Category Archives: Wichita city government

Wichita city government

Wichita WaterWalk contract not followed, again

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Wichita city hall failed to uphold the terms of a development agreement from five years ago, not monitoring contracts that protect the public interest.

Two weeks ago a Wichita Eagle article reported on a 2002 public-private partnership that called for the private-sector company to submit an annual report to the city. But the company did not submit the reports, and the city didn’t ask for them. The city did after the Eagle inquired. 1

Much of the Eagle article described why current city officials were not aware of the 2002 agreement: “Due largely to turnover on the city staff and term limits on the City Council, top officials at City Hall were unaware of the contract provisions until The Eagle inquired about them. … No city official who played a major role in the 2002 contract is still actively involved in government.”

The article quoted Mayor Jeff Longwell as “interested in WaterWalk fulfilling any contractual agreement they have in place (with the city), even if that contract was made 20 years prior to my time.”

Now we know that the city did not enforce a similar agreement with the same WaterWalk developer made while Longwell was a council member. The city manager who oversaw the agreement is still manager.

WaterWalk additional rent calculation, excerpt. Click for larger.
We don’t have to look as far back in history as 2002 to find an agreement the city did not enforce, one where the city was not protecting the interest of taxpayers. In 2012 the city entered into a same or similar agreement in the same WaterWalk development with the same developer, Jack P. Deboer. It also called for the city to potentially earn payments, called “additional annual rent.” It also called for reports to be made, although the exact language used is “provide that calculation.” 2

I asked for the annual reports on July 10. Three days later I received a message indicating the documents would be ready on July 19. On that day they arrived. Like those provided to the Eagle, they were heavily redacted and showed that no additional rent was due the city.

Upon further inquiry, it is clear that these reports were not filed with the city on an annual basis, but were created only after I asked for them. 3

Calculations use incorrect formula

The 2012 agreement specified that the WaterWalk developer would be able to annually deduct 20 percent of the construction costs as “development cost return.” But, in the calculations provided to me by the city, 17 percent is used instead. 4

WaterWalk additional rent calculation, excerpt. Click for larger.

The city excused this error as being in favor of the city, and no additional rent was due in any case.

Redacted, not really

As shown in the examples above, the documents provided to me were heavily redacted, with nearly all numbers obscured. The illustrations show the appearance of the pdf document when opened in Acrobat reader or another pdf reader.

But a simple copy and paste into another application like Microsoft Word revealed the blacked-out numbers. The procedure used by the city didn’t really redact the numbers. It appears that someone used the Acrobat drawing tools to draw thick black lines over the numbers, which isn’t effective. Acrobat offers a set of redaction tools specifically designed for removing sensitive content from pdfs, and the city should have used this method. 5

When I reported this finding to the city, Elder replied: “We would ask that you respect the privacy of this information as well as the City’s obligations under the Kansas Open Records Act at K.S.A. 45-221(b), included below, which strictly prohibits the release of the financial information of a taxpayer, and not disclose the financial information.” 6

I don’t believe that the Kansas Open Records Act prohibits the disclosure of this information, and it is in the public interest that these numbers are available. At the moment, I am inclined to respect the city’s request.

Again

Here is another example of the city and its private-sector partners failing to observe a contract. The city did not monitor its agreements to protect the public interest, and this agreement is recent enough that remoteness in time is not an excuse.

Were the 2002 and 2012 development agreements wise for the city? At the time of the 2012 deal, I wrote this: 7

[There] is a provision that requires the apartment developer to pay “Additional Annual Rent.” Under this concept, each year the apartment developer will calculate “Adjusted Net Cash Flow” and remit 25 percent of that to the city.

To the casual observer, this seems like a magnanimous gesture by the apartment developer. It makes it look like the city has been a tough negotiator, hammering out a good deal for the city, letting citizens profit along with the apartment developer.

But the definition of cash flow includes a comprehensive list of expenses the may be deducted, including the cost of repaying any loans. There’s also an allowable expense called “Tenant Development Cost Return,” which is the apartment developer’s profit. The agreement defines this profit as 20 percent, and it’s deducted as part of the computation of “Adjusted Net Cash Flow.”

If there is ever any money left over after the dedication of all these expenses and profit margin, I will be surprised. Shocked, even. Here’s one reason why. One of the allowable deductions that goes into the computation of “Adjusted Net Cash Flow” is, according to city documents: “Amounts paid into any capital, furniture, fixture, equipment or other reserve.” There’s no restriction as to how much can be funneled into these reserve accounts. We can be sure that if this project was ever in the position where it looked like it might have to remit “Additional Annual Rent” to the city, contributions to these reserve funds would rise. Then, no funds paid to the city.

This is an example of the city appearing to be concerned for the welfare of taxpayers. In reality, this concept of “Additional Annual Rent” is worse than meaningless. It borders on deception.

Beyond this, we now know that neither the city nor the WaterWalk developer followed the terms of the deal. The annual reports were not supplied by the company, and they were not requested by the city. As it turns out the annual reports purport to show that the city was owed no money under the profit sharing agreement.

But that’s not the point. The issue is that the city did not enforce a simple aspect of the agreement, and the private-sector company felt it did not need to comply. Taxpayers were not protected, and we’re left wondering whether these agreements were really meant to be followed.

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Notes

  1. Lefler, Dion. WaterWalk profit-sharing: 15 years, zero dollars for Wichita. Wichita Eagle, July 8, 2017. Available at http://www.kansas.com/news/politics-government/article160147944.html. ↩
  2. “As Additional Annual Rent Tenant shall pay a sum equal to twenty-five percent (25%) of the Adjusted Net Cash Flow commencing with the first day the Tenant Improvements open for business. The Tenant shall calculate Adjusted Net Cash Flow for each Current Year within forty-five (45) days after the end of the Current Year (or portion thereof) and provide that calculation, and pay to the Landlord the Additional Annual Rent, within sixty (60) days after the end of the Current Year. Additional Annual Rent shall continue until this Lease expires. Adjusted Net Cash Flow is Gross Revenues less Total Expenses, less the total amount of capital expenses for furniture, fixtures, and equipment for the Tenant Improvements in excess of the aggregate amount expended from any reserve during such year.” Amendments to WaterWalk Developer Agreements. August 21, 2012. Available at https://drive.google.com/file/d/0B97azj3TSm9Mdm1tWjlQbVAzemM/view?usp=sharing. ↩
  3. Email from city development analyst Mark Elder, July 21, 2017. “The annual report for this project was requested in the same time frame as the reports provided for Gander Mountain however, the documents were provided to the City within the last week.” ↩
  4. Wichita City Council agenda packet for August 21, 2012. Waterwalk Ground Lease, Section 16.08. “Tenant Development Cost Return, defined as, on an annual basis, twenty percent (20%) of the total Construction Costs for all Tenant Improvements paid by Tenant, Developer, or permitted assignees and sublessees. As further clarification, the amount determined to be twenty percent (20%) of the total Construction Costs for all Tenant Improvements may be included in the calculation of the Total Expenses each year during the Term of this Lease.” ↩
  5. Adobe.com. Removing sensitive content from PDFs. Available at https://helpx.adobe.com/acrobat/using/removing-sensitive-content-pdfs.html. ↩
  6. “Except to the extent disclosure is otherwise required by law or as appropriate during the course of an administrative proceeding or on appeal from agency action, a public agency or officer shall not disclose financial information of a taxpayer which may be required or requested by a county appraiser or the director of property valuation to assist in the determination of the value of the taxpayer’s property for ad valorem taxation purposes; or any financial information of a personal nature required or requested by a public agency or officer, including a name, job description or title revealing the salary or other compensation of officers, employees or applicants for employment with a firm, corporation or agency, except a public agency. Nothing contained herein shall be construed to prohibit the publication of statistics, so classified as to prevent identification of particular reports or returns and the items thereof.” ↩
  7. Weeks, Bob. Wichita WaterWalk apartment deal not good for citizens. https://wichitaliberty.org/wichita-government/wichita-waterwalk-apartment-deal-not-good-for-citizens/. ↩
Wichita city government

In Wichita, new stadium to be considered

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The City of Wichita plans subsidized development of a sports facility as an economic driver.

West Bank Redevelopment District. Click for larger.
This week the Wichita City Council will consider a project plan for a redevelopment district near Downtown Wichita. It is largely financed by Tax Increment Financing and STAR bonds. Both divert future incremental tax revenue to pay for various things within the district.1 2

City documents promise this: “The City plans to substantially rehabilitate or replace Lawrence-Dumont Stadium into a multi-sport athletic complex. The TIF project would allow the City to make investments in Lawrence-Dumont Stadium, construct additional parking in the redevelopment district, initiate improvements to the Delano multi-use path and make additional transportation improvements related to the stadium project area. In addition to the stadium work, the City plans to construct, utilizing STAR bond funds, a sports museum, improvements to the west bank of the Arkansas River and construct a pedestrian bridge connecting the stadium area with the Century II block. The TIF project is part of the overall plan to revitalize the stadium area and Delano Neighborhood within the district.”3

We’ve heard things like this before. Each “opportunity” for the public to invest in downtown Wichita is accompanied by grand promises. But actual progress is difficult to achieve, as evidenced by the example of Block One.4

Trends of business activity in downtown Wichita. Click for larger.
In fact, change in Downtown Wichita — if we’re measuring the count of business firms, jobs, and payroll — is in the wrong direction, despite large public and private investment. 5

Perhaps more pertinent to a sports facility as an economic growth driver is the Intrust Bank Arena. Five years ago the Wichita Eagle noted the lack of growth in the area. 6 Since then, not much has changed. The area surrounding the arena is largely vacant. Except for Commerce Street, that is, and the businesses located there don’t want to pay their share of property taxes. 7

I’m sure the city will remind us that the arena was a Sedgwick County project, not a City of Wichita project, as if that makes a difference. Also, the poor economic performance cited above is for Downtown Wichita as delineated by zip code 67202, while the proposed stadium project lies just outside that area, as if that makes a difference.

By the way, this STAR bonds district is an expansion of an existing district which contains the WaterWalk development. That development has languished, with acres of land having been available for development for many years. We’ve also found that the city was not holding the WaterWalk developer accountable to the terms of the deal that was agreed upon, to the detriment of Wichita taxpayers. 8

Following, selected articles on the economics of public financing of sports stadiums.

The Economics of Subsidizing Sports Stadiums

Scott A. Wolla, “The Economics of Subsidizing Sports Stadiums,” Page One Economics, May 2017. This is a project of the Federal Reserve Bank of St. Louis. Link.
“Building sports stadiums has an impact on local economies. For that reason, many people support the use of government subsidies to help pay for stadiums. However, economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact. Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.”

What economists think about public financing for sports stadiums

Jeff Cockrell, Chicago Booth Review, February 01, 2017. Link.
“But do the economic benefits generated by these facilities — via increased tourism, for example — justify the costs to the public? Chicago Booth’s Initiative on Global Markets put that question to its US Economic Experts Panel. Fifty-seven percent of the panel agreed that the costs to taxpayers are likely to outweigh benefits, while only 2 percent disagreed — though several panelists noted that some contributions of local sports teams are difficult to quantify.”

Publicly Financed Sports Stadiums Are a Game That Taxpayers Lose

Jeffrey Dorfman. Forbes, January 31, 2015. Link.
“Once you look at things this way, you see that stadiums can only justify public financing if they will draw most attendees from a long distance on a regular basis. The Super Bowl does that, but the average city’s football, baseball, hockey, or basketball team does not. Since most events held at a stadium will rely heavily on the local fan base, they will never generate enough tax revenue to pay back taxpayers for the cost of the stadium.”

Sports Facilities and Economic Development

Andrew Zimbalist, Government Finance Review, August 2013. Link.
“This article is meant to emphasize the complexity of the factors that must be evaluated in assessing the economic impact of sports facility construction. While prudent planning and negotiating can improve the chances of minimizing any negative impacts or even of promoting a modest positive impact, the basic experience suggests that a city should not expect that a new arena or stadium by itself will provide a boost to the local economy.

Instead, the city should think of the non-pecuniary benefits involved with a new facility, whether they entail bringing a professional team to town, keeping one from leaving, improving the conveniences and amenities at the facility, or providing an existing team with greater resources for competition. Sports are central to cultural life in the United States (and in much of the world). They represent one of the most cogent ways for residents to feel part of and enjoy belonging to a community. The rest of our lives are increasingly isolated by modern technological gadgetry. Sport teams help provide identity to a community, and it is this psychosocial benefit that should be weighed against the sizeable public investments that sports team owners demand.”

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Notes

  1. Weeks, Bob. STAR bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/star-bonds-kansas/. ↩
  2. Weeks, Bob. Wichita TIF projects: some background. Available at https://wichitaliberty.org/wichita-government/wichita-tif-projects-background/. ↩
  3. Wichita City Council, agenda packet for July 18, 2017. ↩
  4. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/. ↩
  5. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
  6. “Ten years ago, Elizabeth Stevenson looked out at the neighborhood where a downtown arena would soon be built and told an Eagle reporter that one day it could be the ‘Paris of the Midwest.’ What she and many others envisioned was a pedestrian and bike-friendly neighborhood of quaint shops, chic eateries and an active arts district, supported by tens of thousands of visitors who would be coming downtown for sporting events and concerts. It hasn’t exactly turned out that way. Today, five years after the opening of the Intrust Bank Arena, most of the immediate neighborhood looks much like it did in 2004 when Stevenson was interviewed in The Eagle. With the exception of a small artists’ colony along Commerce Street, it’s still the same mix of light industrial businesses interspersed with numerous boarded-up buildings and vacant lots, dotted with ‘for sale’ and ‘for lease’ signs.” Lefler, Dion. 5 years after Intrust Bank Arena opens, little surrounding development has followed. Wichita Eagle. December 20, 2014. Available at http://www.kansas.com/news/local/article4743402.html. ↩
  7. Riedl, Matt. Has Commerce Street become too cool for its own good? Wichita Eagle. April 8, 2017. http://www.kansas.com/entertainment/ent-columns-blogs/keeper-of-the-plans/article143529404.html. ↩
  8. Weeks, Bob. Wichita WaterWalk agreement not followed. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-agreement-not-followed/. ↩
Wichita city government

More Cargill incentives from Wichita detailed

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More, but likely not all, of the Cargill incentives will be before the Wichita City Council this week.

A division of Cargill, Cargill Meat Solutions Corporation, is moving from an office on North Main Street in downtown Wichita to the site of the former Wichita Eagle building, also in downtown Wichita. Last year it was widely reported that Cargill was considering moving this division to another city. Reports of incentives offers to Cargill from other cities spurred the City of Wichita to offer its own incentives if Cargill would remain in Wichita. This week the city council will consider additional subsidies and incentives besides those already offered. 1

As summarized in the agenda packet:

“In exchange for Cargill’s commitment, the City has negotiated the following:

  • Issue Industrial Revenue Bonds (Letter of Intent approved April 18, 2017) 100% property tax abatement; 5+5 year basis
  • Sales tax exemption
  • Acquisition of a 15 year parking easement for public access to the garage in the evenings and on weekends (estimated cost of $6,500,000)
  • Expedited plan review (50% reduction in time)
  • Reduced permitting fees (50%) (estimated savings of $85,000)
  • Assign a project manager/ombudsman for a single point of contact for the company”

Industrial Revenue Bonds

In April the city council approved a letter of intent regarding Cargill’s participation in the Industrial Revenue Bond program. 2 The city won’t be lending Cargill money. Instead, IRBs are a (convoluted) method whereby local governments are able to forgive the payment of property taxes. For the case of Cargill, city documents from April state the tax forgiveness could be worth $1,359,531 per year. 3 This would be shared by these taxing jurisdictions in these annual amounts, again according to city documents:

  • City of Wichita: $378,450
  • Sedgwick County: $340,958
  • USD 259, the Wichita Public School District: $622,723
  • State of Kansas: $17,400

Cargill has agreed to make an annual Payment-In-Lieu-Of-Taxes (PILOT) of $413,900, according to city documents.

In addition to the property tax exemption, the IRBs also carry a sales tax exemption for purchases related to construction. City documents give an estimated value of $2,026,291 for the sales tax Cargill will not have to pay. 4

Parking easement

At one time, it was thought that the city would build a parking garage and let Cargill use it an no cost, or at a greatly reduced cost. Instead, the city now proposes that Cargill build the garage and the city will acquire an easement. This has sounded almost benign, but now we realize that the city will pay Cargill an estimated $6.5 million. In return, the city will be able to use up to approximately 700 parking spaces outside of Cargill business hours for a period of 15 years.

Is this a good deal for the city? The city has agreed to pay $9,286 for the use of each parking space for 15 years during non-business hours. 5 For comparison, recently the city rehabilitated the parking garage at 215 S. Market at a cost of $17,609 per parking space. The city rents 180 of these to a nearby company at the rate of $35 per month, which is $420 per year. 6 In the case of Cargill, the city is paying — effectively — $619 dollars per parking spot per year, and for off-hours use only.

It is not known whether the city will charge fees to the public to use the garage. It is also unknown whether there is much demand for public parking at the Cargill location, but present market conditions would suggest there is not much additional demand.

Expedited plan review, reduced fees, and ombudsman

The city has agreed to cut permit fees and speed response time for approvals. 7

This incentive — the need for it and its value to Cargill — is an explicit admission that City of Wichita regulations are burdensome. If not, why would the city devote time and expense to helping Cargill obtain relief from these regulations?

Consider this aspect of public policy: Cargill is a large company with — presumably — fleets of bureaucrats and lawyers trained to deal with burdensome government regulation. These costs can be spread across a large company, meaning that Cargill can afford to overcome burdensome regulations.

But what about the small companies that don’t have fleets of bureaucrats and lawyers? What about the young or small companies that can’t spread the costs of regulation across a large volume of business? What will the city do for these companies? This is especially important because the spirit of entrepreneurship the city wants to cultivate is most commonly found in small, young, companies — the type of company without fleets of bureaucrats and lawyers.

The city says it would do for any company what it is doing for Cargill. Except: How are companies supposed to know to ask for regulatory relief, streamlining, and a discount on fees?

If the city really wants to help all companies, it would — at its own initiative — cut fees and reduce response time across the board, for everyone. Until then Wichita offers special regulatory treatment for special circumstances, which widens the gulf between the haves and have-nots. 8

Other subsidy programs

The agenda packet for the city council meeting doesn’t mention this, but from the State of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill. 9 (Not all; only 95 percent.) Some very rough calculations show that PEAK benefits might be worth some $2 million annually to Cargill. 10

Ironically, with the recent increases in Kansas income taxes, PEAK is even more valuable to Cargill.

Is this needed?

In the past, economic development subsidies of this type were justified by local governments as necessary to recruit new companies to the area. These subsidies, however, are used simply to retain a company that is already located in downtown Wichita.

The city has asked Wichita State University’s Center for Economic Development and Business Research to produce benefit/cost ratios. They show that the costs the city, county, and state incur will generate benefits that exceed these costs. For the school district, costs exactly equal benefits — a remarkable coincidence.

The reasoning and calculation behind these benefit/cost ratios is opaque. The general idea is that spending by a company spawns other spending that results in economic benefit and growth. That’s true. It’s important to know, however, that this benefit also occurs when companies move to Wichita or expand in Wichita, without the benefit of economic development subsidies.

The question, then, becomes are these incentives necessary? Would Cargill have moved to another city if not for these incentives? It’s only if Cargill would have left Wichita that the benefit/cost ratios have any meaning.

The City of Wichita says Cargill received lucrative offers from other cities. But these offers have not been seen, to my knowledge. We’re left to take the word of Cargill that it received offers from other cities, and that it would have moved from Wichita if not for Wichita’s incentives.

Cargill, as we’ve seen, has a multi-million dollar motive. City of Wichita officials also have a large motive, as do officials and politicians at the state level. The politicians and bureaucrats want to — need to — be seen as doing something to improve the economy. It costs none of them one dime to pay these incentives. But the Cargill building will fulfill their ediface complex when they preside at groundbreaking and ribbon-cutting ceremonies.

If Wichita leaders wanted to gain the trust of Wichitans, to have us believe and understand that these incentives are necessary to keep Cargill in Wichita, the city could reveal the other offers Cargill received. Cargill itself could reveal offers it received from other cities. These actions would help Wichitans understand whether these incentives are truly needed. But the world of economic development incentives is a murky swamp.

Finally, Mayor Jeff Longwell, other council members, and city hall bureaucrats tell us that the city has moved beyond cash incentives. Cash will not be paid for jobs, they say.

But forgiving a tax bill is just like paying cash. Discounting the cost of permits is just like paying cash. Paying $6.5 million to use a company’s parking garage during hours the company has no use for it: How is that different from simply paying the company a cash incentive?

Perhaps the mayor and others have a different understanding of the economics of transactions than I.

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Notes

  1. City of Wichita. Agenda Packet for July 18, 2017. Approval of Development Agreement with Cargill Meat Solutions Corporation. ↩
  2. Weeks, Bob. Industrial revenue bonds in Kansas. https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/. ↩
  3. City of Wichita. Council agenda packet for April 18, 2017. ↩
  4. Weeks, Bob. Cargill subsides start forming. Available at https://wichitaliberty.org/wichita-government/cargill-subsides-start-forming/. ↩
  5. $6,500,000 / 700. ↩
  6. Weeks, Bob. Why is this man smiling? Available at https://wichitaliberty.org/wichita-government/man-smiling/. ↩
  7. “Section 4.03. Approvals. The City agrees to provide a 50% reduction in the fees charged by the City for permits and approvals, including plan review, utility and building permitting fees, for all matters related to the Project. The City also agrees to reduce the response time for approval of building plans from the standard 30 days to 15 days for all matters related to the Project.” Also: “The reduction in the permitting fees will be paid from the Economic Development fund.” ↩
  8. Weeks, Bob. Regulation in Wichita, a ‘labyrinth of city processes.’ Available at https://wichitaliberty.org/regulation/regulation-wichita-labyrinth-city-processes/. ↩
  9. Weeks, Bob. In Kansas, PEAK has a leak. https://wichitaliberty.org/kansas-government/kansas-peak-leak/. ↩
  10. For the first year of the agreement, Cargill is expected to have 750 or more employees at an average salary of $66,814. That annual salary / 26 pay periods = $2,570 biweekly. For a family with two children (this is just a guess and could be way off), there are two withholding allowances, so $2,570 – ($86.54 x 2) = $2,397. Using the new withholding tables for married workers (another assumption), bi-weekly withholding is $48.17 + 5.7% x ($2,397 – $1,298) = $48.17 + $62.64 = $110.81. That means $2,881 annual withholding, so Cargill’s 95% share is $2,737. For 750 employees, this is an annual subsidy to Cargill of $2,052,750. ↩
Wichita city government

Naftzger Park public hearing to be considered

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The Wichita City Council may set August 15, 2017 as the date for a public hearing on the future of Naftzger Park in downtown Wichita.

On Tuesday July 11, 2017, the Wichita City Council will consider setting August 15, 2017 as the date for the public hearing for consideration of the plan for the future of Naftzger Park. The relevant pages of the council agenda may be read here.

Much of the document is boilerplate material regarding tax increment financing districts. But there is some additional information.

First, the project is expected to cost $3,000,000: “Park improvements are projected to costs approximately $3,000,000, with $1,500,000 of such costs to be financed from proceeds of the City’s full faith and credit tax increment bonds.”

Second, we see some evidence of the care — or lack of — that the city puts into preparing these documents. The document contains a table called the “Projected Tax Increment Report.” It shows, year by year, the financial projections for the TIF district. Except: The table is subtitled “West Bank Redevelopment District / Delano and Stadium Project.” I think it’s safe to say that is a mistake. A second table titled “Projected Bond Cash Flow Report” has the same mistaken subtitle.

Here we see one of the real reasons for developing Naftzger Park:

“Seneca Property, LLC and Sunflower Wichita, LLC intend to develop the property immediately adjacent to Naftzger Park . The development of the area will consist of renovation the Spaghetti Works building into 41 apartments and the construction of approximately 62,000 square feet of Class A office and retail space. The development is planned to be designed to complement the Naftzger Park redevelopment design and is anticipated to generate a significant portion of the revenue necessary to support the Project.”

A company is developing property adjacent to Naftzger Park, and the company would like to see the park renovated to its liking. It is proposed that the new property taxes the company will pay be used to pay for the renovation.

Normally increased property taxes are used to pay for things like police and fire protection, city council salaries, and schools. But through tax increment financing (TIF), these increased property taxes will be rerouted for the benefit of the private property owner. In the process, a beautiful park will be replaced with an astroturf-covered plain.

For more information on Naftzger Park, including photographs, see Naftzger Park in Downtown Wichita.

A possible plan for Naftzger Park from the City of Wichita
Wichita city government

Wichita WaterWalk agreement not followed

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Does the City of Wichita enforce its public-private partnership agreements? In some cases the city doesn’t even ask for the information that is needed for enforcement.

A Wichita Eagle article reports on a 2002 public-private partnership that called for the private-sector company to submit an annual report to the city. But the company did not submit the reports, and the city didn’t ask for them. The city did after the Eagle inquired. 1

The deal involves the city leasing land to a private developer for a project now known as WaterWalk. Part of the deal called for the city to possibly receive annual payments in a form of profit-sharing. Annual reports to the city were to provide figures from which the city’s payment would be calculated.

There is an important issue here apart from the wisdom of striking the initial deal in 2002. That is, neither the city nor the company followed the terms of the deal. The annual reports were not supplied by the company, and they were not requested by the city, according to Eagle reporting. As it turns out the annual reports purport to show that the city was owed no money under the profit sharing agreement.

But that’s not the point. The issue is that the city did not enforce a simple aspect of the agreement, and the private-sector company felt it did not need to comply.

Some of the Eagle article is devoted to explaining that the deal was struck some years ago, and: “No city official who played a major role in the 2002 contract is still actively involved in government.”

I’m sure we will hear that excuse from current city council members and bureaucrats, that all this happened before our time. Anyone taking cover using that excuse deserves to be terminated immediately.

We should not accept this or any excuse. This is because in 2012 the city entered into a same or similar agreement in the same WaterWalk development with the same developer, Jack P. Deboer. It also called for the city to potentially earn payments, called “additional annual rent.” It also called for reports to be made, although the exact language used is “provide that calculation.” 2

I wonder: When city staff drafted the new agreement in 2012, and when the council deliberated the agreement, did anyone wonder how the 2002 agreement worked out? Did anyone wonder if the city earned any payments from that deal? The 2012 agreement was controversial, at least to some. I and others spoke to the council expressing our concerns. 3

I also wonder: Has the developer filed the annual reports from the 2012 agreement? I’ve asked the city.

Here is the article I filed in 2012: Wichita WaterWalk apartment deal not good for citizens.

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Notes

  1. Lefler, Dion. WaterWalk profit-sharing: 15 years, zero dollars for Wichita. Wichita Eagle, July 8, 2017. Available at http://www.kansas.com/news/politics-government/article160147944.html. ↩
  2. “As Additional Annual Rent Tenant shall pay a sum equal to twenty-five percent (25%) of the Adjusted Net Cash Flow commencing with the first day the Tenant Improvements open for business. The Tenant shall calculate Adjusted Net Cash Flow for each Current Year within forty-five (45) days after the end of the Current Year (or portion thereof) and provide that calculation, and pay to the Landlord the Additional Annual Rent, within sixty (60) days after the end of the Current Year. Additional Annual Rent shall continue until this Lease expires. Adjusted Net Cash Flow is Gross Revenues less Total Expenses, less the total amount of capital expenses for furniture, fixtures, and equipment for the Tenant Improvements in excess of the aggregate amount expended from any reserve during such year.” Amendments to WaterWalk Developer Agreements. August 21, 2012. Available at https://drive.google.com/file/d/0B97azj3TSm9Mdm1tWjlQbVAzemM/view?usp=sharing. ↩
  3. Wichita City Council. Minutes of August 21, 2012 meeting. Available at http://wichitaks.granicus.com/MinutesViewer.php?view_id=2&clip_id=1843. ↩
Wichita city government

Naftzger Park in Downtown Wichita

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An information resource regarding the future of Naftzger Park in downtown Wichita.

A possible plan for Naftzger Park
The City of Wichita is proposing to spend $1,500,000 to transform Naftzger Park from its present form to something else. Here are information resources:

Update: The city council will consider setting the date for a public hearing. See Naftzger Park public hearing to be considered.

Wichita city government

Airport traffic statistics, 2016

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Airport traffic data presented in an interactive visualization, updated through 2016.

Example from the visualization, showing Wichita compared to all airports. Click for larger.
A few observations regarding Wichita airport traffic as compared to the nation:

  • Since 2014, passenger traffic at the Wichita airport has been level, while increasing for the nation.
  • The number of departures has been declining in Wichita, while level and increasing for the nation.
  • The number of available seats on departing flights from Wichita has been mostly level while rising for the nation.

To view and use the interactive visualization, click here.

Wichita city government

Metro Monitor for the Wichita economy

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

Metro Monitor from The Brookings Institution rates metropolitan areas on several indicators. For this year’s report, the most recent data included is from 2015.

For this year’s report, the news for the Wichita area is mixed. For the period 2010 to 2015, Wichita ranks 88th in growth, 69th in prosperity, and 44th in inclusion. (The 100 largest metro areas were ranked.)

Looking at just the most recent years, 2014 to 2015, Wichita ranks 73rd in growth, 42nd in prosperity, and 9th in inclusion. That’s moving in the right direction. So perhaps there is hope for progress, in that the rankings for the most recent years are better than the rankings for the past five years.

There is good news in these numbers, too. Wichita does well in most measures of “Inclusion,” which Brookings describes: “Inclusion indicators measure how the benefits of growth and prosperity in a metropolitan economy — specifically, changes in employment and income — are distributed among individuals. Inclusive growth enables more people to invest in their skills and to purchase more goods and services. Thus, inclusive growth can increase human capital and raise aggregate demand, boosting prosperity and growth.”

Wichita’s productivity ranking is good, also.

Brookings computed a measure called “Metro area competitive shift.” It’s described as “The difference between the actual job growth and the expected job growth. It indicates whether the metro area overperformed or underperformed given its industrial structure.” For the period 2010 to 2015, Wichita scored -4.2 percent. For 2014 to 2015, the measure is -0.5 percent. Again, movement in the right direction.

Looking at more recent data gathered from the Bureau of Labor Statistics through April 2017, we see that at a time private sector employment in the entire nation is rising steadily, in Wichita (and Kansas) employment rose at a slower rate, and has been (roughly) level since 2016.

Looking forward, the employment situation may not improve, or improve only slowly. Recently Wichita State University’s Center for Economic Growth and Business Research revised its forecast downward: “Revised employment numbers showed that Wichita’s economic growth came to a screeching halt in October of 2016. Even though employment growth presumably stopped, there is lacking evidence that the slowed employment growth is systemic. Employment growth is expected to pick up marginally, but multiple headwinds could derail that growth.” 1

Other data from BLS that I’ve charted through the Federal Reserve Bank of St. Louis show that Wichita’s unemployment rate is going down, and so is the civilian labor force. Manufacturing employment is far below previous levels, and is on a slow downward trend. You may view the Wichita dashboard here. A similar dashboard for Kansas is here.

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Notes

  1. Center for Economic Growth and Business Research. Wichita State releases 2017 employment forecasts. Available at http://www.wichita.edu/thisis/wsunews/newsrelease/?nid=3675. ↩
Wichita city government

Census data for downtown Wichita workers

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Is the presentation of the number of workers in downtown Wichita an innocent mistake, mere incompetence, or a willful lie?

There’s a question regarding how many people work in downtown Wichita, the Wichita Eagle reports.1 Other sources have noticed a discrepancy.2

Promotional material on the former Henry’s building. Click for larger.
At issue is the meaning of “working” in a certain location. Data that the Center for Economic Development and Business Research at Wichita State University supplied to the Wichita Downtown Development Corporation indicates about 26,000 people work in downtown Wichita, for these purposes defined as zip code 67202. This number is used in a wide variety of ways, including in Wichita city budgets and federal grants made by the city.

It’s appropriate, then, to understand what the 26,000 number means. The Eagle article mentions “a likely mistake in how the number of jobs downtown is calculated.”3 The same article quotes Jeremy Hill, director of CEDBR, as saying, “It looks very obvious and plausible that it is an error.”

There is no “mistake” or “error” in this Census data, which is known as LEHD Origin-Destination Employment Statistics, or LODES. But we need to be curious or cautious enough to investigate what this data means. Documentation from the Census Bureau for LODES data gives the definition of the place of work and a cautionary note: “A place of work is defined by the physical or mailing address reported by employers in the QCEW (formerly ES-202) or Multiple Worksite Reports. An address from administrative data may or may not be the actual location that a worker reports to most often.”

The Census Bureau continues with another warning regarding this data: “Nonreporting of multiple worksites is especially common with state and local governments and school districts. In such a case, LEHD infrastructure files assign all workers for that employer (within the state) to the main address provided.”4

In the case of downtown Wichita, the mistake was made in the application of this data, which is the claim that there are 26,000 workers in downtown Wichita. There may be that many people who draw a paycheck from an administrative office located in downtown. But large numbers of these don’t come to downtown to perform their jobs.

Census block 201730043001036, showing 7,740 workers.
The LODES data reports a one square block in downtown that holds 7,740 workers. This is the block that holds the administrative office building for the Wichita public school district. Regarding this, the Eagle article reports: “One of the most likely reasons for the difference, according to multiple local academics, including Hill, is that the Census is reporting that every employee for USD 259 works downtown. Most USD 259 employees work in buildings across the city, but the central office is located downtown.” This is something the Census Bureau warns users to consider.

There’s another area of erroneous application, too, and it isn’t mentioned in the Eagle article. This concerns the second largest concentration of workers in downtown Wichita (according to the LODES data) in a Census block which has 3,437 employees. This is the block that holds Wichita city hall. In 2014 the city had 3,270 employees. But they don’t all work at Main and Central. They’re dispersed throughout the city in police stations, fire stations, and other sites.

How was this missed?

The Census Bureau OnTheMap application for downtown Wichita, zip code 67202. Click for larger.
Nearby is an example of using the Census OnTheMap application.5 This is the source of LODES data that the WDDC cites in its footnotes to its annual report. When using the application for zip code 67202, there are two — and only two — large dark blue dots. These represent the census blocks with the greatest number of workers, 7,740 and 3,437. I’d like to think that if someone at CEDBR, WDDC, or city hall looked at this map and saw those two big blue dots, they might ask a few questions. Wasn’t someone curious as to how a single block of downtown Wichita manages to hold so many employees? Which companies do they work for? What can we learn from the success of these companies that employ so many people? Can we duplicate this success in other parts of downtown?

But I don’t think anyone asked these questions. No one — not at CEDBR, WDDC, or city hall — was inquisitive enough to really look at this data and see what it means. It’s either that or there was a willful misrepresentation.

The Eagle article also reports this: “This won’t make much of a difference to most businesses downtown, according to Hill. They already know how big the market is because they have experience with it. … The best companies will look at census data when coming up with their business plans, Hill said, but every business relies on several numbers, so even if there are thousands of fewer jobs downtown than previously thought, it’s unlikely that it would have much of an impact.”

On these remarks, I would say that first, we’re trying to recruit new businesses to downtown Wichita. It’s those business firms that this data speaks to. While the “best” companies may use other sources of data, I don’t think we want to discriminate. All companies are welcome to Wichita, I hope.

Second, Hill says companies “will look at census data.” Well, this is census data.

Third, Hill says this mistake won’t have “much of an impact.” In the future, I think we’ll need to ask CEDBR, WDDC, and city hall if the data they supply is intended to have an impact, or is it for something else.

Trends of business activity in downtown Wichita. Click for larger.
Fourth, there is other census data. The United States Census Bureau tracks business data by zip code.6 The data that is available includes the number of business establishments, the number of employees, and the annual payroll, expressed in thousands of dollars not adjusted for inflation. It includes private-sector workers only, so it does not count all workers.

Nearby are results for zip code 67202. For 2015 the number of jobs is 13,581, not much more than half of what city leaders have told us. Again, these are private-sector workers only.7

Not only are these numbers much smaller, the results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower. The LODES data is on a downwards trend, too.

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Notes

  1. Morrison, Oliver. How many people work downtown? Fewer than Census says. Wichita Eagle, May 10, 2017. Available at http://www.kansas.com/news/local/article149848144.html. ↩
  2. Weeks, Bob. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/. ↩
  3. “But the reason for this is not because 7,000 workers actually will leave but because of a likely mistake in how the number of jobs downtown is calculated. ↩
  4. “For LODES, a place of work is defined by the physical or mailing address reported by employers in the QCEW (formerly ES-202) or Multiple Worksite Reports. An address from administrative data may or may not be the actual location that a worker reports to most often. The distinction of worksite and administrative address may be especially significant in some industries such as construction, where work is often carried out at temporary locations. In some cases, employers do not provide a multiple worksite report when it would be appropriate to do so. Nonreporting of multiple worksites is especially common with state and local governments and school districts. In such a case, LEHD infrastructure files assign all workers for that employer (within the state) to the main address provided. Bureau of Labor Statistics (BLS) data show a national noncompliance rate of 5.61 percent of multiunit employers responsible for about 4.45 percent of multiunit employment.” U.S. Census Bureau. Matthew R. Graham, Mark J. Kutzbach, and Brian McKenzie. Design comparison of LODES and ACS commuting data products. Available at ftp://ftp2.census.gov/ces/wp/2014/CES-WP-14-38.pdf. ↩
  5. U.S. Census Bureau. OnTheMap application. Available at https://onthemap.ces.census.gov/. ↩
  6. U.S. Census Bureau. County Business Patterns (CBP). https://www.census.gov/programs-surveys/cbp/data.html. ↩
  7. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
Wichita city government

As Wichita considers new ventures, a look back at some data

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The City of Wichita will soon be flooded with data regarding downtown convention and performing arts facilities. Past experience should warn us to be skeptical.

Goody Clancy, a planning firm hired by Wichita Downtown Development Corporation, told a Wichita audience that the planning effort for downtown Wichita is grounded in data and hard analysis.1

But at least some of the data Goody Clancy used turned out to be total nonsense.

Specifically, Goody Clancy presented Walk Score data for downtown Wichita. Walk Score is purported to represent a measure of walkability of a location in a city. Walkability is a key design element of the master plan Goody Clancy has developed for downtown Wichita. David Dixon, who leads Goody Clancy’s Planning and Urban Design division, used Walk Score in a presentation delivered in Wichita.

Walk Score is not a project of Goody Clancy, as far as I know, and David Dixon is not responsible for the accuracy or reliability of the Walk Score website. But he presented it and relied on it as an example of the data-driven approach that Goody Clancy takes.

For example, the score for 525 E. Douglas, the block the Eaton Hotel is in and mentioned by Dixon as a walkable area, scored 91, which means it is a “walker’s paradise,” according to the Walk Score website.

Walk score data for 525 E. Douglas, in 2010. Click for larger.
But here’s where we can start to see just how bad the data used to develop these scores is. For a grocery store — an important component of walkability — the website indicates indicated a grocery store just 0.19 miles away. It’s “Pepsi Bottling Group,” located on Broadway between Douglas and First Streets. Those familiar with the area know there is no grocery store there, only office buildings. The claim of a grocery store here is false. It’s an office, not a store.

For a nearby library, it listed Robert F. Walters Digital Library, which is a specialized geological library costing $1,500 per year to use — over the internet.

For a drug store, it listed Rx Doctor’s Choice, which is a company selling oral chelation treatments by mail order. It’s nothing at all like a general-purpose drug store. One of those is nowhere nearby.

There were other claimed amenities where the data is just as bad. But as Larry Weber, then chairman of the Wichita Downtown Development Corporation told me, Walk Score has been updated. I should no longer be concerned with the credibility of this data, he said.

He was correct — partially. Walk Score was updated, but we should still be concerned about the quality of the data. Now for the same location the walk score is 85, which is considered “very walkable.” The “grocery store” is no longer the Pepsi Bottling Group. It’s now “Market Place,” whose address is given as 155 N. Market St #220.

If anyone would ever happen to stroll by that location, they would find that address — 155 N. Market number 220 — is the management office for an office building whose name is Market Place. It’s not a grocery store. It’s an office. So I became even more concerned about the credibility of this data and the fact that Goody Clancy relied on it. I was also concerned that Weber thinks thought this was an improvement, and that he felt I should not be concerned.

David Dixon and Goody Clancy did not create the Walk Score data. But he and his planning company presented it to Wichitans as an example of the data-driven, market-oriented approach to planning that they use.

But anyone who relies on the evidence Dixon and Goody Clancy presented would surely be confused unless they investigated the area on their own.

And since this reliance on Walk Score was made after Goody Clancy had spent considerable time in Wichita, the fact that someone there could not immediately recognize how utterly bogus the data is: That should give us cause for concern that the entire planning process is based on similar shoddy data and analysis. We also ought to be concerned that no one at WDDC or city hall looked closely enough at this data to realize its total lack of correspondence to reality.

When I presented these concerns to the Wichita Metropolitan Area Planning Commission in 2010, Scott Knebel, a member of the city’s planning staff who is the city’s point man on downtown planning, address the concerns raised by me. He said, “In terms of the Walk Score, I suspect Mr. Weeks is absolutely right, it probably is a relatively flawed measurement of Walk Score.” He added that the measurement is probably flawed everywhere, downtown and elsewhere. He said that Goody Clancy used it “as an illustration of the importance of walkability in an urban area.”

An isolated incident, long ago?

Seven years later, should we be concerned about this incident?

If that was the only example of low-quality and deceptive data, we could say sure, that was long ago. Let’s forget this and go forward. Our city leaders are smarter now.

Except they’re not.

The oft-cited claim of 26,000 workers in downtown Wichita is another example of misuse of data, and in a very big way. It comes from the U.S. Census Bureau. This particular data set counts all Wichita school district employees as downtown workers, even though nearly all work at locations scattered throughout the city.2

If we accept this data as meaning what WDDC and the city says it means, we’d have to believe that 7,740 people work in a one square block area from First to Second Streets, and Wichita to Water Streets. That block is mostly surface parking, but it does hold the administrative offices of the Wichita school district. So all school district employees are counted as working in this block.

There is similar problem in another block. All City of Wichita employees are treated as though they work at city hall. But they don’t.

Does any of this matter? It ought to matter. The planners tell us they use data to make decisions. This week the city council decided to hire a consulting firm to investigate the feasibility of a refurbished or new convention center and performing arts center. I’m sure much data will be presented. Based on our past experience, we’ll have to carefully examine data for appropriate usage.

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Notes

  1. Weeks, Bob. Goody Clancy market findings presented to Wichita audience. Available at https://wichitaliberty.org/wichita-government/goody-clancy-market-findings-presented-to-wichita-audience/. ↩
  2. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/. ↩
Wichita city government

Wichita about to commit to more spending. Bigly.

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This week the Wichita City Council considers hiring a consulting firm to develop plans for a new performing arts and convention center.

Options from the City of Wichita.
It’s no secret that many in Wichita want a new performing arts and convention center to replace Century II. Documents produced by the city sketch four possibilities ranging in price from $272 million to $492 million.1 2

The two least expensive scenarios keep the existing Century II structure, while two call for completely new buildings, including the possibility of a performing arts center located a few blocks to the east of the present Century II and proposed convention center site.

Apart from the financial desirability of these projects is the question of how to pay. The traditional approach would be for a city to build, own, and operate the project, paying for it through long-term borrowing. (Governments, including Wichita, often speak of “bonding” projects, a word which seems less foreboding than “borrowing.”)

This week’s business for the city council foreshadows the city using a different method. The firm the city wants to hire, Arup Advisory, Inc., is an advocate of “P3” or public-private partnerships. A report Arup prepared for the City of Los Angeles3 recommended that the city use a method known as Design Build Finance Operate and Maintain (DBFOM), which Arup says is used interchangeably with P3.

In the DBFOM or P3 model as applied to Wichita, a third party — thought to be George Laham — would do all the work of designing, financing, building, and operating a convention center and possibly a performing arts center. Then, the city simply pays a fee each year to use the center. It’s called an “availability payment.” Most people call this rent or lease payments.

The Los Angeles document explains the potential benefits of using DBFOM or P3:

Here, the City as asset owner hires a developer team to take on the full project development responsibility (design, build, finance, operate, maintain) and pays them an annual service fee for the availability of the functioning capital asset (i.e. infrastructure as a service). The service fee is called an “availability payment” in the P3 industry; it is a contractually scheduled pay-for-performance arrangement where the private partner is paid to design, build, and finance a turnkey capital asset and then is responsible for the operation and maintenance of the asset according to performance standards set by the City. The availability payments are fixed at the time the P3 contract is signed and are only subject to indexation to an agreed inflation index (e.g., US or Los Angeles region CPI) and deductions for non-performance against the contractually defined performance standards. The availability payments, which are the only form of compensation by the owner to the P3 developer, start only when the P3 developer has satisfied all the conditions stipulated in the contract for successful completion of construction and start of operations. These features provide substantial incentives for the P3 developer to achieve on-schedule and on-budget construction, as well as optimized life-cycle maintenance over the long term that meets the owner’s needs.

A common strategy recommended by Arup is to “cross-subsidize” with real estate. This is vaguely defined as to “unlock significant land value” in city-owned real estate near the convention center. Specific to Wichita, the proposal from Arup to the city includes, “Assess potential revenue from the monetization of city’s owned land located in proximity to the Century II facility and determine the size of the cross subsidy to the project expansion design schemes 1 and 3.”4

What are the benefits to the city of pursuing the DBFOM/P3 path? The Los Angeles document gives these: “No impact on debt capacity; significantly reduced cost to the General Fund, structured as an obligation to pay a service fee (i.e. availability payment) to the private partner where the value of the service fee is less than the sum of all the relevant LACC costs [for other options].”

To emphasize, again from the Los Angeles document: “… the City’s budgetary obligation is in the form of a service fee (i.e. availability payment) to the private partner, recorded as a contractual liability on the City’s balance sheet, as opposed to a debt obligation, which does not impact the City’s debt capacity.”

In other words, the city can make a decades-long financial committment without appearing to take on debt. Yes, the city’s committment — the “availabity payments” — will be characterized as payments that need be made only if the convention center facility is kept up to certain standards. If, not, then the city can stop paying. But then Wichita would have no cenvention center, and no performing arts center. Instead, the city would have one or two big, hulking, empty buildings in downtown.

Should Wichita do this?

Convention business is on a long downward trend. The Arup report for Los Angeles recognizes this:

Over the last two decades, most large and medium size American cities have experienced a spur in convention center development. According to the Brookings Institution (2005), exhibit hall space in the US grew from 40 million square feet in 1990 to 85 million in 2014 distributed among 400+ facilities. There is a sense in the Convention business that the supply may be exceeding demand.

(For more on convention center trends, see Should Wichita expand its convention facilities? The Brookings report by Heywood Sanders is available at Space Available: The Realities of Convention Centers as Economic Development Strategy.)

A commitment of this size needs public input in the form of a vote. The “availability payments” the city may commit to will be characterized in various ways, but they represent a long-term commitment by the city that it can’t escape. If promised revenues from expanded convention trade don’t cover these payments, taxpayers will have to pay. The city, unfortunately, doesn’t have a good record of honesty with citizens:

  • In 2014 the city told citizens that $250 million in new sales tax revenue was required to provide drought protection. After the vote on the tax failed, the city found less expensive ways to provide the same protection.5
  • Subsidized city projects have not delivered promised benefits.6
  • The city is not truthful in reporting the number of people working in downtown Wichita.7
  • Despite much investment in downtown Wichita, both public and private, business activity is declining.8
  • Despite much investment in downtown Wichita, both public and private, total property valuation is declining.9
  • While touting transparency, the city fails in many basic ways, even though the city communications staff has been expanded.10 11 12

Citizens and taxpayers should insist the city address these issues before committing to any new project, much less one the size of a renovated or new performing arts and convention center.

And — most importantly — the people need to vote up or down on this project.

Update: On May 9 the city council decided to hire this firm.

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Notes

  1. City of Wichita. Grand Vision: Wichita Performing Arts & Convention Center: ‘Millenials Place.’ Available at https://wichitaliberty.org/wp-content/uploads/2017/05/Century-2-Vision.pdf. ↩
  2. City of Wichita. The Heart of Downtown: Catalyst to a 21st Century Riverfront. Available at https://wichitaliberty.org/wp-content/uploads/2017/05/Analysis-of-century-2.pdf. ↩
  3. City of Los Angeles, Office Of The City Administrative Officer. Public-private Financing Options For The Los Angeles Convention Center Expansion Project. Available at http://cao.lacity.org/Reports/20151223%20CAO%20LACC%20Alternative%20Financing.pdf. ↩
  4. City of Wichita. Agenda Packet for May 9, 2017. ↩
  5. Weeks, Bob. In Wichita, the phased approach to water supply can save a bundle. In 2014 the City of Wichita recommended voters spend $250 million on a new water supply. But since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot. Available at https://wichitaliberty.org/wichita-government/wichita-phased-approach-water-supply-can-save-bundle/. ↩
  6. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/.
    Also: Ken-Mar TIF district, the bailouts. Available at https://wichitaliberty.org/wichita-government/ken-mar-tif-district-the-bailouts/. Since the bailout, the situation at the former Ken-Mar center has worsened.
    Also: Wichita TIF district disbands; taxpayers on the hook. Available at https://wichitaliberty.org/wichita-government/wichita-tif-district-disbands-taxpayers-hook/.
    Also: Wistrom, Brent. Warren bailout poses dilemma — city loan, vacant theater both carry risks. Wichita Eagle. Available at https://brentwistrom.wordpress.com/clips/eagle-exposes-lost-taxdollars-in-downtown-theater-loan/. ↩
  7. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/. ↩
  8. Weeks, Bob. Downtown Wichita business trends. There has been much investment in Downtown Wichita, both public and private. What has been the trend in business activity during this time? https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
  9. Weeks, Bob. Downtown Wichita tax base is not growing. There’s been much investment in downtown Wichita, we’re told, but the assessed value of property isn’t rising. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-tax-base-not-growing/. ↩
  10. Weeks, Bob. Wichita check register. A records request to the City of Wichita results in data as well as insight into the city’s attitude towards empowering citizens with data. Available at https://wichitaliberty.org/wichita-government/wichita-check-register-2016/. ↩
  11. Weeks, Bob. Wichita doesn’t have this. A small Kansas city provides an example of what Wichita should do. Available at https://wichitaliberty.org/wichita-government/wichita-does-not-have-this/. ↩
  12. Weeks, Bob. During Sunshine Week, here are a few things Wichita could do. The City of Wichita says it values open and transparent government, but the city lags far behind in providing information and records to citizens. Available at https://wichitaliberty.org/open-records/sunshine-week-wichita/. ↩
Wichita city government

On Wichita’s STAR bond promise, we’ve heard it before

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Are the City of Wichita’s projections regarding subsidized development as an economic driver believable?

Map of STAR bond districts. Click for larger.
This week the Wichita City Council will consider a project plan for a STAR bonds district near Downtown Wichita. These bonds divert future incremental sales tax revenue to pay for various things within the district.1

City documents promise this: “The City plans to substantially rehabilitate or replace Lawrence Dumont Stadium as a modern multi-sport stadium as part of a larger project to develop the river and stadium areas. … Combined, the museum, pedestrian bridge, waterfront improvements and multi-sport stadium will generate significant new visitor tourism as well as provide signature quality of life amenities for the citizens of Wichita and the region.”2

We’ve heard things like this before. Each “opportunity” for the public to invest in downtown Wichita is accompanied by grand promises. But actual progress is difficult to achieve, as evidenced by the lack of progress in Block One.3

Trends of business activity in downtown Wichita. Click for larger.
In fact, change in Downtown Wichita — if we’re measuring the count of business firms, jobs, and payroll — is in the wrong direction, despite public and private investment.4

Perhaps more pertinent to a sports facility as an economic growth driver is the Intrust Bank Arena. Five years ago the Wichita Eagle noted the lack of growth in the area.5 Since then, not much has changed. The area surrounding the arena is largely vacant. Except for Commerce Street, that is, and the businesses located there don’t want to pay their share of property taxes.6

I’m sure the city will remind us that the arena was a Sedgwick County project, not a city project, as if that makes a difference. Also, the poor economic performance cited above is for Downtown Wichita as delineated by zip code 67202, while the proposed STAR bond project lies just outside that area, as if that makes a difference.

By the way, this STAR bonds district is an expansion of an existing district which contains the WaterWalk development. That development has languished, with acres of land having been available for development for many years.

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Notes

  1. Weeks, Bob. STAR bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/star-bonds-kansas/. ↩
  2. Agenda packet for May 2, 2017. Excerpt available at https://drive.google.com/file/d/0B97azj3TSm9MajNOUmQ3dDV0dXc/view. ↩
  3. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/. ↩
  4. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
  5. “Ten years ago, Elizabeth Stevenson looked out at the neighborhood where a downtown arena would soon be built and told an Eagle reporter that one day it could be the ‘Paris of the Midwest.’ What she and many others envisioned was a pedestrian and bike-friendly neighborhood of quaint shops, chic eateries and an active arts district, supported by tens of thousands of visitors who would be coming downtown for sporting events and concerts. It hasn’t exactly turned out that way. Today, five years after the opening of the Intrust Bank Arena, most of the immediate neighborhood looks much like it did in 2004 when Stevenson was interviewed in The Eagle. With the exception of a small artists’ colony along Commerce Street, it’s still the same mix of light industrial businesses interspersed with numerous boarded-up buildings and vacant lots, dotted with ‘for sale’ and ‘for lease’ signs.” Lefler, Dion. 5 years after Intrust Bank Arena opens, little surrounding development has followed. Wichita Eagle. December 20, 2014. Available at http://www.kansas.com/news/local/article4743402.html. ↩
  6. Riedl, Matt. Has Commerce Street become too cool for its own good? Wichita Eagle. April 8, 2017. http://www.kansas.com/entertainment/ent-columns-blogs/keeper-of-the-plans/article143529404.html. ↩
Wichita city government

Growth in Downtown Wichita Jobs

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Even if we accept the measure of jobs used by the City of Wichita, the trend is in the wrong direction. Citizens should ask for truth and accountability.

Click for larger.
Click for larger.
Click for larger.
The City of Wichita and its surrogates tell us there are 26,000 daytime workers in downtown Wichita, defined as zip code 67202. There is a serious problem with that number, as it includes workers whose “administrative home” is downtown, even though they work somewhere else.1 The largest example of this is the counting of all Wichita school district employees as downtown workers, even though almost all work in schools and other locations throughout the city.

But even if we use the statistic promoted by the Wichita Downtown Development Corporation, the trend in jobs is in the wrong direction. WDDC promotes the large investment in downtown Wichita, by both private and public sources. But employment is trending in the opposite direction.

As Wichita considers other large downtown investments, such as STAR bond financing for the west bank of the Arkansas River or a new convention center and performing arts center, we should ask at least two questions:

  • Can we depend on the city to use meaningful and truthful data?
  • Will the city recognize the lackluster results of its economic development efforts?
  • Shouldn’t we insist on progress in projects like Block One before proceeding elsewhere?2

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Notes

  1. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/. ↩
  2. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/. ↩
Wichita city government

Downtown Wichita jobs, sort of

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The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice.

Have you heard that 26,000 people work in downtown Wichita, defined as zip code 67202? It’s likely you have, as this number appears in many places.

It appears in the Wichita city budget.1

Downtown Wichita brochure.
It is cited by our chief economic development agency.2

State of Downtown Report, 2016. Click for larger.
The city’s downtown development agency uses this number in brochures and annual reports.3 4

It appears in a federal grant application made by the city.5

It appears in our state’s largest newspaper, as reported by a journalist billed as a data specialist.6

Promotional material on the former Henry’s building. Click for larger.
It appears in a Wichita specialty business newspaper quoting a Wichita business leader.7

It’s advertised on a vacant downtown building, the former Henry’s store at Broadway and William.

The Wichita Downtown Development Corporation states the data for workers in downtown Wichita, which is defined for these purposes as zip code 67202, comes from the United States Census Bureau, specifically an application called “OnTheMap Application and LEHD Origin-Destination Employment Statistics.”8 The data is commonly known as LODES. Using this application and focusing analysis on zip code 67202 produces the figure 25,850 primary jobs. Round that to 26,000, and that’s the source of the job claims for downtown Wichita.

But: Census documentation for this data gives the definition of the place of work and a cautionary note: “A place of work is defined by the physical or mailing address reported by employers in the QCEW (formerly ES-202) or Multiple Worksite Reports. An address from administrative data may or may not be the actual location that a worker reports to most often.”

The Census Bureau continues with another warning regarding this data: “Nonreporting of multiple worksites is especially common with state and local governments and school districts. In such a case, LEHD infrastructure files assign all workers for that employer (within the state) to the main address provided.”9

Census block 201730043001036
Census block 201730043001036, satellite view.
This is highly relevant and important in the case of downtown Wichita. When using the OnTheMap application for zip code 67202, there are two large bright blue dots that stand out from all others. These represent the two highest concentrations of workers in downtown Wichita. One is Census block 201730043001036, which has 7,740 employees. This is a one square block area from First to Second Streets, and Wichita to Water Streets. The block consists mostly of surface parking lots, although there are three buildings. One building is the Wichita school district administration building, and there’s the problem with the way the city uses this data. The school district has thousands of employees. Only a small fraction, however, work in the downtown administrative building at First and Water Streets. The rest are dispersed throughout the city in school buildings and other sites such as the large facility at 37th Street North and Hydraulic.

But this Census data counts all these employees in one census block. This is an example of the warning the Census Bureau supplies with the data: Nonreporting of multiple worksites is especially common with state and local governments and school districts.

There’s another example. The second largest concentration of workers in downtown Wichita appears in Census block 201730043001023, which has 3,437 employees. This is the block that holds Wichita city hall. In 2014 the city had 3,270 employees. But they don’t all work at Main and Central. They’re dispersed throughout the city in police stations, fire stations, and other sites.

(By the way, the 26,000 number is often qualified as daytime workers. But we know that many police officers and firefighters work at night. The same is true for people working at the many hotels, restaurants, and bars in downtown. They aren’t all daytime workers.)

Here’s something to consider: The Wichita school district is moving its administrative offices to the former Southeast High School building at Lincoln and Edgemoor. That’s in zip code 67218. What will happen to the reporting of jobs in downtown Wichita when some seven thousand workers start receiving their paychecks from an office in that zip code, and the Census Bureau adjusts it data accordingly?

So how many people do actually work in downtown Wichita, zip code 67202? A different set of Census data gives the number 13,593 for 2014.10 This data is much more representative of the number of people actually working in a location, although it includes private-sector workers only. So we might add a few to that number. But it’s clear that the claim of 26,000 workers is far from true.

We’re told that the city makes decisions based on data and analysis. In the city manager’s policy message in the current city budget, the manager wrote: “In 2016, the City was selected by Bloomberg Philanthropies as a What Works City for making a public commitment to use data for informed decision making.” The same document also states: “Departmental goals and data drive decision making within each department.”

The use of data for decision making is especially important for downtown planning, we’ve been told. In selling the plan for downtown Wichita in 2010, the city’s consultants told us that the plan is “grounded in data and hard analysis.”11 But I showed that data the consultants relied on — a “walk score” — was based on nonsensical data.

We’re left with a few observations:

  • The claim of 26,000 workers in downtown Wichita is true. But as we’ve seen, it is not true in the way it is used, which is as an indication of the number of human beings actually working in downtown.
  • Did the person who gathered this data about downtown workers know what it means? If not, why not?
  • Did the person who decided to use this data in marketing downtown Wichita know what it means? If not, why not?
  • If someone knew the meaning of this data and decided to use it anyway: What does that tell us?
  • Did no one at Wichita city hall look at this data? As I’ve shown, it’s easy to see that the mapping application says 3,437 people work in the block holding city hall. Did no one look at the big blue dot and that number and realize that it is not real?
  • What if you opened a lunch counter in downtown Wichita based on the claim of 26,000 daytime workers, and then you learn there are really only half that many, with some of those working at night?

We want to trust our city leaders. We want downtown Wichita and the entire metropolitan area to succeed so that people may prosper and be happy. But episodes like this destroy trust and breed well-deserved cynicism. We can — we must — do better than this.

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Notes

  1. City of Wichita. Proposed Budget 2017 – 2018. Page 2. “Over 26,000 workers also populate downtown every day, working in industries such as education, finance, manufacturing, health care, government, and retail. ↩
  2. Greater Wichita partnership. Living & Working. “With a highly trained pool of talent and a deeply rooted entrepreneurial spirit, Downtown Wichita is work central, boasting 26,000 daytime workers in the financial, healthcare, education, oil & gas and creative services industries.” Available at http://greaterwichitapartnership.org/living_working/downtown_wichita. ↩
  3. Wichita Downtown Development Corporation. Wichita — Center of Progress. Available at http://www.downtownwichita.org/brochure/files/inc/792168633.pdf. ↩
  4. Wichita Downtown Development Corporation. State of Downtown Report 2016. This document states over 25,000 workers. Available at http://downtownwichita.org/user/file/2016_State_of_Downtown_Report_2.pdf. ↩
  5. City of Wichita. Multi-Modal Transportation Connections for Wichita State Innovation Campus. 2016 TIGER Grant Application. Available at http://www.wichita.gov/Government/Departments/Planning/TIGER%20Grant%20Documents/2016%20TIGER%20Grant%20Application.pdf. ↩
  6. Ryan, Kelsey. 9 things happening with Wichita downtown development. Wichita Eagle. June 01, 2015. Available at http://www.kansas.com/news/business/real-estate-news/article22844223.html. ↩
  7. Stearns, John. Downtown’s office exodus — Nearly 1,000 are leaving, so why aren’t downtown developers having a heart attack? Wichita Business Journal. October 4, 2013. Available at http://www.bizjournals.com/wichita/print-edition/2013/10/04/downtowns-office-exodus.html. ↩
  8. U.S. Census Bureau. OnTheMap application. Available at https://onthemap.ces.census.gov/. ↩
  9. “For LODES, a place of work is defined by the physical or mailing address reported by employers in the QCEW (formerly ES-202) or Multiple Worksite Reports. An address from administrative data may or may not be the actual location that a worker reports to most often. The distinction of worksite and administrative address may be especially significant in some industries such as construction, where work is often carried out at temporary locations. In some cases, employers do not provide a multiple worksite report when it would be appropriate to do so. Nonreporting of multiple worksites is especially common with state and local governments and school districts. In such a case, LEHD infrastructure files assign all workers for that employer (within the state) to the main address provided. Bureau of Labor Statistics (BLS) data show a national noncompliance rate of 5.61 percent of multiunit employers responsible for about 4.45 percent of multiunit employment.” Matthew R. Graham, Mark J. Kutzbach, and Brian McKenzie. Design comparison of LODES and ACS commuting data products. Available at ftp://ftp2.census.gov/ces/wp/2014/CES-WP-14-38.pdf. ↩
  10. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
  11. Weeks, Bob. Some Goody Clancy Wichita findings not credible. Available at https://wichitaliberty.org/wichita-government/some-goody-clancy-wichita-findings-not-credible/. ↩
Wichita city government

Downtown Wichita’s Block One, a beneficiary of tax increment financing

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Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts.

Windows in the former Henry’s building promote Block One. They’re fading from exposure to the sun. Click for larger.
I’ll not bore you with the mechanism of tax increment financing (TIF). But if you’re curious, please read Wichita TIF projects: some background and Tax increment financing district (TIF) resources.

Whatever the mechanism, tax increment financing is meant to spur economic growth. But in one of Wichita’s largest TIF districts, economic activity, much less growth, is difficult to find.

In particular, “Block One” — a square block bounded by Douglas and William, Broadway and Topeka — has benefited from TIF money, but has stumbled. There is the Ambassador Hotel, which received many millions in taxpayer subsidy in addition to TIF benefits. There is also the Kansas Leadership Center, a handsome new building.

Block One retail space sits mostly empty, despite the benefit of tax increment financing. Click for larger.
But on William Street, progress is harder to find.

The former Henry’s building remains empty. Promotional materials in its display windows have been fading in the sun for four years. Across the alley to the east is 8,400 square feet of retail space, all empty for four years except for a used book store. It’s not for lack of parking that this space is empty, as it lies underneath a taxpayer-funded parking garage. There’s plenty of on-street parking too, as little happens on this block.

Some of the surrounding property is not doing well, either. The Broadway Plaza building features a large ground floor office or retail space that has been empty for years. South of that, the former State Office Building — directly across Broadway from the former Henry’s building — faces possible demolition.

Block One ribbon cutting, March 2013.
Has there been lack of promotion for Block One? No. The downtown development agency uses it as an example of the success of its efforts in downtown Wichita. It has called it “the first complete city block of development along the core of Douglas Avenue.”

But the legacy of this, at least along William Street, is empty storefronts and a hulking vacant building.

Now the City of Wichita has approved the formation of yet another tax increment financing district. Sedgwick County and the Wichita School District have an opportunity to veto its formation. Before approving any new tax increment financing districts, we might want to ask for some progress in what we have.

Block One promotional material. Click for larger.
Wichita city government

Downtown Wichita business trends

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There has been much investment in Downtown Wichita, both public and private. What has been the trend in business activity during this time?

Trends of business activity in downtown Wichita. Click for larger.
According to the 2016 report from the Wichita Downtown Development Corporation, over the past decade there has been $602 million in private investment and $369 million in public investment in downtown. An additional $190 million investment is in the form of the Intrust Bank Arena. The total, according to WDDC, is $1,161 million.1

What has been the result of this investment? If you expected business growth in downtown Wichita, you may be disappointed.

Business activity in zip code 67202, Downtown Wichita. Click for larger.
The United States Census Bureau tracks business data by zip code.2 The data that is available includes the number of business establishments, the number of employees, and the annual payroll, expressed in thousands of dollars not adjusted for inflation. It includes private-sector workers only, so it does not count all workers.

Nearby are results for zip code 67202, which has nearly the same boundaries as the Self-Supporting Municipal Improvement District (SSMID). This is a district that pays extra property tax for supporting the WDDC. Its boundaries are from Kellogg north to Central, and the Arkansas River east to Washington. It is greater Downtown Wichita plus Old Town.

Zip Code 67202.
The results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower.

This is movement in the wrong direction, the opposite of progress. There may be good news in that the number of people living downtown may be rising. But business activity is declining.

Trends in business establishments, employment, and payroll for zip code 67202, which is Downtown Wichita. Click for larger.

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Notes

  1. Wichita Downtown Development Corporation. State of Downtown Report, 2016. http://www.downtownwichita.org/2016StateofDowntown/?page=1. ↩
  2. U.S. Census Bureau. County Business Patterns (CBP). https://www.census.gov/programs-surveys/cbp/data.html. ↩
Wichita city government

Cargill subsides start forming

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Details of the subsidy programs used to keep Cargill in Wichita are starting to take shape.

This week the Wichita City Council will consider one of the (potentially many) subsidy programs offered to keep Cargill in Wichita.

Cargill Protein Group is currently located at 151 N. Main. The plan is for Cargill to purchase and demolish the Wichita Eagle building at 825 E. Douglas, then build a new office building in its place. The subsidy program to be considered this week is the Industrial Revenue Bond program1. The city won’t be lending Cargill money. Instead, IRB’s are a (convoluted) method whereby local governments are able to forgive the payment of property taxes. For the case of Cargill, city documents state the tax forgiveness could be worth $1,359,531 per year.2 This would be shared by these taxing jurisdictions, again according to city documents.

  • City of Wichita: $378,450
  • Sedgwick County: $340,958
  • USD 259, the Wichita Public School District: $622,723
  • State of Kansas $17,400

Of note, the city is in a hurry to handle this matter. Pending legislation would reduce the amount of property tax able to be exempted.3

In addition to the property tax exemption, the IRBs also carry a sales tax exemption for purchases related to construction. City documents give an estimated value of $2,026,291 for the sales tax Cargill will not have to pay.

Not the entire subsidy package

The action to be considered this week is likely just a portion of total subsidy package. For example, at one time it was speculated that the City of Wichita would build a parking garage and let Cargill use it as their own. With a proposed capacity of 750 parking spots, this would cost many millions.4

Now, the city plans to let Cargill construct the garage, and the city will, according to city documents, “purchase a parking easement from Cargill to obtain public access to the parking structure Cargill will complete as part of this project.” It sounds like the city will rent spaces in the garage. It will be interesting to see the rate the city will agree to pay.

From the state of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill.5 (Well, only 95 percent goes back to Cargill. The state keeps five percent.)

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Notes

  1. Weeks, Bob. Industrial revenue bonds in Kansas. https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/. ↩
  2. City of Wichita. Council agenda packet for April 18, 2017. ↩
  3. Kansas Legislature. SB 146: Continuation of 20 mill statewide levy for schools and property tax exemption of certain portion of property used for residential purposes from such levy. http://www.kslegislature.org/li/b2017_18/measures/sb146/. ↩
  4. Recently the city paid $4.73 million (not including change orders) to build a downtown garage with 270 parking spaces, a cost of about $17,500 per stall. Applying that to a 750 stall garage results in a cost of $13.1 million). ↩
  5. Weeks, Bob. In Kansas, PEAK has a leak. https://wichitaliberty.org/kansas-government/kansas-peak-leak/. ↩
Wichita city government

Cash incentives in Wichita, again

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The City of Wichita says it does not want to use cash incentives for economic development. But a proposal contains just that.

Update: The council did not approve this project, by a vote of four to three.

This week the Wichita City Council will consider a package of incentives for the developer of a large downtown building, the Finney State Office Center. While the city has said that it does not want to use cash incentives, they are proposed for this project.1

Finney State Office Building environs
Elements of the proposal are these:

The Wichita Public Building Commission will sell the building for $100,000.

The project is also asking for the city to issue Industrial Revenue Bonds. Despite the use of the term “bond,” the city is not lending money to anyone. Someone else will purchase the bonds. Instead, the IRBs are a vehicle for conveying property tax abatements and sales tax exemptions.

In this case, the developer requests a sales tax exemption for purchases during the renovation. City documents don’t give a value for the sales tax that might be exempted. But the developer has requested IRBs for an amount up to $35,000,000. Therefore, a sales tax exemption might be worth up to $2,625,000, depending on the price of taxable products and services purchased, and the sales tax rate at the time.

If someone excuses you from paying millions in sales tax, that’s better than receiving cash. But cash incentives are proposed, too. The city proposes a grant of up to $2,000,000, although the city calls this an “investment.”2

Whatever it is called, this is a cash incentive.

Also, the Wichita Public Building Commission will pay up to $1,000,000 for improvements to the building.3

This proposed payment from the WPBC seems to be in violation of the city statutes governing the commission, which read: “Under no circumstances shall any income of the public building commission inure to the benefit of any private person.”4

I’m sure the city will characterize its $2 million “investment” in some way other than a cash incentive. The city will also say the $1 million from the WPBC is not from the city, which is true. But the city will have to rationalize allowing the commission to violate the clear language of its statutes.

There are some good aspects of this agreement with the developer, such as a timeline and performance bond requirement. But the cash incentives are against stated city policy and its laws.

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Notes

  1. Wichita City Council agenda packet for April 11, 2017. ↩
  2. ibid. “The City proposes to invest up to $2,000,000 to be used to modernize the building. The investment would only be paid upon completion of the entire building renovation project.” ↩
  3. ibid. “On April 5, 2017, the WPBC approved the Development Agreement/Purchase and Sale Agreement and agreed to commit up to $1,000,000 for building improvements as well.” ↩
  4. Wichita Municipal Code. Sec. 2.12.640 (i). Under no circumstances shall any income of the public building commission inure to the benefit of any private person. https://www.municode.com/library/ks/wichita/codes/code_of_ordinances?nodeId=TIT2ADPE_CH2.12BOAGCO_S2.12.640SAUNCO. ↩
Wichita city government

Wichita business property taxes still high

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An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation.

Property taxes in Wichita. Click for larger.
The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study, June 2016” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita.

In Kansas, residential property is assessed at 11.5 percent of its appraised value. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions in order to compute tax.) Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent.

This means that commercial property faces 2.180 times the property tax rate as residential property. The U.S. average is 1.683. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.

For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.29 percent, while the national average is 1.43 percent. The results for a $300,000 property were similar. Of note, however, is the property taxes on a median-valued home. In this case Wichita is a bargain, due to our lower housing prices. A home at the median value in Wichita pays $1,552 in taxes, while the nationwide average is $3,097.

Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,351 or 1.96 percent of the property value. For Wichita the corresponding values are $3,398 or 2.83 percent, ranking sixth from the top. Wichita property taxes for this scenario are 45 percent higher than the national average.

For industrial property taxes, the situation in Wichita is better, with Wichita ranking near the middle. For an industrial property worth $1,000,000, taxes in Wichita are $30,980. The national average is $32,445.