Voice For Liberty

Category: Wichita city government

  • Wichita Mayor Carl Brewer saves us from covered wagons

    On August 12, 2008, at a meeting of the Wichita City Council, Wichita Mayor Carl Brewer delivered remarks that I found … well, I’m still trying to find the words that fully describe my astonishment. You can read my transcription of his remarks in this post: Wichita Mayor Carl Brewer, August 12, 2008.

    The context of these remarks is that John Todd and I had just testified against the city establishing a tax increment financing (TIF) district that benefits a local developer. Mayor Brewer believes it is the city’s firm duty to guide and subsidize economic development. His remarks on July 1, 2008 (Mayor Brewer Warren Theatre [sic] Statement) leave no doubt about this. So I wasn’t too surprised that the mayor ignored John’s and my advice and supported the formation of this TIF district.

    What surprised me was when the mayor said that without the city’s “role in guiding and identifying how the city was going to grow … we would still be in covered wagons and horses.”

    When I heard him say that, I thought he’s just using a rhetorical flourish to emphasize a point. But later on he said this: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

    So I think it’s fair to say that the mayor believes that without the city’s role in economic development, we would soon return to the stone age (okay, there I exaggerate a bit).

    Many people in Wichita, including the mayor and many on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

    Today this rugged heritage is disappearing in favor of the public-private partnership and programs like Visioneering Wichita. We don’t have long before the entrepreneurial spirit in Wichita is totally extinguished. What can we do to return power to the people instead of surrendering it to government?

  • Wichita Mayor Carl Brewer, August 12, 2008

    Wichita Mayor Carl Brewer delivered these remarks after John Todd and I testified against the creation of a tax increment financing (TIF) district benefiting Wichita minister Kevass Harding. My remarks can be read here: Reverend Kevass Harding’s Wichita TIF District: A Bad Deal in Several Ways. John’s remarks are here: Testimony Opposing Tax Increment Financing for the Ken Mar Redevelopment Project.

    I took the time to transcribe the mayor’s remarks not only because I think Wichitans need to know more about his philosophy of the way government should work, but also because they reveal a few of the mayor’s beliefs that I found astonishing. The mayor appeared to be speaking informally, without prepared remarks.

    Commentary on the mayor’s remarks is here: Wichita Mayor Carl Brewer Saves Us From Covered Wagons. Video is at Wichita Mayor Carl Brewer on role of government and free enterprise.

    Wichita Mayor Carl Brewer: You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

    I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

    Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

    Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

    But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

    This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

    But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

    But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

    So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

    So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

    And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

    So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.

  • Testimony Opposing Tax Increment Financing for the Ken Mar Redevelopment Project

    Testimony of John Todd, opposing the formation of a tax increment financing (TIF) district, delivered to the Wichita City Council on August 12, 2008.

    Mr. Mayor and members of the Wichita City Council, thank you for allowing me this opportunity to speak before you today. My name is John Todd. I stand before you today as a citizen in opposition to the Establishment of a Redevelopment District, Tax Increment Financing for the Ken Mar Redevelopment Project. (District I)

    There are dozens of neighborhood shopping centers across Wichita that have a greater need for redevelopment than the Ken Mar shopping center that you are considering for public taxpayer assistance today.

    The question that needs to be answered today is, “What is the Proper Role of Government Relating to Economic Development Activity?” And the specific question the council needs to answer before granting public money for this project is: “Why is the Ken Mar shopping center being considered for public money, and not the dozens of similar shopping centers across our city, with particular emphasis on those dozens of centers possessing greater redevelopment needs than Ken Mar?”

    It is my understanding that the proposed Ken Mar TIF is $2.5 million dollars. A commercial real estate broker friend of mine advised me that in his opinion, the Ken Mar center redevelopment project would not work without the $2.5 million public cash infusion. My reply to this observation: 1. If the potential owners/buyers for Ken Mar have not closed on their purchase transaction of the shopping center, perhaps as part of their contract “due diligence” clause, they need to negotiate $2.5 million dollars off the purchase price of the Ken Mar center, and in the event they fail to obtain the lower purchase price, they need to either scale back their plans for the redevelopment of the center or to simply walk away from the project since the project is not economically feasible for them. 2. Or, if on the other hand, the current owners of Ken Mar paid $2.5 million dollars more than the shopping center was worth, what makes them immune from taking responsibility for this $2.5 million dollar error in judgment? And 3. If this City Council were truly acting as stewards of the public treasury, why would you even consider using public money to correct this alleged $2.5 million developer-problem?

    In a free-market economic system, private business enterprises should have the opportunity and the freedom to succeed and to enjoy the fruits of their success. By the same token, they should also have the freedom to fail and suffer whatever consequences that brings. Thousands of other businesses enterprises across our city play by these rules every day without the government parachute or the backing of the public treasury that is being considered for this private group. Why should the Ken Mar shopping center group be an exception to these rules?

    Please vote against the proposed TIF.

  • Reverend Kevass Harding’s Wichita TIF District: A Bad Deal in Several Ways

    Remarks to be delivered to the Wichita City Council on August 12, 2008.

    There’s several reasons why this council should not approve this request for TIF financing.

    Material in today’s agenda packet doesn’t specify an amount, but past materials indicated that the project was $2.5 million short of the total needed for the project.

    Now some on this council feel that TIF financing isn’t an outright subsidy or gift to the developers of a project. But let me ask you this: if the project is $2.5 million short without TIF financing, and then with City of Wichita TIF financing the project is fully funded, what does that tell you about the value of the TIF district to the developers of this project?

    Under TIF financing, the City of Wichita doesn’t directly give developers the money. Instead, the city issues bonds, and then uses the proceeds from the bonds to do things that directly benefit the developers.

    Now if the developers borrowed that money from a bank, they’d have to pay back the loan. Each year the developers would have to make the loan payments, and also, just like everyone else, they’d have to pay their property taxes. (Those taxes have increased as now the development is worth more due to the improvements made by the developer. That’s the “increment” in TIF.)

    But with a TIF district, the bank is the City of Wichita, which issued bonds to pay for things the developers needed to make the project work. So the developers have to pay back the city. But instead of making payments on a loan from a bank and their property taxes, all the TIF developers have to do is pay their property taxes. By merely paying the same taxes that everyone else has to pay based on the value of their property, their loan is repaid.

    That’s why a TIF district allows developers to effectively avoid paying some or all of the increased property taxes on their development. When a development is undertaken without the benefit of a TIF district, developers have to repay loans and pay higher taxes. With a TIF district, all the developers have to pay is higher taxes.

    I’m tempted to ask this rhetorical question: Why don’t we strip away all the confusion and obfuscation surrounding TIF districts and just give the developers $2.5 million? This way, we fund the development, the shopping center is remodeled, and we wouldn’t have to come back year after year, evaluating the TIF district to see if it is meeting its goals, perhaps pouring in more funds if it isn’t. Instead, we could just give Reverend Harding’s group $2.5 million, wish them good luck, and be done with it.

    But I don’t want to seriously pose that question, because I’m afraid of what this council’s response might be.

    Besides this, there’s another reason to oppose this TIF district, or at least insist this be handled in a special way. Reverend Harding is a member of a board that has to give its tacit approval to the formation of this TIF district. That board doesn’t have to take any positive action; all it has to do is nothing. I spoke to this council about the thorny ethical issues surrounding this on July 8th. At that time Reverend Harding said that he informed the city and his colleagues on the Wichita school board of what he was doing. But it’s not to them that he has an ethical obligation. Instead, it is to the citizens of Wichita and the residents of USD 259 that he has the ethical obligation to make sure that this matter is handled with appropriate transparency. To my knowledge, he has not done that.

    Finally, I have asked Reverend Harding several questions, but he has not answered me, even though I am his constituent: How much tax revenue will the Wichita public school district forgo if this TIF district is granted? And given Reverend Harding’s votes to increase property taxes and his urging for taxpayers to pass an expanded bond issue, shouldn’t he set an example and pay his full share of taxes like everyone else?

  • Testimony Opposing Expansion of the Wichita City South Redevelopment Tax Increment Financing District

    From John Todd.

    Mr. Mayor and members of the Wichita City Council, thank you for allowing me this opportunity to speak before you today. My name is John Todd. I stand before you today as a citizen in opposition to the Expansion of the City South Redevelopment District (Tax Increment Financing) (Districts I & VI).

    I testified before you on July 1, 2008 in opposition to the Old Town Warren Theater Loan that you recently approved. The City Council at that time cited the need for taxpayer assistance to prop up an “under-performing” $9.5 million dollar Tax Increment Financing (TIF) subsidy program that a previous city council awarded to Old Town developers in 1998.

    The size of the Old Town TIF project pales in comparison to the $61,772,000 projected in “parking and infrastructure improvements in the Arena Neighborhood Redevelopment Plan area, to be paid for by the TIF” that you are considering today. What vision for a successful TIF in 2008 does this city council have that the 1998 council lacked? What will another “under-performing” TIF cost future taxpayers? Is it the proper role of city government to speculate in real estate ventures using taxpayer money?

    Sedgwick County voters approved the $184.5 (now $205) million dollar downtown arena and have been assured repeatedly by the three county commissioners who originally voted for the arena that adequate parking exists for the arena. I am a little more than suspect when I see the word “parking” in the TIF proposal you are considering today?

    Voters of the arena were told that their approval of the new arena would provide the “economic boost” and the “synergy” needed for effective downtown redevelopment. No mention was made of the need for additional taxpayer subsidy. I believe our new downtown arena project should be given the chance to perform economically as promised before additional taxpayer money is committed to the project.

    If you approve this TIF, please keep in mind that approximately 45% of the $61.8 million dollar proposal or roughly $28 million will be diverted away from The Wichita Public Schools over a 20-year period and another 27% or roughly $16 million from the Sedgwick County taxpayers.

    If you approve this TIF, I believe an excerpt from the July 5, 2008 Wall Street Journal article entitled “Blame Taxes for Baltimore’s Rot” (written by Steve H. Hanke and Stephen J.K. Walters) is on target for Wichita, “True enough, the ability to hand out subsidies gives officials great power. But it also gives them a reason, and incentive, to dismiss the common sense that if tax breaks for the well-connected are a good idea, lower tax rates across the board would lead to broad-based redevelopment.”

    We need to rely on privately funded redevelopment downtown and not on taxpayer-subsidized redevelopment that favors the politically well-connected developers to the exclusion of all other private developers.

    Please vote against the proposed TIF.

  • Downtown Wichita Arena TIF District

    Remarks to Wichita City Council, August 5, 2008.

    When I’ve been talking to people in Wichita, I find there is great confusion about the way that TIF districts work. This confusion serves to obfuscate what really happens with TIF districts: the TIF developers get to use their own property taxes to pay for things that non-TIF developers have to pay for out-of-pocket, or through special tax assessments on top of their regular property taxes.

    It is really this simple. To deny this is to deny simple arithmetic.

    Then, do TIF districts perform as promised? One of the troubling things I learned from recent Wichita Eagle reporting is that in the past four years, assessed valuations in the downtown TIF areas have grown at 14.9 percent per year, just 1.4 times the rate of all commercial property. A few weeks ago I was assured by one council member that the taxes paid by property owners in TIF districts grows “exponentially.” But now we have evidence that the growth is quite modest.

    I was going to say that I have no doubt that the members of this council have good and noble intentions in wanting downtown Wichita and the area around the arena to succeed. But establishing this TIF district is not good for the arena district or the city as a whole.

    Entrepreneurs in Wichita, or anywhere for that matter, have a difficult enough job to do in predicting what consumers want. For government to step in and create special tax-favored districts adds another measure of uncertainty and risk. It distorts the market allocation of capital. Investment will be driven by government incentives rather than market considerations.

    This is also a blow to those who have invested elsewhere. It is the city telling them they made a mistake, that they invested in the wrong part of town.

    For the arena district to succeed, it needs to be because entrepreneurs, using their own capital, decide that it is a worthwhile place to invest.

  • Do Wichita TIF Districts Create Value?

    A recent Wichita Eagle article City tax districts aren’t breaking even reports on some of the problems with tax increment financing, or TIF, districts in Wichita:

    One promise of TIFs was that revitalizing certain areas — such as Old Town and the East Bank — would boost property values throughout downtown.

    In the past four years, assessed valuation has risen 14.9 percent a year within the downtown TIF areas where millions of dollars of public money have been invested.

    But take away those TIF districts and valuations have grown at 4.1 percent a year for the rest of the downtown area. Countywide, commercial property values have gone up about 10.7 percent a year.

    One question I have, and one that might be difficult to answer, is if property values in TIF districts are being assessed accurately and fairly. For assessed valuations in TIF districts to grow at only 1.4 times the rate as all commercial property seems to indicate that perhaps TIF district property is undervalued by the assessor. After all, it is in TIF districts that we expect to see rapid growth — “exponential,” as Wichita city council member Jeff Longwell explained to me — in value as developers renovate old buildings or build new buildings.

    The primary problem, however, is that these TIF districts represent the city government’s desire for more development in places or things that people don’t value it as much as they do in other places. It is government central planning, led by politicians and bureaucrats, making decisions rather than people expressing their preferences through voluntary transactions in a free market.

    Since politicians and bureaucrats have different goals than entrepreneurs, it is not surprising that TIF districts may not live up to the expectations of the public. Of course, it depends on your expectations. If you desire simply to get something built — this would be the politicians’ goal — then TIF districts work. Buildings, indeed, are built.

    If, on the other hand, your goal is to create wealth by building something that the public values enough that you can earn a profit — this being the goal of entrepreneurs — government central planning simply doesn’t work.

  • What Wichita Vice Mayor Sharon Fearey Doesn’t Understand

    In a Wichita Eagle article City tax districts aren’t breaking even we find this whopper of a quote:

    Vice Mayor Sharon Fearey likened the situation to what would happen if she put a swimming pool in her yard.

    “I’d probably actually lose money, but for the years that I’ve had that swimming pool, I’d have a quality of life I couldn’t get without it,” she said.

    Evidently Ms. Fearey does not understand the difference between making a free choice to spend one’s own money (the swimming pool in her backyard) with government taxation to pay for decisions politicians and bureaucrats make for us. Despite the reservations we express.

    Perhaps my headline is a little too harsh. Which is it:

    Vice Mayor Fearey doesn’t draw a distinction between people making free choices and government action, or

    Vice Mayor Fearey understands the difference between people making free choices and government action, but also knows that her judgment is superior to that of ordinary Wichitans.

    What do you think?

  • Wichita City Council’s misunderstanding of tax increment financing

    On July 8, 2008 I testified at a public hearing at a Wichita city council meeting. Afterward, a council member told me that I had a “glaring error” in my arguments. I won’t identify this member in order to avoid embarrassing the member. The minutes of the meeting don’t identify the member who said this, but video is available.

    My purpose in testifying that day was not to question the merits of tax increment financing (TIF) districts. Instead, I was identifying an ethics problem that a Wichita school board member has regarding his involvement in a proposed TIF district. (See Reverend Kevass Harding and His Wichita TIF District.) In my testimony I stated, with a qualification, that the applicant for this TIF district was asking for relief from paying some of the property tax for his real estate development. After my testimony, a council member told me that I was wrong, that the TIF district won’t allow someone to avoid paying property taxes. True, I said. It was sloppy for me to have said that without clarification, but it wasn’t the point I was making that day.

    But since the city council member brought up the point, let’s examine how TIF districts work. I am sure you will be able to agree that the use of TIF districts allow developers to effectively avoid paying some of their increased property taxes.

    In material prepared by Wichita’s Office of Urban Development and presented at the March 18, 2008 city council meeting, we may read this: “The developers have identified a financing shortfall of $2.5 million, for which they are seeking tax increment financing assistance. The preliminary project budget presented to City staff indicates that TIF funds would need to be used for site acquisition costs in order to spend $2.5 million on project costs eligible for TIF funding.”

    So without the formation of the TIF district, the developers are $2.5 million short. With the TIF district, they’ve got the money they need. We must conclude, then, that the TIF district financing, no matter what it is used for, is worth $2.5 million to the developers.

    Now if the developers borrowed that money from a bank, they’d pay back the loan over some period of years. Each year, out of the cash flow the project generates, the developers would have to make the loan payments, and also, just like everyone else, they’d have to pay their property taxes. (Those taxes have increased as now the development is worth more due to the improvements made by the developer. That’s the “increment” in TIF.)

    But with a TIF district, the “bank” is the City of Wichita, which issued bonds to pay for the benefits the developers needed to make the project work. So the developers have to pay back the city. But instead of making payments on a loan from a bank and their property taxes, all the TIF developers have to do is pay their property taxes. By merely paying the same taxes that everyone else has to pay, their loan (the bonds issued by the City of Wichita) is repaid.

    That’s why a TIF district allows developers to effectively avoid paying some of the increased property taxes on their development. When a development is undertaken without the benefit of a TIF district, developers have to repay loans and pay higher taxes. With a TIF district, all the developers have to pay is higher taxes.

    It is as simple as this.