In this episode of WichitaLiberty.TV. Sedgwick County Commissioner Richard Ranzau joins Bob Weeks and Karl Peterjohn to discuss current issues in Sedgwick County government. View below, or click here to view at YouTube. Episode 150, broadcast May 7, 2017.
Tax rates in the city of Wichita:
City of Wichita 32 mills (27 percent of total)
Sedgwick County 29 mills (25 percent)
School district 54 mills (46 percent)
State 21.5 mills (18 percent)
Total 117 mills
Are the City of Wichita’s projections regarding subsidized development as an economic driver believable?
This week the Wichita City Council will consider a project plan for a STAR bonds district near Downtown Wichita. These bonds divert future incremental sales tax revenue to pay for various things within the district.1
City documents promise this: “The City plans to substantially rehabilitate or replace Lawrence Dumont Stadium as a modern multi-sport stadium as part of a larger project to develop the river and stadium areas. … Combined, the museum, pedestrian bridge, waterfront improvements and multi-sport stadium will generate significant new visitor tourism as well as provide signature quality of life amenities for the citizens of Wichita and the region.”2
We’ve heard things like this before. Each “opportunity” for the public to invest in downtown Wichita is accompanied by grand promises. But actual progress is difficult to achieve, as evidenced by the lack of progress in Block One.3
In fact, change in Downtown Wichita — if we’re measuring the count of business firms, jobs, and payroll — is in the wrong direction, despite public and private investment.4
Perhaps more pertinent to a sports facility as an economic growth driver is the Intrust Bank Arena. Five years ago the Wichita Eagle noted the lack of growth in the area.5 Since then, not much has changed. The area surrounding the arena is largely vacant. Except for Commerce Street, that is, and the businesses located there don’t want to pay their share of property taxes.6
I’m sure the city will remind us that the arena was a Sedgwick County project, not a city project, as if that makes a difference. Also, the poor economic performance cited above is for Downtown Wichita as delineated by zip code 67202, while the proposed STAR bond project lies just outside that area, as if that makes a difference.
By the way, this STAR bonds district is an expansion of an existing district which contains the WaterWalk development. That development has languished, with acres of land having been available for development for many years.
“Ten years ago, Elizabeth Stevenson looked out at the neighborhood where a downtown arena would soon be built and told an Eagle reporter that one day it could be the ‘Paris of the Midwest.’ What she and many others envisioned was a pedestrian and bike-friendly neighborhood of quaint shops, chic eateries and an active arts district, supported by tens of thousands of visitors who would be coming downtown for sporting events and concerts. It hasn’t exactly turned out that way. Today, five years after the opening of the Intrust Bank Arena, most of the immediate neighborhood looks much like it did in 2004 when Stevenson was interviewed in The Eagle. With the exception of a small artists’ colony along Commerce Street, it’s still the same mix of light industrial businesses interspersed with numerous boarded-up buildings and vacant lots, dotted with ‘for sale’ and ‘for lease’ signs.” Lefler, Dion. 5 years after Intrust Bank Arena opens, little surrounding development has followed.Wichita Eagle. December 20, 2014. Available at http://www.kansas.com/news/local/article4743402.html. ↩
Even if we accept the measure of jobs used by the City of Wichita, the trend is in the wrong direction. Citizens should ask for truth and accountability.
The City of Wichita and its surrogates tell us there are 26,000 daytime workers in downtown Wichita, defined as zip code 67202. There is a serious problem with that number, as it includes workers whose “administrative home” is downtown, even though they work somewhere else.1 The largest example of this is the counting of all Wichita school district employees as downtown workers, even though almost all work in schools and other locations throughout the city.
But even if we use the statistic promoted by the Wichita Downtown Development Corporation, the trend in jobs is in the wrong direction. WDDC promotes the large investment in downtown Wichita, by both private and public sources. But employment is trending in the opposite direction.
As Wichita considers other large downtown investments, such as STAR bond financing for the west bank of the Arkansas River or a new convention center and performing arts center, we should ask at least two questions:
Can we depend on the city to use meaningful and truthful data?
Will the city recognize the lackluster results of its economic development efforts?
Shouldn’t we insist on progress in projects like Block One before proceeding elsewhere?2
In this episode of WichitaLiberty.TV: Kansas Policy Institute Dave Trabert joins Bob Weeks and Karl Peterjohn to discuss the Kansas economy, budget, and schools. View below, or click here to view at YouTube. Episode 149, broadcast April 30, 2017.
It is cited by our chief economic development agency.2
The city’s downtown development agency uses this number in brochures and annual reports.34
It appears in a federal grant application made by the city.5
It appears in our state’s largest newspaper, as reported by a journalist billed as a data specialist.6
It appears in a Wichita specialty business newspaper quoting a Wichita business leader.7
It’s advertised on a vacant downtown building, the former Henry’s store at Broadway and William.
The Wichita Downtown Development Corporation states the data for workers in downtown Wichita, which is defined for these purposes as zip code 67202, comes from the United States Census Bureau, specifically an application called “OnTheMap Application and LEHD Origin-Destination Employment Statistics.”8 The data is commonly known as LODES. Using this application and focusing analysis on zip code 67202 produces the figure 25,850 primary jobs. Round that to 26,000, and that’s the source of the job claims for downtown Wichita.
But: Census documentation for this data gives the definition of the place of work and a cautionary note: “A place of work is defined by the physical or mailing address reported by employers in the QCEW (formerly ES-202) or Multiple Worksite Reports. An address from administrative data may or may not be the actual location that a worker reports to most often.”
The Census Bureau continues with another warning regarding this data: “Nonreporting of multiple worksites is especially common with state and local governments and school districts. In such a case, LEHD infrastructure files assign all workers for that employer (within the state) to the main address provided.”9
This is highly relevant and important in the case of downtown Wichita. When using the OnTheMap application for zip code 67202, there are two large bright blue dots that stand out from all others. These represent the two highest concentrations of workers in downtown Wichita. One is Census block 201730043001036, which has 7,740 employees. This is a one square block area from First to Second Streets, and Wichita to Water Streets. The block consists mostly of surface parking lots, although there are three buildings. One building is the Wichita school district administration building, and there’s the problem with the way the city uses this data. The school district has thousands of employees. Only a small fraction, however, work in the downtown administrative building at First and Water Streets. The rest are dispersed throughout the city in school buildings and other sites such as the large facility at 37th Street North and Hydraulic.
But this Census data counts all these employees in one census block. This is an example of the warning the Census Bureau supplies with the data: Nonreporting of multiple worksites is especially common with state and local governments and school districts.
There’s another example. The second largest concentration of workers in downtown Wichita appears in Census block 201730043001023, which has 3,437 employees. This is the block that holds Wichita city hall. In 2014 the city had 3,270 employees. But they don’t all work at Main and Central. They’re dispersed throughout the city in police stations, fire stations, and other sites.
(By the way, the 26,000 number is often qualified as daytime workers. But we know that many police officers and firefighters work at night. The same is true for people working at the many hotels, restaurants, and bars in downtown. They aren’t all daytime workers.)
Here’s something to consider: The Wichita school district is moving its administrative offices to the former Southeast High School building at Lincoln and Edgemoor. That’s in zip code 67218. What will happen to the reporting of jobs in downtown Wichita when some seven thousand workers start receiving their paychecks from an office in that zip code, and the Census Bureau adjusts it data accordingly?
So how many people do actually work in downtown Wichita, zip code 67202? A different set of Census data gives the number 13,593 for 2014.10 This data is much more representative of the number of people actually working in a location, although it includes private-sector workers only. Se we might add a few to that number. But it’s clear that the claim of 26,000 workers is far from true.
We’re told that the city makes decisions based on data and analysis. In the city manager’s policy message in the current city budget, the manager wrote: “In 2016, the City was selected by Bloomberg Philanthropies as a What Works City for making a public commitment to use data for informed decision making.” The same document also states: “Departmental goals and data drive decision making within each department.”
The use of data for decision making is especially important for downtown planning, we’ve been told. In selling the plan for downtown Wichita in 2010, the city’s consultants told us that the plan is “grounded in data and hard analysis.”11 But I showed that data the consultants relied on — a “walk score” — was based on nonsensical data.
We’re left with a few observations:
The claim of 26,000 workers in downtown Wichita is true. But as we’ve seen, it is not true in the way it is used, which is as an indication of the number of human beings actually working in downtown.
Did the person who gathered this data about downtown workers know what it means? If not, why not?
Did the person who decided to use this data in marketing downtown Wichita know what it means? If not, why not?
If someone knew the meaning of this data and decided to use it anyway: What does that tell us?
Did no one at Wichita city hall look at this data? As I’ve shown, it’s easy to see that the mapping application says 3,437 people work in the block holding city hall. Did no one look at the big blue dot and that number and realize that it is not real?
What if you opened a lunch counter in downtown Wichita based on the claim of 26,000 daytime workers, and then you learn there are really only half that many, with some of those working at night?
We want to trust our city leaders. We want downtown Wichita and the entire metropolitan area to succeed so that people may prosper and be happy. But episodes like this destroy trust and breed well-deserved cynicism. We can — we must — do better than this.
City of Wichita. Proposed Budget 2017 – 2018. Page 2. “Over 26,000 workers also populate downtown every day, working in industries such as education, finance, manufacturing, health care, government, and retail. ↩
Greater Wichita partnership. Living & Working. “With a highly trained pool of talent and a deeply rooted entrepreneurial spirit, Downtown Wichita is work central, boasting 26,000 daytime workers in the financial, healthcare, education, oil & gas and creative services industries.” Available at http://greaterwichitapartnership.org/living_working/downtown_wichita. ↩
“For LODES, a place of work is defined by the physical or mailing address reported by employers in the QCEW (formerly ES-202) or Multiple Worksite Reports. An address from administrative data may or may not be the actual location that a worker reports to most often. The distinction of worksite and administrative address may be especially significant in some industries such as construction, where work is often carried out at temporary locations. In some cases, employers do not provide a multiple worksite report when it would be appropriate to do so. Nonreporting of multiple worksites is especially common with state and local governments and school districts. In such a case, LEHD infrastructure files assign all workers for that employer (within the state) to the main address provided. Bureau of Labor Statistics (BLS) data show a national noncompliance rate of 5.61 percent of multiunit employers responsible for about 4.45 percent of multiunit employment.” Matthew R. Graham, Mark J. Kutzbach, and Brian McKenzie. Design comparison of LODES and ACS commuting data products. Available at ftp://ftp2.census.gov/ces/wp/2014/CES-WP-14-38.pdf. ↩
Whatever the mechanism, tax increment financing is meant to spur economic growth. But in one of Wichita’s largest TIF districts, economic activity, much less growth, is difficult to find.
In particular, “Block One” — a square block bounded by Douglas and William, Broadway and Topeka — has benefited from TIF money, but has stumbled. There is the Ambassador Hotel, which received many millions in taxpayer subsidy in addition to TIF benefits. There is also the Kansas Leadership Center, a handsome new building.
But on William Street, progress is harder to find.
The former Henry’s building remains empty. Promotional materials in its display windows have been fading in the sun for four years. Across the alley to the east is 8,400 square feet of retail space, all empty for four years except for a used book store. It’s not for lack of parking that this space is empty, as it lies underneath a taxpayer-funded parking garage. There’s plenty of on-street parking too, as little happens on this block.
Some of the surrounding property is not doing well, either. The Broadway Plaza building features a large ground floor office or retail space that has been empty for years. South of that, the former State Office Building — directly across Broadway from the former Henry’s building — faces possible demolition.
Has there been lack of promotion for Block One? No. The downtown development agency uses it as an example of the success of its efforts in downtown Wichita. It has called it “the first complete city block of development along the core of Douglas Avenue.”
But the legacy of this, at least along William Street, is empty storefronts and a hulking vacant building.
Now the City of Wichita has approved the formation of yet another tax increment financing district. Sedgwick County and the Wichita School District have an opportunity to veto its formation. Before approving any new tax increment financing districts, we might want to ask for some progress in what we have.
By Paul Waggoner. This column first appeared in the Hutchinson News.
Listening too often to Topeka politicians and administrators can leave a normal person feeling rather jaded, even used. Or maybe it’s the reporting, sometimes I just don’t know.
Such was the case Tuesday reading the News report of Kansas Dept of Education Deputy commissioner Dale Dennis speech to the local Rotary club (Hutchinson News, April 18, “Ed Official: Fund Gap numbers shocking”). His talk was filled with boilerplate and themes typical of the education establishment.
Mr. Dennis made multiple comparisons and statements of fact to prove his points. In the article by the News own Mary Clarkin, Mr. Dennis set up a paradigm of school under-funding by noting that “in 1992 base state aid per pupil was $3,600”, while now it is only $ 3,852. If the amount had just been adjusted for inflation “it would be $6001.12”. Those cheapskate legislators!
These disheartening numbers for funding over the last 25 years, Mr. Dennis told the crowd, “are shocking, shocking”. Then he went on to tout House Bill 2410 that would raise base state aid to $4,006 next year and $4,800 per pupil by 2021. The total cost of this bill would come to $750 million. Which, Ms. Clarkin summarizes, would get us “back to where the state should have been in 2015-16”’.
I am not an educator, but I am a business person and I am conversant with state budget and spending numbers. Mr. Dennis, I hope to show, should be embarrassed by his comments; but even more, the News should be embarrassed by their article.
The data on Kansas K-12 spending is easily accessible at the Kansas Dept of Education website ksde.org. Going back 20 years to Gov. Graves and 1997 you see total state funding of $1,815 million, rising to $3,950 million in 2016, a 117 percent increase! But the inflation rate during this period was only 47 percent, and the student count was up just three percent. Surprised?
Total spending (state/federal/local) is the best indicator of overall education financing. Plus you avoid disputes over how KPERS should be counted (whether state or local) and you get a genuine bottom dollar cost.
Many News readers need to let these numbers sink in. This is not spin, this is official data, Total spending went from $6,828 to $12,188 per pupil in barely 10 years.
Now Mr. Dennis was giving you a “fact” on base state aid, but he avoided telling our esteemed Rotarians that in the 1990s “base state aid” was 90 percent of the money Kansas provided our schools, but by 2005 it was only 65 percent of Kansas school funding, and in 2015 it was barely 50 percent. The ksde.org website listed over 25 different avenues state money now flows to local schools.
Ms. Clarkin of the News is an intelligent women and if some Department of Commerce representative came touting “shocking” job growth numbers in Kansas she surely would have noted evidence or context to the contrary. But Mr. Dennis utter factual inaccuracies go unchallenged.
Many seem to think it is “anti-education” to point out the real spending numbers. But to ignore the context of the 12 years prior to Brownback and the 80% increase in state K-12 spending is insane. Does any genuine public servant think that spending trajectory was sustainable?
The actual K-12 spending information is just a few clicks away from us for any school district or the state as a whole. The Rotarians of 2017 are a sensible group and will (I trust) rotate their minds with the actual data and judge accordingly.
But I, for one, am forever shocked (shocked!) by how disingenuous Topeka bureaucrats and our Kansas news media continue to be. And in that I expect I will have plenty of company as this legislative year moves forward.
Paul Waggoner is a Hutchinson resident and business owner. He can be reached with comments at [email protected]
In Rich States, Poor States, Kansas improves its middle-of-the-pack performance, but continues with a mediocre forward-looking forecast.
In the 2017 edition of Rich States, Poor States, Utah continues its streak at the top of Economic Outlook Ranking, meaning that the state is poised for growth and prosperity. Kansas continues with middle-of-the-pack performance rankings, and after falling sharply in the forward-looking forecast, continues at the same level.
Rich States, Poor States is produced by American Legislative Exchange Council. The authors are economist Dr. Arthur B. Laffer, Stephen Moore, who is Distinguished Visiting Fellow, Project for Economic Growth at The Heritage Foundation, and Jonathan Williams, who is vice president for the Center for State Fiscal Reform at ALEC.
In addition to the printed and pdf versions of Rich States, Poor States there is now an interactive web site at www.richstatespoorstates.org.
Rich States, Poor States computes two measures for each state. The first is the Economic Performance Ranking, described as “a backward-looking measure based on a state’s performance on three important variables: State Gross Domestic Product, Absolute Domestic Migration, and Non-Farm Payroll Employment — all of which are highly influenced by state policy.” The process looks at the past ten years.
Looking forward, there is the Economic Outlook Ranking, “a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less — especially on income transfer programs, and states that tax less — particularly on productive activities such as working or investing — experience higher growth rates than states that tax and spend more.”
For economic performance (the backward-looking measure), Kansas ranks twentieth. That’s up from twenty-seventh last year.
In this year’s compilation for economic outlook, Kansas ranks twenty-sixth, up one position from the previous year, but down from eighteenth and fifteenth the years before. In 2008, the first year for this measure, Kansas was twenty-ninth.
Kansas compared to other states
A nearby chart shows the Economic Outlook Ranking for Kansas and some nearby states, shown as a trend over time since 2008. The peak of Kansas in 2013 is evident, as is the decline since then.
Why Kansas fell
Kansas fell in the Economic Outlook Ranking from 2013 to 2016 and moved by just one position in 2017. To investigate why, I gathered data for Kansas from 2008 to 2017. The nearby table shows the results for 2017 and the rank among the states, with the trend since 2008 shown. A rank of one is the best ranking. For the trend lines, an upward slope means a decline in ranking, meaning the state is performing worse.
There are several areas that account for the difference.
The most notable change is in the measure “Recently Legislated Tax Changes (per $1,000 of personal income)” Kansas fell four positions in rank. By this measure, Kansas added $2.66 in taxes per $1,000 of personal income, which ranked forty-sixth among the states. This is a large change in a negative direction, as Kansas had ranked seventh two years before.
For the state liability system, Kansas ranks nineteenth, when it was fifth two years ago.
Kansas remains one of the states with the most public employees, with 669.8 full-time equivalent employees per 10,000 population. This ranks forty-eighth among the states.
Kansas has no tax and spending limits, which is a disadvantage compared to other states. These limitations could be in the form of an expenditure limit, laws requiring voter approval of tax increases, or supermajority requirements in the legislature to pass tax increases.
How valuable is the ranking?
After the 2012 rankings were computed, ALEC looked retrospectively at rankings compared to actual performance. The nearby chart shows the correlation of ALEC-Laffer state policy ranks and state economic performance. In its discussion, ALEC concluded:
There is a distinctly positive relationship between the Rich States, Poor States’ economic outlook rankings and current and subsequent state economic health.
The formal correlation is not perfect (i.e., it is not equal to 100 percent) because there are other factors that affect a state’s economic prospects. All economists would concede this obvious point. However, the ALEC-Laffer rankings alone have a 25 to 40 percent correlation with state performance rankings. This is a very high percentage for a single variable considering the multiplicity of idiosyncratic factors that affect growth in each state — resource endowments, access to transportation, ports and other marketplaces, etc.
In Kansas, a governor is proud of savings and efficiencies.
Can you guess which Kansas governor and administration did these things?
Looked for future highway projects “where it seemed the amount of money set aside exceeded the need, or where the scope of individual projects had changed,” and took credit for $278 million in savings.
Took credit for saving $67 million by adjusting the inflation rates used in estimating future project costs.
Took credit for $306 million in savings by spending reserve funds, deciding that money wasn’t needed just “sitting in the bank.”
Refinanced bonds so that payments would be lower for a few years, but higher afterwards.
There has been much investment in Downtown Wichita, both public and private. What has been the trend in business activity during this time?
According to the 2016 report from the Wichita Downtown Development Corporation, over the past decade there has been $602 million in private investment and $369 million in public investment in downtown. An additional $190 million investment is in the form of the Intrust Bank Arena. The total, according to WDDC, is $1,161 million.1
What has been the result of this investment? If you expected business growth in downtown Wichita, you may be disappointed.
The United States Census Bureau tracks business data by zip code.2 The data that is available includes the number of business establishments, the number of employees, and the annual payroll, expressed in thousands of dollars not adjusted for inflation. It includes private-sector workers only, so it does not count all workers.
Nearby are results for zip code 67202, which has nearly the same boundaries as the Self-Supporting Municipal Improvement District (SSMID). This is a district that pays extra property tax for supporting the WDDC. Its boundaries are from Kellogg north to Central, and the Arkansas River east to Washington. It is greater Downtown Wichita plus Old Town.
The results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower.
This is movement in the wrong direction, the opposite of progress. There may be good news in that the number of people living downtown may be rising. But business activity is declining.
Discussions of public policy need to start from a common base of facts and information. An episode shows that both our state government and news media are not helping.
A recent Hutchinson News article1 started with this:
Once you wake up to where Kansas was in 1992 at funding schools and what it needs to do to get caught up, said the Kansas Department of Education’s Deputy Commissioner Dale Dennis, it’s a shocker.
In 1992, base state aid per pupil was $3,600. That amount, taking into account the Consumer Price Index, would be the equivalent of $6,001.12 in 2013. Base state aid, however, has been frozen at $3,852 since 2014-15.
“The numbers are shocking, shocking,” Dennis told the Hutchinson Rotary Club at its Monday luncheon meeting at the Hutchinson Town Club.
Why is a speech by a government bureaucrat, as covered in a major newspaper, important? It illustrates two problems we face in understanding, discussing, and debating important matters of public policy.
First, can government be truthful and accurate? Dale Dennis — the state’s top official on school finance — certainly knows that the numbers he presented do not accurately characterize the totality of school spending in Kansas. But the problem is even worse than that. To use base state aid as the indicator of state spending on schools is deceptive. It’s deceptive in that, after adjusting for inflation, base state aid has declined. But total state aid to school districts has increased.
Base state aid is a false indicator of total spending on schools by the state. It’s fake — fake government. And for a newspaper to uncritically present this as news illustrates the second problem we face.
Background on base state aid and school spending
Base state aid per pupil — the statistic Dennis presented — is an important number.2 It’s the starting point for the Kansas school finance formula used before the 2015-2016 (fiscal 2016) school year, and something like it may be used in a new formula.3
Base state aid, however, is not the only important number. To calculate the funding a school district receives, weightings are added. If students fall into certain categories, weightings for that category are added to determine a weighted enrollment. That is multiplied by base state aid to determine total state aid to the district. 4
While this may seem like a technical discussion that doesn’t make a difference, it’s very important, because some of the weightings are large. The at-risk weighting, intended to cover the additional costs of teaching students from low-income families, started at five percent in 1993. In other words, for every student in this category, a school district received an extra five percent of base state aid. The value of this weighting has risen by a factor of nine, reaching 45.6 percent starting with the 2008-2009 school year.
There’s also the high-density at-risk weighting. Starting with the 2006-2007 school year districts with a high concentration of at-risk students could receive an extra weighting of four percent or eight percent. Two years later the weightings were raised to six percent and ten percent. (This formula was revised again in 2012 in a way that may have slightly increased the weightings.)
The weightings have a large effect on school funding. For example: During the 2004-2005 school year, base state aid was $3,863 and the at-risk weighting was ten percent. An at-risk student, therefore, generated $4,249 in state funding. (Other weightings might also apply.)
Ten years later base state aid was $3,852 — almost exactly the same — and the at-risk weighting was up to 45.6 percent. This generates funding of $5,609. For a district that qualified for the maximum high-density at-risk weighting, an additional $404 in funding was generated. (These numbers are not adjusted for inflation.)
So even though base state aid remained (almost) unchanged, funding targeted at certain students rose, and by a large amount.
Over time, values for the various weightings grew until by 2014 they added 85 percent to base state aid. A nearby chart shows the growth of total state aid as compared to base state aid. (Starting in fiscal 2015 the state changed the way local tax dollars are counted. That accounts for the large rise for the last year of data in the chart. For school years 2016 and 2017, block grants have replaced the funding formula, so base aid and weightings do not apply in the same way.)
What have we learned?
We’re left wondering a few things:
Did Deputy Superintendent Dale Dennis tell the audience that base state aid is just part of the school funding landscape, and not reflective of the big picture? Did he tell the audience that total state aid to schools has increased, and increased substantially? If so, why wasn’t it mentioned in the article?
If Dale Dennis did not tell the audience these things, what conclusions should we draw about his truthfulness?
Why didn’t the Hutchinson News article explain to readers that base state aid is not an accurate or total indicator of total state spending on schools?
What is the duty of reporters and editors? We’re told that experienced journalists add background and context to the news — things that the average reader may not know. (This article is designated as “Editor’s Pick” by the Hutchinson News.)
By the way, the Wichita Eagle, on its opinion page, cited in a positive and uncritical manner the Hutchinson News article.5 This is notable as the writer of the Eagle piece, opinion editor Phillip Brownlee, was a certified public accountant in a previous career. This is someone we should be able to trust to delve into numbers and tell us what they mean. But that isn’t the case.
Whatever your opinion on the level and trend of school spending, we need to start the discussion from a common base of facts and information. From this episode, we see that both our state government and news media are not helping.
In this episode of WichitaLiberty.TV: Danedri Herbert of The Sentinel joins Bob Weeks and Karl Peterjohn to discuss news reporting and politics in Kansas. View below, or click here to view at YouTube. Episode 148, broadcast April 23, 2017.
Effective July 1, 2015, the tax on cigarettes in Kansas rose by $0.50 per pack, going from $0.79 to $1.29 per pack. For the three years prior to that date cigarette tax collections averaged about $7.5 million per month. Since then collections has averaged about $11.1 million per month. But, as the chart shows, the trend is down. For February 2017 collections were $8.7 million, almost exactly the same as the month before the tax hike took effect.
Details of the subsidy programs used to keep Cargill in Wichita are starting to take shape.
This week the Wichita City Council will consider one of the (potentially many) subsidy programs offered to keep Cargill in Wichita.
Cargill Protein Group is currently located at 151 N. Main. The plan is for Cargill to purchase and demolish the Wichita Eagle building at 825 E. Douglas, then build a new office building in its place. The subsidy program to be considered this week is the Industrial Revenue Bond program1. The city won’t be lending Cargill money. Instead, IRB’s are a (convoluted) method whereby local governments are able to forgive the payment of property taxes. For the case of Cargill, city documents state the tax forgiveness could be worth $1,359,531 per year.2 This would be shared by these taxing jurisdictions, again according to city documents.
City of Wichita: $378,450
Sedgwick County: $340,958
USD 259, the Wichita Public School District: $622,723
State of Kansas $17,400
Of note, the city is in a hurry to handle this matter. Pending legislation would reduce the amount of property tax able to be exempted.3
In addition to the property tax exemption, the IRBs also carry a sales tax exemption for purchases related to construction. City documents give an estimated value of $2,026,291 for the sales tax Cargill will not have to pay.
Not the entire subsidy package
The action to be considered this week is likely just a portion of total subsidy package. For example, at one time it was speculated that the City of Wichita would build a parking garage and let Cargill use it as their own. With a proposed capacity of 750 parking spots, this would cost many millions.4
Now, the city plans to let Cargill construct the garage, and the city will, according to city documents, “purchase a parking easement from Cargill to obtain public access to the parking structure Cargill will complete as part of this project.” It sounds like the city will rent spaces in the garage. It will be interesting to see the rate the city will agree to pay.
From the state of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill.5 (Well, only 95 percent goes back to Cargill. The state keeps five percent.)
Recently the city paid $4.73 million (not including change orders) to build a downtown garage with 270 parking spaces, a cost of about $17,500 per stall. Applying that to a 750 stall garage results in a cost of $13.1 million). ↩
In this episode of WichitaLiberty.TV: Kansas Senator Ty Masterson joins Bob Weeks and Karl Peterjohn to discuss legislative issues and politics. View below, or click here to view at YouTube. Episode 147, broadcast April 16, 2017.
From the Wichita Pachyderm Club: Members of the Kansas Legislature from the Wichita area briefed members and guests on happenings in the Kansas Senate and House of Representatives. Recorded April 14, 2017. Members appearing, in order of initial appearance, are:
The issue the commission was considering, significant in its own right, is not important to the following discussion. It’s the process that needs improvement.
There was a proposed ordinance. Commissioner Jim Howell offered two amendments — really substitute motions — that altered the proposed ordinance. Each failed by votes of three to two.
Howell had two more motions to offer. But Commissioner David Dennis moved a motion to end the offering of additional motions. In this vote the majority prevailed, and Howell was silenced. Commissioners voting to end debate were Chair Dave Unruh, Michael O’Donnell, and Dennis. Richard Ranzau and Howell opposed the motion to end debate.
The county commission is not a deliberative body like a legislature. The county does not have committees like a legislature. I’m not advocating for the county to form committees, but here’s what is missing from the county process: There is no opportunity for interested parties — often lobbyists, but also regular people — to testify before a committee as legislation is being developed. There is no committee mark-up process in which the text of a bill is crafted and finalized. There is no committee vote that decides whether to recommend the bill to the entire legislative body.
Some of this happens in Sedgwick County, of course, but mostly behind the scenes. There is the county staff meeting Tuesday morning, when the commissioners meet with staff in an informal setting. While this meeting is open to the public, there is rarely news coverage. (Hint to county staff: These meetings could easily be broadcast and archived on the internet without much cost or effort.)
In a legislature, when a bill is considered by the entire body, there is usually an amendment process. They may be many amendments that require time to debate and consider. This process was mentioned by two commission members who have served in the Kansas legislature.
But it seems a majority of Sedgwick County Commission members don’t care for this process.
I understand why some commissioners wanted to end debate. Sometimes amendments to legislation create a moment where legislators have to cast a vote on an issue, often a finely-grained issue. Sometimes that vote is used as a campaign issue in future elections. Those votes may appear in compilations of legislative activity that reveal how legislators vote.
But amendments and debate are part of the legislative process. Commissioner Howell had several amendments that he had prepared in advance. They were not off-the-cuff, spur-of-the-moment ideas. They were crafted to attempt to find a compromise that a majority of commissioners could accept.
But a majority of Sedgwick County Commission members didn’t want that.
Perhaps some commissioners where concerned about the meeting becoming lengthy. We see that from Wichita City Council members. They’re paid a part-time salary, so maybe there’s merit to their carping about long meetings.
But Howell’s amendments took just a few minutes each to consider. And — this is highly relevant — the members of the Sedgwick County Commission are paid a handsome full-time salary. They should not object to the meeting lasting all day, if that’s what it takes to serve the citizens. And citizens were not well-served by the commission’s decision to silence one of its members.
An interactive map of voting in the special congressional election in Kansas district 4, for Sedgwick County only.
Intensity of red indicates higher percentage of votes for Ron Estes. By using the interactive map (link below) you may zoom and pan. Click on a precinct to see details of its vote. Precinct sizes — in terms of the number of voters — vary widely. Precincts cast anywhere from one to 950 votes.
This is data for Sedgwick County only. (It’s the only data I have at the moment.) Sedgwick County cast 67.9 percent of the votes in the district.
Click here to access the interactive map. Built with Google Fusion tables.
Tomorrow the Sedgwick County Commission will consider raising its limit on borrowing for reasons which need to be revealed, and then carefully examined.
Update: By vote of three to two, the commission adopted the second item in the following list, implementing a higher debt limit.
There are three proposals for a policy regarding a debt limit for Sedgwick County government, according to information from the county’s finance office:
2017 cap in current policy (debt service payments as % of budgeted expenditures): 9% = $126,341,621
2017 cap included in March 22 agenda item (debt service payments as % of budgeted expenditures): 10% = $155,303,346
2017 cap using Commissioner Howell’s comments from the bench on March 22 (% of assessed value): 3% = $135,944,585
The third option has intuitive appeal as it pegs the borrowing limit to the county’s primary source of income to pay debt, which is property tax. In any case, taxpayers might wonder why the county is considering any proposal to raise the amount it can borrow.
Why borrow more?
Personal correspondence from Sedgwick County Commissioner Richard Ranzau last month explains the changes the Commission is scheduled to hear tomorrow:
In 2016, the Board of County Commissioners modified the debt policy by limiting the annual debt service obligations (the amount we pay in principal and interest on a yearly basis) to 9% of budgeted expenditures until January 1, 2019, at which time the maximum will decrease to 8%. The previous maximum had been 20% with the County’s annual debt service hovering around 10% of budgeted expenditures. The policy was amended in an effort to place meaningful yet reasonable limits out the County’s borrowing capacity so as to avoid unnecessary habitual borrowing and excessive spending on projects “just because we can.”
The County’s current annual debt service is 8.22% and will fall below 8% in 2018.
No reason or project has been given as to why this change is needed. The county currently has no plans to issue debt for anything in 2017.
A nearby table summarizes and compares the present policy with debt limits that would exist under the new policy, according to the Sedgwick County Financial Office. (There is an alternative interpretation of policy that if used, would limit borrowing in 2019 to $73,218,639.)
Ranzau’s correspondence says there have been no reasons given for the need to change the debt limit, and that there is no plan to issue debt in 2017.
But that’s the county’s public position. Internally, there is consideration of borrowing and bonding in 2017. Some is for projects already completed and paid for.
Borrowing against the Ronald Reagan Building at 271 W. Third St. is being considered in the amount of $4.0 million. That’s $2.1 million of renovations already completed, plus $1.9 million in planned renovations already paid for.
Borrowing against the Downtown Tag Office at 2525 W. Douglas is considered at $2.3 million. This project has been paid for.
Additionally, the county may borrow to pay for the new Law Enforcement Training Center, in the amount of $5.5 million. This building is under construction, but the county has already transferred cash to the capital improvement fund that is designated to pay for this building.
Why would these buildings — some paid for, another for which cash is already set aside — be under consideration for bond issues?
An analogy is in personal finance, where a family might — after many years — pay off the mortgage on their house. Or maybe they saved and purchased the house outright without borrowing.
But then, the family takes out a mortgage — a new loan — on the house to have additional money for current spending. And more current spending is likely what some Commission members have in mind, as there is no need to take out a mortgage on property owned free and clear unless one wants to spend on something else.
Further, there are more projects the county may consider starting in years through 2021, using borrowing through bonds as payment. These total to $59.4 million, which is within the $61.6 million of borrowing allowed just through 2019. (That limit rises each year.)
This seems to contradict the need for a higher debt limit.
Before approving a higher borrowing limit, Sedgwick County Commissioners need to explain the need for the higher limit, and let taxpayers know if they’re about to be saddled with new mortgages on properties we thought we owned outright.