are free to choose the best values for their purposes.