Category Archives: Wichita city government

City of Wichita acknowledges taxes are not good for business

On November 6, 2007, the Wichita City Council considered and approved a request by Learjet for industrial revenue bonds. One of the benefits of IRBs such as these is that the property purchased with the proceeds is usually exempt from property tax. In this case, the period of tax abatement is ten years.

In the minutes of the meeting, under the heading “Economic Vitality and Affordable Living” we can read: “Granting an ad valorem property tax exemption and sales tax exemption will encourage the business to create new job opportunities and stimulate economic growth for the City of Wichita and Sedgwick County.”

Wow! Someone in city hall realizes that a reduction in taxes is good for business, and is reducing taxes in response to that revelation.

Now if all businesses and individuals could have lower taxes — instead of only those who lobby government for special favor — think how nice that would be. The economic benefit that this tax reduction will bring to Learjet could be felt across our entire city.

Consider the alternative to a public library in Wichita

Listen to this article in audio by clicking here.

As Wichita considers the need for a new public library, a more central and fundamental question goes unconsidered: what is the role of the public library today, and do we really want one?

Consider the difference between public and private institutions. The public institution has to satisfy only a small group of people, namely the politicians that fund it. Yes, once in a while voters get to select the politicians, but issues such as a library are usually far down the list of important topics, notwithstanding a recent Wichita Eagle editorial promoting a public library as “one of the most important cultural institutions in a community. It’s an investment in our future, a symbol of our values and aspirations.”

Private institutions, or businesses, on the other hand, are voted on every day by customers, who choose one over the other for their own personal reasons. This is the idea of “consumer sovereignty.”

Public institutions, open to all, appeal to few in the end. The problem caused by unwanted “customers” at the central library is well known, and must serve to decrease its usage by some large amount.

Reading the 2006 annual report of the library, it appears that 34% of the loans made at the central branch were art, music, and video. (Due to the way the library presented the figures, I couldn’t determine this number for the branches.) Disregarding the presumably small number of artworks loaned (in comparison to the number of DVDs), the library is competing with services provided by the free market, namely video rental stores.

Even the loaning of books competes with bookstores. The library reports tells us that the value of the books the library circulated — that is, what it would cost if each person who borrowed a book had bought the book instead — is $29,068,288. I am tempted to ask what the City of Wichita has against local bookstore owners. But the reality is that the library competes rather poorly with bookstores. It has been many years since I relied on the library for timely books in my field, computers and software engineering. I found the shelves filled with titles referring to software and computers long out of date.

Today, if you want to borrow a recently-released book, especially a bestseller, you are likely to find yourself waiting in line behind dozens of borrowers, each with up to two weeks to use the book. This makes buying the book an attractive alternative, which is often what I do.

If you want to read a classic, good luck to you. I wanted to read Capitalism and Freedom, one of Time Magazine’s 100 most important books published since World War II. But, the library didn’t own it.

Could a privately-owned library be what Wichita needs? Could it do a better job? How would such a library work?

As it turns out, I can’t find an example of a city with a private library. That alone doesn’t mean a private library couldn’t work. It is, I believe, more a symptom of our increasing reliance on government instead of private solutions.

There are many ways a private library could work. Patrons might be charged a small admission fee. Patrons might buy monthly or annual memberships for unlimited use. There might be a fee for checking out items, perhaps based on the newness or popularity of the item and the length of the loan period. Items might carry advertising. Meeting rooms and other services could carry rental fees.

The point is that the library would be directly accountable to its customers who use the library, instead of a governing board, the city council, and the “public,” whoever that is. The library, wishing to earn a profit for its owners, would have strong motivation to provide services that people are willing to actually pay for. It would be free to act on its own to raise capital and provide these services, instead of complaining about the lack of funding, which is the case with the current library, as with nearly all other cultural institutions, too.

Plans for new libraries call for coffee shops in the mode of Starbucks. Will the refreshments served be free? Of course not. So charging for some services is okay, it seems.

What about people who can’t afford even the small fees a private library might charge? We are all already paying these fees now in the form of taxes. We are already paying for a library, both those who use it and those who don’t. Spreading out the costs over everyone doesn’t make it more affordable for the town as a whole. As Thomas Sowell recently wrote: “This was all before politicians gave us the idea that the things we could not afford individually we could somehow afford collectively through the magic of government.”

I wish that the Wichta Eagle editorial board would consider the alternative to government provision of things like libraries, entertainment facilities, airports, arts and culture, schools, and many other aspects of life. Relying on coercive government action over individual and voluntary group initiative makes us less free as a country and city.

Wichita’s payday lenders

Payday loans are expensive, a recent Wichita Eagle articles tells us. If someone needs to borrow money and has access to a loan from almost any other source, they should avoid payday lenders. But the reality is that there are people who have poor credit and are not able to obtain credit through the usual channels such as banks, credit unions, credit cards, and family and friends. These people may have but one source for loans: the maligned payday lenders.

Why can’t these people borrow from traditional, “legitimate” lenders? The answer is that making small loans to people who have a history of credit problems is expensive. Wishing it weren’t so and imposing government regulation won’t change this fact.

Community activists call for existing banks and financial institutions to offer small loans at reasonable interest rates. One institution in Wichita, Communities United Credit Union, did just that. But earlier this year it failed after suffering losses from bad loans, providing more evidence that it is costly to offer small loans to credit-challenged customers.

If existing financial institutions are to make small loans to credit-challenged borrowers, they should do so only with the reasonable expectation of earning profits from these loans. To do otherwise is to abandon their responsibility to their investors, and, should I learn that my bank or a bank I had invested in was making risky loans without being compensated for the risk, I would withdraw my investment in that bank.

An irony is that existing government regulation may be a contributing factor as to why payday loans are so prevalent. In an Wichita Eagle article from earlier this year, we read “Some bankers are reluctant to offer them [small loans] because their industry is so tightly regulated …” These regulations either prohibit or add to the cost of making small loans, bankers say.

Furthermore, usury laws, which limit the interest that banks and other traditional lenders may charge, are perhaps too restrictive. If traditional banks and credit unions could charge, say 25%, 40%, or even 50% for small loans, they might find it profitable to do so. An interest rate of 50%, while high, is certainly preferable to the several hundred percent rates that payday loan borrowers who roll over their loans pay.

Those who call for a limit on the interest rate that payday lenders can charge may very well drive these lenders out of business. I suspect that is their unstated goal. If they are successful, where will credit-challenged borrowers go for loans? As shown above, traditional lenders are not serving these borrowers.

A group named Sunflower Community Action says that payday lenders prey on poor people who have few financial options. I believe this group is misinformed on two points. First, the transaction between the borrower and lender is voluntary. Neither party is coerced, so there is no “preying.” Second, it is true that poor people have few options. Eliminating payday loans removes one more option, an option that evidently some people use. To its credit, this group promotes financial education and literacy, which is the best weapon to fight the cycle of poverty that some find themselves stuck in.

Everyone’s Right in AirTran Affair

The Wichita Eagle reports that Mayor Carl Brewer and City Manager George Kolb received free upgrades to business class seats on a recent AirTran flight. The two are indignant over being questioned about the propriety of accepting the gift. The Eagle described Kolb as “peeved.” The Mayor was moved to write a letter to the Eagle describing its reporting as a “cheap shot” with its “lapse in basic journalistic standards” a risk to “harming reputations.”

The AirTran station manager who granted the free upgrade was quoted as saying “Do I expect something from those people? No!”

Wichita civic and business leaders who also traveled on the flight were bothered by the incident, according to Eagle reporting.

Who’s right in this story? The answer is: everyone!

The Eagle is right to report this story. It happened; therefore it’s news.

The AirTran station manager was correct in giving the upgrades to the politicians. She clearly knows who butters her bread. I presume she was being discreet when she denied expecting something from those people — something other than the up to $7 million annual subsidy provided by the City, Sedgwick County, and the State of Kansas, that is.

The Wichita civic and business leaders are right to be miffed, as they are the ones who buy a lot of AirTran tickets, and if anyone deserves to receive a free upgrade, it’s them.

The two politicians are right to be peeved about the reporting of the appearance of a conflict of interest. That’s because there is a conflict of interest, since the city and other local governments give up to $7 million of taxpayer money each year to AirTran. Any relations between the airline and these governments must be analyzed in the light of the subsidy. This is symptomatic of the problems that arise when government intervenes in areas properly left to markets.

When I receive the occasional free upgrade to first class, I say “Thank you, American Airlines!” and accept it gladly, with clean conscience, knowing that I have done nothing wrong. The fact that Mayor Carl Brewer and City Manager George Kolb weren’t able to do this, coupled with how their acceptance of a business courtesy caused such a stir, tells us a great deal about the problems of government interventionism.

Economic fallacy supports arts in Wichita

Recently two editorials appeared in The Wichita Eagle promoting government spending on the arts because it does wonderful things for the local economy. The writers are Rhonda Holman and Joan Cole, who is chairwoman of the Arts Council.

I read the study that these local writers relied on. The single greatest defect in this study is that it selectively ignores the secondary effects of government spending on the arts.

As an example, the writers in the Eagle promote the study’s conclusion that the return on dollars spent on the arts is “a spectacular 7-to-1 that would even thrill Wall Street veterans.” It hardly merits mention that there aren’t legitimate investments that generate this type of return in any short timeframe.

So were do these fabulous returns come from? Here’s a passage from the study that the Eagle writers relied on:

A theater company purchases a gallon of paint from the local hardware store for $20, generating the direct economic impact of the expenditure. The hardware store then uses a portion of the aforementioned $20 to pay the sales clerk’s salary; the sales clerk respends some of the money for groceries; the grocery store uses some of the money to pay its cashier; the cashier then spends some for the utility bill; and so on. The subsequent rounds of spending are the indirect economic impacts.

Thus, the initial expenditure by the theater company was followed by four additional rounds of spending (by the hardware store, sales clerk, grocery store, and the cashier). The effect of the theater company’s initial expenditure is the direct economic impact. The subsequent rounds of spending are all of the indirect impacts. The total impact is the sum of the direct and indirect impacts.

Relying on this reasoning illustrates the problem with the Eagle editorials: they ignore the secondary effects of economic action, except when it suits their case. The fabulous returns erroneously attributed to spending on the arts derive from this chain of spending starting at the hardware store. But what the authors of this study and the Eagle editorial writers must fail to see is that anyone who buys a gallon of paint for any reason sets off the same chain of economic activity. There is no difference — except that a homeowner buying the paint is doing so voluntarily, while an arts organization using taxpayer-supplied money to buy the paint is using someone else’s money.

The study also pumps up the return on government investment in the arts by noting all the other spending that arts patrons do on things like dinner before and desert after arts events. But if people kept their own money instead of being taxed to support the arts, they would spend this money on other things, and those things might include restaurant meals, too.

The fact that these editorials have been printed might lead me to suspect that government-supported arts organizations and Eagle editorial writers might feel a little guilty about using taxpayer funds. They should. To take money from one group of people by government coercion and give it to other people, especially when that purpose is to stage arts events, is wrong. It’s even more so when the justification for doing this is so transparently incorrect.

Arts organizations need to survive on their own merits. They need to produce a product or service that satisfies their customers and patrons just as any other business must.

It may turn out that what people really want for arts and culture, as expressed by their own selections made freely, might be different from what government bureaucrats and commissions decide we should have. That freedom to choose, it seems to me, is something that our Wichita City Council, Arts Council, and Wichita Eagle editorial writers believe the public isn’t informed or responsible enough to enjoy.

A downtown Wichita urban renewal success story … not

This history lesson from Karl Peterjohn of the Kansas Taxpayers Network tells the story of what might have been for downtown Wichita, and shows how close Wichita came to losing a company very important to our local economy, even if they’re not located downtown.

In the 1960’s the urban renewal redevelopment project that became Century II used eminent domain and forced a medium sized, private company in the petroleum business out of their office building and corporate headquarters on the south side of W. Douglas just east of the river.

This business was in transition with the founder handing off control to a young relative who had been living and working out-of-state. This firm’s two major business assets were outside of Kansas so the firm’s geographic ties to Wichita were not strong either. At that time, I’ve been told that this business had gross sales around $250 million a year and possessed their own multi-story office building downtown. That sales figure is understated and would be a lot more if measured in the inflated 2007 dollars.

Local leaders in Wichita had decided that they knew what was best for downtown and using the urban renewal redevelopment program’s eminent domain powers, acquired a large chunk of downtown (as well as many other parcels across this community — see Wichita Business Journal’s most recent list of biggest local taxpayers that still prominently includes the City of Wichita).

The medium sized petroleum company left Wichita after losing their building. This company relocated a couple of miles north of the Wichita city limits back then (they were eventually annexed back into the city many years later) but could have easily relocated elsewhere. Conversely, imagine what downtown Wichita would be like if this firm had remained there. You may have guessed that I’m referring to Koch Industries and their 1,800 local employees.

Bill Davitt on blight

Bill Davitt makes some excellent points about the dangers of giving politicians power to control blight through eminent domain. He also explains why it is best to vote for Carlos Mayans for mayor of Wichita.

Bill warns us that your home or business may be declared blighted even though it is in good and desirable condition. He is referring to cases all over the country where local officials abuse their power to declare property blighted so that it can be taken from its owners. The Castle Coalition has examples of property that is being declared blighted. You be the judge as to the condition of these properties:
www.castlecoalition.org/CastleWatch/bogusblight
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Testimony of William T. Davitt before Senate Judiciary Committee of Kansas Legislature at 9:00 A.M. on Thursday, March 1, 2007 AGAINST amending BLIGHT into Kansas Statutes as an excuse for EMINENT DOMAIN.

My name is William T. Davitt from Wichita. Everything I say is my opinion, belief and understanding.

Last August I went to a meeting called by Wichita City Manager. 250 people in the room. Fancy buffet with salmon sandwiches along the wall.

Up on the stage two members of Wichita City Council show color slides on large screen. “Oh, look at the beautiful swimming pool, manicured lawn, attractive apartments! It is so wonderful that we are going to have all this in Wichita REDEVELOPMENT!”

Standing at the microphone, big developer from St. Louis explains that he will continue owning these new apartments and collecting the rent. Says he is going to KNIT together churches and schools, city and county government, taxpayers and philanthropists.

Question from audience: “What if we don’t want to sell our land to you?” Answer of developer: “We’ll TAKE IT with EMINENT DOMAIN … clean up Wichita’s BLIGHT!”

And BLIGHT is why we are here today. They want the legislature to nail BLIGHT in Kansas Statutes so they can use BLIGHT as an excuse to destroy our homes and places of business with a bulldozer, take our land away from us, turn our land over to big developer from St. Louis so he can build rental apartments and scoop in millions of dollars in profits for himself.

Well, you say your home is so beautiful that they can never declare your home BLIGHTED. Don’t kid yourself.

BLIGHT is going to be whatever the Kansas Supreme Court says it is following the argument of BIG LAW FIRMS representing BIG DEVELOPERS . . . because every judge on Kansas Supreme Court owes his job to a handful of BIG LAW FIRMS.

That is why we desperately need an amendment to our Kansas Constitution taking selection of these judges away from BIG LAW FIRMS and requiring these judges to be confirmed by Kansas Senate as is done in the federal.

We also desperately need an amendment to our Kansas Constitution that will protect our homes and places of business from EMINENT DOMAIN.

What more can I say?

LIBERABUS DOMINE.

William T. Davitt
Wichita, Kansas

Note that Wichita City Council member Carl Brewer IS in favor of creating a REDEVELOPMENT AUTHORITY.

Wichita Mayor Carlos Mayans IS NOT in favor of creating a REDEVELOPMENT AUTHORITY.

A roadblock to private investment in Wichita

As reported in The Wichita Business Journal:

The response from the Wichita Historic Preservation Board was positive. The six members liked the design and thought the project could be good for downtown.

They still voted no.

So for the moment, a developer’s plan for a downtown hotel and conference center is blocked by a law, the Kansas preservation statute. What is the problem with the proposed building? “[the problem] is that it incorporates too many materials and features inconsistent with the surrounding buildings. That includes glass, marble, stainless steel, redwood and balconies.”

This design is judged as “too modern” to be compatible with the “overall historic appearance of downtown.”

It is a sad day in Wichita when a law prevents an individual from making an investment in the improvement of his property, especially when private investment in downtown Wichita is desired and needed. This law needs to be repealed before it causes more harm.

Furthermore, it devalues private property rights when property owners or developers must subject themselves to the whims of groups such as the Wichita Historic Preservation Board. As John W. Sommer wrote in The Cato Journal:

With few exceptions, historic or landmark preservation illustrates the powerful force of cultural elites who impose their tastes on the landscape at the expense of the general public. City after city has been confronted by small groups of architectural aesthetes who are as highly organized as they are both righteous and wealthy. In city after city these groups have succeeded in stalling, or permanently freezing, the pace of physical and functional change. In the name of “heritage” or “culture” or “a livable city,” and invariably “in the public interest,” preservationists seek to legislate “charm” for others.

We would be much better off with out these two disruptive forces — the Kansas preservation statute and the Wichita Historic Preservation Board — acting against our economy and private property rights.

Tax increment financing in Wichita benefits few

Today the Wichita City Council votes on granting $4.5 million in tax increment financing to a developer. Here’s an article from August 17, 2006 that explains why the council should not approve this gift.

(Note to The Wichita Eagle: Why not report stories like this a little earlier than the day the council is voting?)

Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood.

How does a TIF district work? The Wichita Eagle reported: “A TIF district doesn’t cost local governments any existing tax money. It takes property taxes paid on new construction that would ordinarily go into government coffers and redirects it to the bond holders who are financing the project.”

In the present case, the value of the benefit the developer sought is estimated to be worth $3.5 million to $4 million. Whether this benefit is given at no cost to existing government, as The Wichita Eagle article implies, is open to debate. If the new development does not use any local government services, then perhaps there is no cost in giving the benefit. But if that’s true, we might ask this question: if the development does not consume any government services, why should it have to pay taxes at all?

There is evidence that TIF districts are great for the developers — after all, who wants to pay taxes — but not so good for the rest of the city and county. The article Tax Increment Financing: A Tool for Local Economic Development by economists Richard F. Dye and David F. Merriman states, in its conclusion:

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

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

We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

So TIF districts may actually reduce the rate of economic growth in the rest of the city.

There’s also evidence that TIF districts are simply a transfer of wealth from the taxpayers at large to a privileged few. In the paper titled “Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth?” by Iowa State University economists David Swenson and Liesl Eathington, we can read this:

There is indirect statistical evidence that this profligate practice [establishing TIF districts] is resulting in a direct transfer of resources from existing tax payers to new firms without yielding region-wide economic and social gains to justify the public’s investment.

This analysis suggests that the enabling legislation for tax based incentives deserves revisiting. … there is virtually no evidence of broad economic or social benefits in light of the costs.

In the present case in Wichita, the developer says that without the benefit the TIF provides, the project is not economically viable. This is the standard rationale given for the requirement of the TIF district. Without the TIF, the development would not take place.

It may be true that this project in College Hill is not economically viable. If so, we have to wonder about the wisdom of investing in this project. More importantly, we should ask why our taxes are so high that they discourage investment and economic activity.

It may also be that the developer simply wishes to gain an advantage over the competition by lobbying for a favor from government. As government becomes more intrusive, this type of rent-seeking behavior is replacing productive economic activity.

There is one truth, however, if which I am certain: when businesses and individuals pay less tax, they have the opportunity to invest more. TIFs and tax abatements are tacit recognition that the cost of government is onerous and serves to decrease private economic activity and investment.

Here’s a better idea: reduce taxes for everyone, instead of only for companies and individuals that are successful in extracting favors from our local governments.

Wichita City Council and Cessna Aircraft Company Industrial Revenue Bonds

I received this letter written to Wichita Mayor Carlos Mayans and members of the Wichita City Council. The author makes excellent points about the harmful effects of special tax treatment for special interests. A better goal would be to work to reduce taxes for all companies and all people. This way, each company and individual can decide how to make best use of their own funds, instead of the Wichita City Council deciding for us. That is, in effect, what tax breaks like this do. It is the government deciding that resources should be allocated in a way different than how the market has decided. Our experience tells us that governments aren’t as smart as markets, and that governments almost always allocate resources inefficiently.

Mayor Carlos Mayans
Wichita City Hall
455 N. Main St.
Wichita, KS 67202

Dear Mayor Mayans:

Item 27 on the Wichita City Council’s December 12, 2006 agenda would have the city council approve a $99 million bond issuance for Cessna Aircraft Co. This is based upon the total $800 million Industrial Revenue Bonds (IRB) for Cessna Aircraft Company authorization approved earlier this year by this council.

If that is the case, the $99 million issuance (100% abatement) being sought will reduce city property tax revenues by my calculations almost $800,000 a year, or roughly $4 million to the city over five years. The total value of the tax break when all units of government are included is much larger.

That is a large tax break for Cessna Aircraft Company. This is a sizable reduction when city property tax revenues were projected at $89.5 million for 2006. According to the largest taxpayer list from the Wichita Business Journal, Cessna Aircraft Company paid $2,484,343 in property taxes in 2005. The abatement being sought is the equivalent of almost 32% of the property taxes paid by this company in 2005.

Earlier this year Mr. Jack Pelton, the President and CEO of Cessna Aircraft Company, provided public testimony in support of raising property taxes in Sedgwick County almost 10 percent. That is certainly a position that both Mr. Pelton and his company may take. According to Textron’s 2005 annual report (www.textron.com/resources/textron_annual_report_2005.pdg), the Cessna Aircraft earnings for this publicly traded company were $457 million so they could certainly afford to pay their share of this increase. In fact, they can afford to pay this tax with greater ease than almost every other Wichitan or Wichita based company.

This week Mr. Pelton and Cessna Aircraft’s ordinance for this large property tax reduction/IRB for this firm will be in you and your city council colleagues’ hands. You and your council colleagues need to know that this tax break demonstrates rank hypocrisy from both Cessna Aircraft and Mr. Pelton. This council item conflicts with Cessna’s support for higher property taxes countywide this summer. Mr. Pelton and Cessna Aircraft Company want special property tax breaks that the rest of the citizens in Wichita do not receive.

Two recent national surveys indicate that Kansas has high property taxes. The Tax Foundation (see Special Report 146, Nov. 2006) and the Small Business & Entrepreneurship Council (Small Business Survival Index 2006) have both issued reports showing that Kansas has the overall highest property taxes on a statewide basis of the five states (KS and surrounding states) in our region. Nationally, Kansas was among the top 25 percent of property taxes measured both as a percentage of income or on a per capita basis. Neighboring Oklahoma, in contrast, scored as the 4th lowest among all 50 states.

Kansas has high taxes in general and high property taxes in particular. However, the tax abatement for Cessna Aircraft does not eliminate the tax burden. This tax is shifted onto the backs of homeowners, farmers, and small and medium sized businesses in this community who lack the political clout to receive a property tax abatement. The total tax break for Cessna from all levels of Kansas government is almost $3 million a year or just under $15 million over the next five years (assuming current mill levies). Ironically, all national surveys indicate that small business is more successful in creating jobs than large firms.

So Cessna Aircraft will soon receive another special tax break. This is on top of earlier IRBs issued on their behalf by the city. Other employers will have to pay their property tax plus the share shunned by Cessna Aircraft. Cessna Aircraft’s overhead costs are reduced with the property tax abatement. As a result Cessna Aircraft is able to pay employees more and be more selective in hiring. After all, these overhead costs have been shifted onto the rest of the taxpaying community. Businesses without the property tax abatements have to pay higher overhead costs (in the form of higher property taxes) and are at a competitive disadvantage for hiring workers from within this community if they compete with Cessna (or other firms with these tax breaks) in hiring workers.

Special tax breaks for special firms hurt the smaller businesses that compete for labor against these firms. This provides a major warning sign to outside firms that might consider relocating into Wichita. These special tax breaks raise the risk and uncertainty for firms without these breaks in this community. This is a major reason why it is hard to attract firms into the Wichita market.

It is clear that Cessna Aircraft Company’s concern about high property taxes does not extend beyond the company’s property line. In addition, the cyclical nature of Cessna Aircraft’s business has meant sizable and substantial changes in the company’s employment. Despite these sizable tax breaks, Cessna’s Wichita employment is much lower in 2005 with 8,500 employees than it was five years earlier when Cessna had 12,509 employees. Cessna Aircraft’s employment figures have changed dramatically according to the Wichita Business Journal’s employment figures. The numbers change substantially annually.

That is another reason why Cessna Aircraft Company needs to shift their overhead costs onto the rest of the community. Companies that engage in widespread “hiring/firing” binges have a harder time attracting and keeping workers. This is especially true for skilled and highly educated workers. If they pay the same overhead costs as the other firms seeking Wichita area workers, they have a problem finding workers. Cessna needs to be able to offer extra wages and/or benefits to attract workers into this type of cyclical company.

There is no reason that Cessna Aircraft Company’s self imposed problems should be shifted onto Wichita area taxpayers at large. Cessna Aircraft Company has testified in support of raising property taxes in this community. The Wichita city council should reject their request for an additional property tax abatement, and welcome them into the high property tax environment that they supported in front of the Sedgwick County commission this summer. Help Cessna Aircraft Company end their policy of tax hypocrisy and their plan to shift higher taxes onto the non-abated firms and the rest of the citizens in this community.

The motivations of politicians

News reports say that former Wichita mayor Bob Knight may be considering a bid for that same office. Here’s a Voice For Liberty in Wichita article from January 25, 2005 regarding Mr. Knight.


The Motivations of Politicians

Presently Mr. Bob Knight of Wichita, a private citizen, is promoting the building of a casino in Park City, Kansas. These articles from The Wichita Eagle have reported Mr. Knight’s position on casino gambling in Kansas when he was the mayor of Wichita:

“GOP governor hopefuls stake their positions” (July 3, 2002) “Knight and Kerr said they oppose gambling but would consider voter approval.”

“Trump has no plans for local casino” (May 9, 2003) “Last year, Ruffin said, he approached former Mayor Bob Knight about the possibility of relocating the track to downtown and adding a casino if lawmakers approved. Knight was not interested, he said.”

“Gambling on the slots” (May 22, 2002) “Wichita Mayor Bob Knight, seeking the Republican nomination, said gambling is an unreliable source of revenue. ‘I don’t think it fits my sense of how you build and sustain a strong state,’ he said.”

The cynic in me imagines Executive Assistant District Attorney Jack McCoy of the television show Law and Order with Mr. Knight on the witness stand asking — justifiably indignant — “Were you lying then, or are you lying now?”

But I do not know Mr. Knight, and there may be other explanations. It may be that as mayor of Wichita, he wasn’t being very careful or thorough in forming his opinions. A Wichita Eagle editorial “Plan requires serious look” states in part: “He [Knight] acknowledged that as mayor he had opposed an earlier casino plan for Wichita. But after studying this project, he said, he became convinced that a true destination casino could pay off handsomely for the Wichita area and region.” Mr. Knight has been out of the mayor’s office for less than two years. What about the Wichita area has changed in that time that makes a casino a good bet (so to speak) now?

Or, has a casino always been a good idea, but Mr. Knight either didn’t know that when he was mayor, or he just didn’t want the citizens of Wichita gambling on his watch?

I do not know the answer to these questions, and given our collective experience with politicians, I probably wouldn’t believe Mr. Knight if he answered them. Such is the credibility of the motivations of politicians.

Proposed Wichita housing code change

Thank you to John Todd for this material. John has much experience in real estate, and cares deeply about the rights of property owners.


To: Mayor Mayans and Wichita City Council members:

Subject: Comments and concerns regarding the proposed changes for the Housing Code of the city of Wichita.

The city’s housing code has problems. Here is an overview of the problems. Some suggested improvements follow.

General concerns covering the Housing Code ordinances and enforcement.

  1. Has a “crime” actually been committed if a property owner owns a property in which a board and paint separate (peel) in violation of the Housing Code? Are folks who are found in violation in front of the city’s municipal court becoming part of the growth in the population in the county jail sometimes?
  2. Is there “selective enforcement” of the existing ordinance? Does peeling paint receive the same attention in Reflection Ridge as it does in Midtown?
  3. Are city, county, and school district owned properties subject to the same code? Are code violations on government owned properties subject to no penalties?
  4. Is “blight” the cause of neighborhood crime or is the lack of enforcement of criminal activity in certain neighborhoods creating the neighborhood flight and subsequent need by property owners to secure their properties by boarding up windows and doors?
  5. Is the Municipal Environmental Court free and independent from the legislative (City Council) and executive functions (City Manager) of the City? Does the setup of the Municipal Court meet the “separation of powers” doctrine we expect from government?

Recommendations to improve Wichita housing and the city’s housing code:

  1. Reports of prospective housing code violation complaints need to be in writing with copies of the signed complaint given to the property owner and to the person reporting the alleged violation. Nothing undermines a sense of community more than government allowing one group of people to anonymously “snitch” on another group.
  2. Mediation between the aggrieved parties should be required before the complaint goes to court. The Wichita Bar Association has a system of mediation already in place.
  3. City Code Enforcement Officials should be licensed, and be required to have at least five years of prior “hands-on” building experience.
  4. Municipal Court Judges need to be elected by the people rather than appointed by the City Council. The City Council could handle this through the passage of a Charter Ordinance.
  5. Blight needs to be defined in the ordinance.
  6. City owned properties should comply with the ordinance just like privately owned property.

Here are the detailed comments on the proposed changes in the city’s housing code.

  1. Comments concerning the new term “Resident Agent” are discussed below.
  2. Section 20.04.055 The Minimum requirements for maintaining vacant dwellings.

Proposed Section 11 Vacant Structures. The phrase used to describe the material used to board windows and doors shall now in addition to having a protective coating now must be “matching the predominant color of the structure”. The question of what is a matching color leaves wide latitude on the part of the city code enforcement official deciding what is matching. Perhaps a contrasting color might be appropriate? And, perhaps after a damaging weather event, unpainted plywood or OSB board should meet the requirement?

3. Section 20.04.200 the penalty section.

Existing Section. Since the notice of violation that the city issues to a property owner refers to a “uniform criminal complaint”, perhaps the word “crime” should be added after the word “misdemeanor” or suggested “misdemeanor crime”?

Existing Section. The penalties discussed in the existing section seem adequate and allow the Municipal Court Judge what might be considered extreme additional latitude if he or she invokes the provision in the existing ordinance, “Each day that any violation of this ordinance continues shall constitute a separate offense and be punishable hereunder as a separate violation.” Also, jail time for a Municipal Court is limited to “a period of not exceeding one year”. Invoking this provision of the existing ordinance would potentially allow multiple years jail time to be assessed in excess of this maximum “not exceeding one year”.

Proposed Section. The new proposed ordinance essentially doubles existing fines. Before increasing the fines, several questions need to be answered. How is the current fine schedule working? Are convicted property owners paying the fines? What is happening to property owners who do not have the money to pay the fines? Are there property owners who are being assessed fines people who could pay for the repair of their property if they had money they are being fined to do the repair(s)? Is jail time being assessed against property owners? Who bears the costs associated with incarceration? Are the additional fines actually a new “revenue source” for the city? The new proposed ordinance also requires the “mandatory” imposition of fines by Municipal Court Judges with a provision requiring alternative community service in lieu of the fines for defendants who are financially unable to pay the fines imposed. Several questions, relating to “mandatory” and alternative “community service” for the poor need to be answered before this ordinance is passed. Don’t “mandatory” fines take away the need for judgment on the part of the Municipal Court Judge when dealing with property owner defendants in his or her court in seeking compliance with the housing code ordinance? Are there not circumstances where defendant property owners that are physically, mentally, as well as financially unable to care for their properties due to age, loss of employment, disability, or other extenuating circumstance who needs “judgment” on the part of a judge rather than mandatory fines or community service? Could not a defendant property owner be earning money to repair his or her property or actually doing the repair during the time imposed for “community service”? Does the registering of a defendant property owner’s property with the Superintendent of Central Inspection comply with “equal protection under of the law” that has been a requirement under our legal system?

Chapter 20.04.010 the Definitions are amended. The definition of “Resident Agent” is created.

Proposed Ordinance No._______Section 30.01.020 of the Code of the City of Wichita, Kansas. The responsibilities and potential liabilities of the “resident agent” might be troublesome. Would a licensed real estate broker or salesperson be exempt from this ordinance due to provisions enumerated in the Real Estate License Act? Is it legal for an agent to be held responsible for the action or inaction of his client property owner? Why would an agent be willing to take on responsibilities for the actions or inactions of his client property owner? Is this a “can of worms” for a “resident agent”?

To George Kolb, regarding urban renewal in Wichita

To Wichita City Manager George Kolb, Regarding Urban Renewal in Wichita
By Karl Peterjohn, Executive Director Kansas Taxpayers Network

Today, city government plays a large role in this city’s life. The most recent municipal budget is in the neighborhood of $1/2 billion. That massive sum does not seem to be large enough for many of the city leaders since there is now an effort underway to recreate one of the major mistakes of the 20th century: Urban Renewal.

Urban renewal was a major issue in the middle of the 20th century. Cities across the country attempted to improve and revitalize themselves using urban renewal. They wanted to improve their community and remove dilapidated and blighted properties. Despite the best of intentions, urban renewal failed. The failure took a number of forms and was very costly. Minority and low income citizens were hurt badly. Housing costs rose massively while the choices available for low income citizens were reduced. At that time, this was a national program and a significant part of the urban renewal costs were paid for by the federal government. Today, that is not the case. In addition, beneficiaries of urban renewal were often more affluent citizens who positioned themselves to take advantage of this program.

Ironically, much of the city’s land that has been provided for the east bank/Waterwalk redevelopment project in downtown Wichita was originally acquired by the city back in the urban renewal era. Cost figures on what the city paid for this land were not available when I sought that information during the public hearings over the Waterwalk project. It is a sad fact that much of this city owned land simply stagnated economically during the close to half a century that the city has exercised control over this property. In addition, the city’s need to be able to condemn private property by using eminent domain has raised the risk of property owners, diminished property rights, and made this community less competitive by expanding the public sector over the private.

Recently, the city manager and some other local leaders have been looking at establishing another layer of local government by setting up a new redevelopment authority. I heard that you were outspoken in support of this concept at the August meeting at the Hughes Center. This is the first step in recreating urban renewal in Wichita.

The presentation that the city council had June 27, 2006 indicates the close ties between the proposed redevelopment authority in the 21st century that relies upon the 1950’s era K.S.A. 17-4712 et seq. as well as 17-4757 and 12-2904 urban renewal statutes as the legal authority for creating this authority. These statutes indicate that Sedgwick County will also be involved in this new layer of local government too.

What is the city going to do to avoid repeating the numerous and myriad mistakes made roughly a half century ago?

The academic literature (a partial reading list is provided below) is clear in pointing out the mistakes and failures made with the urban renewal efforts half a century ago. A major, but unspecified, increase in taxing authority will be needed to finance this new layer of local government.

As an organization representing taxpayers, we see that the growth of local government is a major burden stifling development locally and statewide. Recent Bureau of Labor Statistics data shows that Kansas is near the bottom of the 50 states in private sector job growth. Adding a new layer of bureaucracy is likely to hurt this community’s economy, not help it.

City Manager Kolb and other proponents for a new “Redevelopment Authority” need to provide a clear road map on how this new governmental body will avoid repeating the very expensive and harmful mistakes made during the urban renewal era from the 1950’s. Citizens of Wichita need to know how this expensive new entity will be paid for. Will the city council want to pay for it with higher property taxes? Or sales taxes? Or some new tax?

Our organization’s position on raising taxes is clear: voters must be able to decide this issue at the ballot box. Let’s not make Wichita worse with more expensive red tape, bureaucracy, and resurrecting urban renewal. There are many ways to improve Wichita, but recreating urban renewal is not one of them.

Urban Renewal Reading List:
1) The Unheavenly City, Edward Banfield.
2) The Federal Bulldozer, A Critical Analysis of Urban Renewal 1949-1962, Martin Anderson.
3) The Death and Life of Great American Cities, Jane Jacobs.
4) Race and Economics, Thomas Sowell.
5) The Art of Community, Spencer MacCallum.
6) Beyond the Melting Pot, Nathan Glazer & Daniel Moynihan.
7) The Tyranny of Good Intentions, Paul C. Roberts & Lawrence M. Stratton.

Resurrecting urban renewal in Wichita?

Thank you to John Todd for this excellent article.


Resurrecting Urban Renewal in Wichita?
By John Todd

On August 22, 2006, the City of Wichita hosted a Visioneering Committee “Public Forum on Community Revitalization” featuring Mr. Richard Baron, Chairman and CEO of McCormack Baron Salazar (MBS) of St. Louis, Missouri in the Sudermann Commons Room at the Wichita State University Hughes Metropolitan Complex. An August 14, 2006 letter from City Manager George Kolb explains, “This forum is part of the City’s commitment to and participation in a prisoner reentry initiative to help transform not only the lives of returning ex-offenders, but also to transform the communities/neighborhoods into which they will return.”

Mr. Baron’s PowerPoint presentation had little to do with “prisoner reentry” into communities/neighborhoods, but rather the “evolution” of public housing from the failed government housing projects of the past in larger cities like St. Louis, Pittsburgh, and Los Angeles into the new “public-private” partnership housing projects that rely almost exclusively on loans/grants from local, state, and the federal government as well as national and local foundation support.

Council Members Carl Brewer and Sharon Fearey toured several of Mr. Baron’s MBS developments in St. Louis, were sold on what he was doing, so they invited him to Wichita for the tonight’s presentation.

Mr. Baron’s presentation explained how his company, working with government, and government money, was able to raze and rehabilitate failed government housing projects of the past that usually included city owned land and additional assembled “tax foreclosure” properties into a “mixed-income” MBS rental housing apartment units project that always included a public neighborhood K through 8 elementary school, a common swimming pool, park area, and a sprinkling of privately owned housing units. Mr. Baron indicated that his company transformed failed gang, drug, and crime infested public housing projects occupied by people with average annual income of $6,000 to “mixed-income” housing units with incomes ranging from around 35% under $10,000, with another estimated 35% from $10,000 to $30,000 and the balance above those numbers with around 1% over $100,000 per year. His company collected market rents through HUD’s Section 8 rental subsidy program. In response to a question, he said that about 40% of the total rents collected from the project came from the Section 8 subsidy. Mr. Baron indicated that most of his projects were on tracts of around 40 acres.

The public forum was held from 6-8 p.m. in Sudermann Commons Room was attended by I would estimate over 100 people including, Mayor Carlos Mayans, City Council Members, Carl Brewer, Sharon Fearey, and Bob Martz, County Commissioners Tim Norton and David Unruh, City Manager George Kolb, County Manager Bill Buchannan, a couple of state legislators along with heavy attendance from government housing staff members along with staff members from several governmental agencies and members of several Wichita Neighborhood organizations. There appeared to be widespread crowd enthusiasm and support for Mr. Baron’s presentation. However, I regrettably have to say that I think those people more closely associated with government and local neighborhood associations failed to see through Mr. Baron’s super smooth “sales” presentation. He was given over an hour of time to tout his company’s success in assembling this “new” type of “public-private” housing project that involved massive amounts of taxpayer subsidy with the implication that the key to the success of these projects was his company’s ownership and management of the projects. During questioning he did finally admit that government played a key role in the condemnation and taking of private property for his projects through their eminent domain powers.

Following Mr. Baron’s presentation, City Manager George Kolb spoke glowingly and enthusiastically to the group about the City’s plans to revitalize the Beat 44 neighborhood in northeast Wichita. At this point, Mr. Kolb failed to mention a private partner in his vision for Beat 44 revitalization, but rather a city-run project. No mention as to whether the project needed at least 40 acres to succeed, and how many houses would be razed for the cities project. Mr. Kolb indicated that the Beat 44 project would be a “model” for other city housing revitalization projects. Mr. Kolb did hint of “public takings” if needed to clean up the area, and he admitted to me after the meeting that he was a strong supporter of the City’s ability to use of its eminent domain power in those takings.

I find it interesting to note that The Wichita Eagle has already started their support for the City’s neighborhood revitalization program with their recent front-page “blight” story. Earlier this year they printed an opinion letter from City Manager Kolb imploring the legislature to “either defeat the proposed (eminent domain) legislation or find a compromise that honors the tradition of eminent domain.” In that same April 9, 2006 newspaper, the editorial board agreed with the City Manager, “…it is important for the city to preserve its condemnation authority, which could be threatened by legislative efforts to curtail the use of eminent domain.” Since Mr. Kolb and the editorial staff have so little regard for private property protection, I wonder if the newspaper would have any problem with a city ordinance that would from time to time limit the Eagle’s freedom of the press in cases where a reporter was writing unfavorable articles about the City of Wichita that were having a “detrimental” impact on the collective “economic well being” of this community. Surely, the collective health of this community outweighs one individual reporter’s freedom to write anything in the newspaper that is not in the community’s best interest. This argument sounds like the same rational the newspaper uses to justify the taking of private property from an individual for the collective good of the community. Perhaps Mr. Kolb can convince the City Council to pass such an ordinance with the understanding that we can “trust” the city to use its power to curb the free press sparingly and city officials will always exercise “good judgment” in their use of this power. The Kansas League of Municipalities used this same “trust” argument before a legislative committee last spring in their efforts to stop the legislature from passing needed private property protection through meaningful eminent domain reform.

In deference to Mr. Baron’s approach to the new public housing projects his company is involved in, the key to his company’s financial success appears to me to be their ability to gather “public” money and then apply “private” ownership and management skills with an interest in their companies bottom line “profit.” Judging from the PowerPoint presentation, his company appears to be applying sound business skills that are necessary for a project to be financially successful. I hear that our City Manager Mr. Kolb is working to form a “Housing Authority” with limited supervision by the City Council. Kolb will be the leader of the group that owns and manages the new housing development that is being proposed in the Beat 44 neighborhood. The lack of the “profit” motive with the inherent lack personal financial “risks” makes me suspect of the ability of the new “Housing Authority” to be successful in their so-called housing revitalization. This proposal resurrects the failed urban renewal policies of the 1950’s and 1960’s.

There are several questions that I have been unable to obtain answers for after several attempts in calling Mr. Baron’s office. How are the housing projects titled? Private company? Public entity? Public-private partnership ownership entity? Non-profit entity? And, does the project pay property taxes? Have TIF’s (Tax increment financing) been used?

Tax increment financing in Wichita benefits few

Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood.

How does a TIF district work? The Wichita Eagle reported: “A TIF district doesn’t cost local governments any existing tax money. It takes property taxes paid on new construction that would ordinarily go into government coffers and redirects it to the bond holders who are financing the project.”

In the present case, the value of the benefit the developer sought is estimated to be worth $3.5 million to $4 million. Whether this benefit is given at no cost to existing government, as The Wichita Eagle article implies, is open to debate. If the new development does not use any local government services, then perhaps there is no cost in giving the benefit. But if that’s true, we might ask this question: if the development does not consume any government services, why should it have to pay taxes at all?

There is evidence that TIF districts are great for the developers — after all, who wants to pay taxes — but not so good for the rest of the city and county. The article “Tax Increment Financing: A Tool for Local Economic Development” by economists Richard F. Dye and David F. Merriman states, in its conclusion:

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

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

We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

So TIF districts may actually reduce the rate of economic growth in the rest of the city.

There’s also evidence that TIF districts are simply a transfer of wealth from the taxpayers at large to a privileged few. In the paper titled “Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth?” by Iowa State University economists David Swenson and Liesl Eathington, we can read this:

There is indirect statistical evidence that this profligate practice [establishing TIF districts] is resulting in a direct transfer of resources from existing tax payers to new firms without yielding region-wide economic and social gains to justify the public’s investment.

This analysis suggests that the enabling legislation for tax based incentives deserves revisiting. … there is virtually no evidence of broad economic or social benefits in light of the costs.

In the present case in Wichita, the developer says that without the benefit the TIF provides, the project is not economically viable. This is the standard rationale given for the requirement of the TIF district. Without the TIF, the development would not take place.

It may be true that this project in College Hill is not economically viable. If so, we have to wonder about the wisdom of investing in this project. More importantly, we should ask why our taxes are so high that they discourage investment and economic activity.

It may also be that the developer simply wishes to gain an advantage over the competition by lobbying for a favor from government. As government becomes more intrusive, this type of rent-seeking behavior is replacing productive economic activity.

There is one truth, however, if which I am certain: when businesses and individuals pay less tax, they have the opportunity to invest more. TIFs and tax abatements are tacit recognition that the cost of government is onerous and serves to decrease private economic activity and investment.

Here’s a better idea: reduce taxes for everyone, instead of only for companies and individuals that are successful in extracting favors from our local governments.

Consider carefully costs of a new Wichita airport terminal

As Wichita considers building a new terminal at its airport, we should pause to consider the effect an expensive new terminal would have on the cost of traveling to and from Wichita, and by extension, the economic health and vitality of our town.

My reading reveals that airlines are starting to become alarmed at the high costs some airports charge airlines for using their facilities. A recent Wall Street Journal article (“Airports Start to Feel the Sting Of Airline Cost-Cutting Efforts” published on May 17, 2006) reads, in part:

The same economic forces in the air-travel business that have created buy-your-own box lunches in coach and fully reclining seats for long flights in business class are now showing up in a split at airports. The split is creating tensions as cash-strapped airlines balk at paying for first-class airports. Air Canada, the main tenant of the new terminal in Toronto, says it can’t afford the high fees.

Airports have long been considered economic-development tools for the communities that own them. Many, like Toronto, erected palatial terminals to showcase their cities and passed on the costs to airlines and passengers. Even as airlines have gone bankrupt, airport earnings have risen.

Now, the combination of financial woes of traditional airlines and the explosion of low-cost competitors around the world is forcing big changes in airport design and operation. Airlines, which have already won concessions from employees, travel agents and suppliers, are now putting pressure on airports to cut costs and fees. And low-cost carriers have sparked the creation of bare-bones depots, like Schiphol’s “Pier H,” in Europe and Asia.

“Many airport monopolies still operate in the dark ages. And our patience has worn out,” says Giovanni Bisignani, director general of the International Air Transport Association, the airline trade group that has spearheaded an attack on airport charges in Europe, Asia and the Americas.

Closer to home, and very relevant to Wichita’s desire to attract additional low-cost carriers such as Southwest Airlines, we learn from the same article that Southwest is quite sensitive to the costs it faces:

Denver International, which was attacked for its high fees when it opened in 1995, has since cut costs and reduced fees, winning back low-cost Southwest Airlines. And some airports, such as Schiphol and the Cologne Bonn Airport in Germany, have moved ahead by luring new airlines with low operating costs. In the low-margin airline world, a savings of a few dollars per passenger can turn an unprofitable flight into a money-maker, especially among discount airlines charging less than $100 per ticket.

“Nowadays if you start to build a new terminal, you are no longer able to build a castle,” says Michael Garvens, chairman of the Cologne Bonn Airport, which opened a terminal for low-cost airlines in December 2004.

We certainly don’t want to be placed in the position of Seattle, where Southwest cut its service there because of costs. From the article “Airport costs climb” from the Puget Sound Business Journal (Seattle) on March 5, 2004 we can read this:

The $587 million cost of the South Terminal expansion at Seattle-Tacoma International Airport is driving away at least one of the very carriers it was intended to attract. … But Southwest Airlines in January cut its daily flights between Seattle and Spokane from eight to five, reducing its overall daily flights through Sea-Tac to 36. According to Southwest manager of properties Amy Weaver, the move was largely due to the airport’s rising per-passenger costs for carriers.

Talking to some people and reading some remarks, it seems as though not many are too concerned about the costs of a new terminal, as it will be paid for by federal money and airline fees. But someone pays those federal tax dollars, and now we learn that airlines, especially discount carriers, are sensitive to the fees they must pay to use airports.

The Wichita Eagle recently reported that Wichita airport officials have been talking with the airlines, and the airlines are “happy with the prospect of a new terminal.” That is directly contradictory to the reporting contained in the two articles cited above.

Local business leaders tell us that we must have an airport that makes a good first impression for Wichita. A grand airport terminal is impressive until you realize who pays for such things. I have been in terminals in fine cities — Denver and Salt Lake City come to mind — where the gate area is quite spartan, being built from corrugated steel in the manner of a warehouse. And if I remember correctly, in Salt Lake City the concourse I used was not even sealed to the elements.

In Cincinnati, Comair, part of the Delta network, has its own remote gate area. That building is plain in its construction, but worked very well. (As Delta and Comair no longer fly to this destination from Wichita, I guess it doesn’t matter now.) I appreciated these facilities for what appeared to be their concerted effort to hold down costs.

In Wichita, we should remember that fewer passengers used our airport in 2005 than did in 2004. In 2006, each month’s traffic has been less than that for same month from last year. We are told not to worry about this, that air traffic is down nationwide, but the decline in Wichita is several times that of the nationwide trend.

(From the ATA Monthly Passenger Traffic Report, enplanements nationwide are down 0.6% for the first five months of 2006, compared to the same months from 2005. In Wichita, enplanements for the first five months of 2006 are 284,848, compared to 300,169 for the first five months of 2005. That is a drop of 5.1%.)

At the same time our airport traffic is rapidly declining, AirTran, the local discount carrier, is experiencing increased passenger counts, meaning that we are becoming increasingly dependent on a discount carrier. (For the first five months of 2005, AirTran’s share of traffic in Wichita was 6.7%. For the first five months of 2006, AirTran’s share is 10.6%.)

As the articles cited above tell us, these low-costs carriers are very sensitive to the cost of using airports. AirTran may not be concerned, at least not regarding its cost in using the Wichita airport, as our local governments reimburse AirTran for its losses.

Airport officials tell us that fixing what is wrong with our existing terminal will cost nearly as much as building a new terminal. It is difficult for me to believe this. We must find a way to hold down the costs that airlines and travelers face when flying to and from Wichita. Our current airport officials do not seem to agree.

What’s Good for Gander Not Good For Goose

The July, 2006 issue of Budget & Tax News reports that Gander Mountain is opposing the giving of tax breaks to its competitors. A quote from the article:

Fairness Is Questioned

However, Gander Mountain and its developer, Oppidan Investment Co., argue granting special favors to any one retailer leads down a slippery slope. “If you give [a tax break] to a Wal-Mart, should you give it to Target? If you give it to Home Depot, then should you give it to Lowe’s? And if you give it to Bass Pro, shouldn’t you give it to Cabela’s and Gander Mountain? How about we just don’t give it to anybody?” Oppidan CEO Mike Ayers said to the Toledo Blade for a March 22 article.

When the CEO of Gander Mountain was asked why the company doesn’t take subsidies he replied:

We believe in the American system of free enterprise and consider these demands to be anti-competitive and fundamentally inappropriate. We cannot in good conscience go down that road and maintain our integrity as a good corporate citizen. We think it’s wrong. So we are unwilling to accept the “everyone is doing it” argument and become part of the problem./blockquote>

More from the Gander Mountain CEO:

Resources that could be used for education or true economic development are being wasted on private retail developments. Communities have been paying big money to bring in low-paying retail jobs. Buda, Texas, for instance, gave Cabela’s subsidies worth $61 million, or about $271,000 for every full-time job, according to our estimates. Reno, Nevada spent $54 million, or $208,000 for every job. It also should be noted that incentives to lure retail into a community often do harm to businesses already located in the area. Local stores and other national firms like Gander Mountain, who don’t seek subsidies, are placed at a competitive disadvantage by this practice. Studies have also demonstrated that the promises of increased revenue, jobs, and economic growth are seldom fulfilled.

I was quite astonished to read these articles, as Gander Mountain certainly received a lot of aid from Wichita. To be precise, I believe the aid that Wichita gave to Gander Mountain was not in the form of a tax break. Nor was it a subsidy, if by subsidy we mean an ongoing series of payments.

Instead, Gander Mountain received an outright gift from our city and a sweetheart lease. Now that this company has apparently changed its mind about receiving government handouts, should Wichita ask for its money back?

Update, July 8, 2006

I received a communication from a representative of Gander Mountain seeking to correct a mistake I made in this article. It was the developers of WaterWalk, not Gander Mountain directly, that received the subsidy from the City of Wichita. That subsidy undoubtedly let the developers offer Gander Mountain an “attractive lease rate,” as the Gander Mountain representative wrote.

I apologize for this mistake. It is, in my opinion, a distinction without a difference. Giving money to one party so that they can give it to another is still a subsidy, and the introduction of a middleman probably added to what the city had to pay.

Also, the City of Wichita built a parking garage for the use of Gander Mountain customers, as well as customers of other businesses, should any appear. This was reported to cost $2.1 million.

Arts funding in Wichita produces controversy

As local government tries to decide which arts and cultural institutions are to receive government funds, controversy arises. A June 8, 2006 Wichita Eagle article titled “Arts panel biases alleged” tells how some funding applicants are upset that some of the members of the funding committee have ties to organizations that also applied for funds. In an editorial titled “Let Arts Funding Work” published in the June 10, 2006 Wichita Eagle, Rhonda Holman writes “The process may not be perfect, but it’s a precious opportunity for public dollars to be invested in the arts and attractions in a merit-based way that’s fair, open and accountable.”

Later Ms. Holman makes the case that it is desirable to have experts decide how to allocate taxpayer funds amongst the various organizations that have applied. The old method, she writes, had no “scrutiny or oversight.” She pleads for the public not to lose faith in this new system of deciding who gets what.

As I wrote in the past (Let Markets Fund Arts and Culture, How to Decide Arts Funding) there is a very simple way to decide which arts and cultural organizations are worthy of receiving funds: simply stop government funding. Let the people freely decide, though the mechanism of markets rather than government decree, which organizations they prefer.

When people spend their own money on arts and culture there is no controversy. There can be no allegations of bias. But government spending always creates controversy. Someone is upset that they didn’t get as much as someone else. People who don’t or can’t use what the government-supported organizations provide are upset they have to pay for it. Much misguided effort goes into making the funding decisions. Instead of working to create and refine their product, arts organizations have to lobby politicians and commissions for funds.

In the end, the public gets what the commission decrees, instead of what they really want.

If arts and cultural organizations forgo government funding, they will learn very quickly if they are producing a product the public really wants. If they aren’t, they will have a powerful motivating factor to change.

It may turn out that what people really want for arts and culture, as expressed by their selections made in a free market, might be different from what a commission decides we should have. That freedom to choose, it seems to me, is something that our Wichita City Council, Arts Council, and Wichita Eagle editorial writers believe the public isn’t informed or responsible enough to enjoy.

As expected, price controls harm Wichita travelers

Writing from Tallahassee, Florida

As reported in the Wichita Business Journal on May 12, 2005: “The average number of daily departures dropped to 45 in March 2006 from 54 in March 2005.”

The effect of the AirTran subsidy is to reduce the price of airfare to and from Wichita. That is its stated goal. If the subsidy did not work to reduce prices, we would be wasting our money. The fact is that the subsidy does work to reduce airfares to and from Wichita. It also does what any economist could predict: it reduces the supply of air transport to and from Wichita. I think that’s why economics is called the “dismal science.” There really is no free lunch.

The same article also reports this:

Sam Williams, chairman of the Wichita Fair Fares campaign, believes that the airlines will see there is enough passenger growth to justify reinstating the lost destinations.

“The numbers always showed that we had the ability in our catchment area to, over time, make this airport very successful,” Williams says. “Nothing has dampened my enthusiasm that that’s still going to happen.”

I have a picture in my mind of a group of planners for, say, American or United or Northwest, planning whether to increase capacity to and from Wichita, or even if to stay in the Wichita market at all. If AirTran — a “new” airline with low labor costs — can’t earn a profit on its Wichita route at the fares it charges, how can the “legacy” airlines be expected to do so? And if they can’t earn a profit, how can we expect them to continue providing service in Wichita?

The answer is this: we can’t expect the legacy airlines to continue their present levels of service in Wichita as long as we continue to apply price controls.

For all the gushing over AirTran, try using it to get to some of the destinations I regularly fly to: Lexington, Jackson, Cincinnati, and Tallahassee. But I can get to these cities on most of the legacy airlines — the very airlines that we are punishing. If we lose the service of the legacy airlines, we will be in deep trouble.

If we want to allow Mr. Williams’s dream of a successful Wichita airport to come true, we need to let market forces set fares. Any other solution will cause — and has already caused — our city harm.