WichitaLiberty.TV: David Schneider on Convention of States

In this episode of WichitaLiberty.TV: David Schneider of Citizens for Self-Governance joins Bob Weeks and Karl Peterjohn to explain the Convention of States project. View below, or click here to view at YouTube. Episode 154, broadcast June 18, 2017

Shownotes

In Kansas, sweeps to continue

Even though the Kansas Legislature raised taxes, sweeps from the highway fund will continue.

Spending on major road programs in Kansas. Click for larger.
Why did the legislature and governor raise taxes in Kansas? One reason cited by many is the need to stop “robbing the highway fund.” This refers to transferring (“sweeping”) money from a fund in the Kansas Department of Transportation to the state’s general fund, where the money is then spent on things besides highways. There was bipartisan agreement that this practice should stop. Highways were falling apart, it was said, even though spending on major road maintenance programs continued at about the same level. 1

The real danger in transferring money from the highway fund is that KDOT borrows money — a lot of money. And instead of that money being spent on long-lived assets like roads and bridges, that borrowed money is spent on current consumption.

But: Guess what? Transfers from the highway fund to the general fund are scheduled to continue for another two years, based on the budget passed by wide margins in both chambers of the legislature. 2

Language in the budget calls for quarterly sweeps totaling $288,297,663 in fiscal year 2018, with the first sweep on July 1, 2017. 3

For fiscal year 2018, the total of the quarterly sweeps is $293,126,335. 4

Transfers from sales tax to Kansas highway fund. Click for larger.
There are several ways to look at these transfers. We might look at it as reclaiming from the highway fund some of the sales tax the state collects. That amount has grown. In 2006 the transfer of sales tax revenue to the highway fund was $98,914 million. In 2016 it was $517,698 million, an increase of $418,784 million or 423 percent. 5

But if the legislature wanted to alter the transfer of sales tax, it could have done so by altering the law that specifies the rate of transfer. That promotes transparency.

The budget authorizes the transportation department to borrow up to $400 million in each of the next two fiscal years. There will be pressure to issue those bonds.


Notes

  1. Weeks, Bob. Highway budget cuts and sweeps in Kansas. Available at https://wichitaliberty.org/kansas-government/highway-budget-cuts-sweeps-kansas/.
  2. Conference Committee Report for HB 2002. Available at http://www.kslegislature.org/li/b2017_18/measures/hb2002/.
  3. Sec. 163 (i). On July 1, 2017, October 1, 2017, January 1, 2018, and April 1, 2018, or as soon thereafter each such date as moneys are available, the director of accounts and reports shall transfer $72,074,415.75 from the state highway fund (276-00-4100-4100) of the department of transportation to the state general fund: Provided, That the transfer of each such amount shall be in addition to any other transfer from the state highway fund of the department of transportation to the state general fund as prescribed by law: Provided further, That, in addition to other purposes for which transfers and expenditures may be made from the state highway fund during fiscal year 2018 and notwithstanding the provisions of K.S.A. 68-416, and amendments thereto, or any other statute, transfers may be made from the state highway fund to the state general fund under this subsection during fiscal year 2018.
  4. Sec. 164 (i). On July 1, 2018, October 1, 2018, January 1, 2019, and April 1, 2019, or as soon thereafter each such date as moneys are available, the director of accounts and reports shall transfer $73,281,583.75 from the state highway fund (276-00-4100-4100) of the department of transportation to the state general fund: Provided, That the transfer of each such amount shall be in addition to any other transfer from the state highway fund of the department of transportation to the state general fund as prescribed by law: Provided further, That, in addition to other purposes for which transfers and expenditures may be made from the state highway fund during fiscal year 2019 and notwithstanding the provisions of K.S.A. 68-416, and amendments thereto, or any other statute, transfers may be made from the state highway fund to the state general fund under this subsection during fiscal year 2019.
  5. Weeks, Bob. Highway budget cuts and sweeps in Kansas. Available at https://wichitaliberty.org/kansas-government/highway-budget-cuts-sweeps-kansas/.

Kansas bills deserve the veto pen

Kansas Governor Sam Brownback may exercise a line item veto over any item in the just-passed budget and school spending bills. Here are a few ideas that deserve the veto.

A small matter: In his recommended budget, Kansas Governor Sam Brownback recommended moving the Kansas Securities Commissioner to the Insurance Department. That happened. But his recommendation to move the Board of barbering to the Board of Cosmetology was not followed. As a result, $186,384 must be added to spending for FY 2018. This is all funds spending, not general funds. There is a deletion of spending from the Board of Cosmetology that partially offsets this spending, but it is a lost opportunity to save. 1 2

A large matter: The efficiency study commissioned by the legislature recommended savings in the method of acquiring health insurance for public school employees. This was not adopted. Therefore, $47,200,000 in general fund spending is added over what the governor recommended. 3 4

This is the type of spending that needs to be vetoed. Except: There is no line in a bill that designates this spending. Instead, this “spending” in the form of savings not realized. The governor should veto SB 19, the school funding bill, in part or in whole. Such a veto, along with a likely override, would send a message to Kansas taxpayers that the legislature chose to spend this money instead of pursuing needed efficiency.


Notes

  1. “For FY 2018 and FY 2019, the Governor recommends certain consolidations that include moving the Securities Commissioner to the Insurance Department and moving the Board of Barbering to the Board of Cosmetology. The Governor estimates that combining the agencies will create efficiencies and save money over the long-term.” The Governor’s Budget Report for Fiscal 2018, Vol. 1. p. 77
  2. Conference Committee Report for HB 2002, Sec. 12 (a)
  3. “The FY 2018 budget assumes savings of $47.2 million from implementation of Alvarez & Marsal efficiency recommendations to include K-12 health benefit consolidation and sourcing select benefit categories on a statewide basis.” Budget Report, p. 17
  4. “Add $47.2 million, all from the State General Fund, for removing savings associated with A&M recommendations for health insurance and procurement for FY 2018.” Bill Explanation For 2017 Senate Sub. For House Bill 2002, p. 10.

The yardstick for the Kansas experiment

A politician’s boasting should not be the yardstick for policy.

As noted by Ed Flentje in the Wichita Eagle:

As a newly elected governor in 2011 Brownback embraced the discredited, tax-cut dogma of Arthur Laffer in the belief that tax cuts would dramatically stimulate economic growth. He told a friendly audience that cutting income tax rates would generate even more revenue for government. Soon after, the governor elevated the bluster. His tax cuts would give “a shot of adrenaline in the heart of the Kansas economy.” “We’ll have a real live experiment.” “Look out Texas. Here comes Kansas!” “Glide path to zero.”

Despite Professor Flentje’s claim, there is much evidence that higher taxes, especially higher income taxes, mean lower economic growth. 1 2 3 (There’s also the side benefit of leaving more money in the hands of those who earned it, rather than transferring it to the wasteful public sector.) Cutting taxes — or raising taxes, for that matter — is a treatment that influences things in one direction. If other more powerful forces influence things in an opposite direction, it doesn’t mean the original treatment didn’t work.

In the case of Kansas, think how much worse things might be if not for the stimulative effect of the tax cuts.

Still, Governor Brownback should have been more measured in his remarks — or his bluster. He shouldn’t have followed the example of President Barack Obama. He, right after becoming president, promised that the unemployment rate would not top eight percent if his stimulus bill was passed. That plan passed.

In January 2009 two Obama administration officials, including Christina Romer (who would become chair of the Council of Economic Advisers) wrote a paper estimating what the national unemployment rate would be with, and without, the American Recovery and Reinvestment Plan, commonly known as the stimulus. The Romer paper included a graph of projected unemployment rates. The nearby chart from e21 took the Romer chart and added
actual unemployment rates. (The accompanying article is Revisiting unemployment projections. That chart and article were created in 2011. I’ve updated the chart to show the actual unemployment rate since then, as black dots. The data shows that the actual unemployment rate was above the Obama administration projections — with or without the stimulus plan — for the entire period of projections.

The purpose of this is not to defend Brownback by showing how Obama is even worse. (Disclosure: Although I am a Republican, I didn’t vote for Brownback for governor.) Instead, we ought to take away two lessons: First, let’s learn to place an appropriately low value on the promises, boasts, and bluster made by politicians. Then, let’s recognize the weak power government has to manage the economy for positive effect. Indeed, the lesson of the Obama stimulus is that it made the unemployment rate worse than if there had been no stimulus — at least according to the administration projections.

Governor Brownback was right to cut taxes because Kansas taxes were too high.

Unemployment with and without stimulus through 2014-01

  1. “So what does the academic literature say about the empirical relationship between taxes and economic growth? While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy. In this review of the literature, I find twenty-six such studies going back to 1983, and all but three of those studies, and every study in the last fifteen years, find a negative effect of taxes on growth. Of those studies that distinguish between types of taxes, corporate income taxes are found to be most harmful, followed by personal income taxes, consumption taxes and property taxes.” McBride, William. What Is the Evidence on Taxes and Growth? Tax Foundation. Available at https://taxfoundation.org/what-evidence-taxes-and-growth/.
  2. “Research finds that higher state taxes are generally associated with lower economic performance. There is somewhat weaker evidence that state and local taxes can significantly reduce income growth within a state, particularly when the revenues raised are devoted to transfer payments. More recent research corroborates this finding in relation to net investment and employment. However, when additional tax revenue is used to improve the quality of public goods and services, economic growth may increase. When looking at business activity more broadly, more comprehensive reviews of the literature find higher taxes to be associated with less economic growth. They also find this relationship to be stronger within metropolitan areas than across metropolitan areas, which means that local taxes have a larger effect on economic growth when it is less costly for firms and taxpayers to relocate to avoid the tax.” Mercatus Center. Economic Perspectives: State and Local Tax Policy. Available at https://www.mercatus.org/publication/economic-perspectives-state-and-local-tax-policy.
  3. “Two research papers illustrate the need to maintain low taxes in Kansas, finding that high taxes are associated with reduced income and low economic growth.” Weeks, Bob. Kansas needs low taxes. Available at https://wichitaliberty.org/kansas-government/kansas-needs-low-taxes/.

Kris Kobach at Wichita Pachyderm Club

Kansas Secretary of State Kris Kobach addressed members and guests of the Wichita Pachyderm Club on Friday June 9, 2017, the day after he announced his candidacy for Kansas Governor in 2018. Video of this event is on YouTube here.

By Karl Peterjohn

Kris Kobach’s gubernatorial campaign heralding conservative policy options for Kansas arrived at the Wichita Pachyderm Club luncheon June 9. Speaking to a packed house of Pachyderm Club members and guests, Kobach wasted little time in blasting the tax and spend climate at the Kansas statehouse that resulted in the largest tax hike in Kansas history, a $1.2 billion income tax hike that was approved this week over Governor Brownback’s veto.

The Kansas Secretary of State since 2010, Kobach began criticizing the “climate of corruption,” at the Kansas statehouse. He criticized Democrat legislative leader Senator Anthony Hensley who has been in the legislature, “since the Ford administration,” when Kobach was eight years old at that time, and today Kobach is 51 years old. Kobach said many of the legislators are well past their, “sell by date,” and used this example from the last century to call for term limits on all statewide elected officials as well as legislative term limits.

“We had an obscene tax increase,” Kobach said in criticizing the legislators who overrode Governor Brownback’s veto and approved a $1.2 billion tax hike. “Kansas does not have a revenue problem, Kansas has a spending problem.” Kobach repeatedly blasted tax and spending expansion advocates from both Republican and Democrat legislators override the gubernatorial veto.

“It’s so easy when spending other peoples’ money,” Kobach said.

Kobach blasted the retroactive tax hike feature along with raising taxes on supposedly “high income” families making only $60,000 or more, a year. He called for a rollback of this tax hike, and pointed out the failure of the conservative Republican’s Truth Caucus budget that would not have raised taxes and failed in the senate by only a couple of votes. When legislators say they had no choice (but raise taxes) they are lying.”

Besides ending the culture of corruption and the tax battle, Kobach’s third point in his campaign platform plank included immigration and ending benefits for illegal immigration, including the in-state tuition that treats out of state U.S. citizens worse than illegal immigrants who have broken U.S. law. He also wants to end “sanctuary cities/counties,” that have been adopted by some local governments in Kansas.

Kobach called for making Kansas number one for pro-life issues and praise the legislation enacted relating to abortion since 2011. A sportsman and outdoorsman, Kobach praised the excellent pro-2nd Amendment ranking Kansas has achieved but expressed a desire, if elected, to make Kansas number one in rankings related to pro-life, 2nd amendment, and fiscal issues.

The Secretary of State has just finished their ninth conviction for voter fraud and done this while his office budget has been reduced by 18 percent. Personnel costs were the major area for generating savings in the Kansas Secretary of State’s office according to Kobach. He said this was achieved by eliminating positions due to retirement or job changes, and not by any layoffs. Kobach wants to take this personnel policy and apply it as governor.

When Kobach was asked about his support for initiative and referendum for state issues, he said that while he was personally supporting this, he doubted that this could get through the legislature. He did commit to demanding that the legislature cut back benefits for illegal immigrants, and would force the legislature into acting if he is elected.

This could generate significant savings in state spending. Kobach criticized Kansas for being behind our neighboring states since Kansas spends $424 million in benefits paid for illegal immigrants. This is a net figure, that includes the $18 m paid in mostly sales taxes, paid by illegals Kobach said. 71% of illegal household receive public benefits.

In continuing his criticism of the legislature, and particularly long serving legislative leaders, Kobach called for a restriction on legislators leaving public office and immediately becoming lobbyists for their former colleagues. This is commonplace at the Kansas statehouse. Kobach wants a ban that would last several years.

Kobach expressed strong support for school choice. He said that competition is good and wanted to provide parents and students with the ability to choose the best schools that would meet their educational needs.

The success of the effort to lower income taxes in Kansas was seen by the expansion in corporate filings that demonstrate new business formation while he has been in office. Annual filings have grown to 15,000 a year, an increase of about 35 percent since 2012, the first year that this information was tracked by the secretary of state’s office.

Former Sedgwick County Republican Party chairman Bob Dool introduced Kobach at this event. Dool cited Kobach’s Kansas ties in returning to Kansas after earning degrees at Harvard; Oxford, England; and a law degree from Yale University. Kobach had also worked as a White House fellow for George W. Bush and went on to join the U.S. Justice Department where he was serving during and after the 9-11-2001 Islamic terrorist attacks. Dool will serve as the treasurer for Kobach campaign. Kobach is married with five children and has served on the Overland Park city council. Recently, President Trump appointed Kobach to help lead a federal panel to look at problems with our voting system, reduce voter fraud, and improve our elections.

Kobach has become the second announced gubernatorial candidate after Wichita businessman Wink Hartman who was the first Republican to announce his candidacy recently. Governor Sam Brownback is term limited and cannot run for re-election. While the self-described, “moderates,” do not have a GOP gubernatorial candidate in this contest as of today, it is clear that at least two conservatives, and possibly more, are going to enter the Kansas gubernatorial primary for the GOP nomination.

WichitaLiberty.TV: James Franko, Kansas Policy Institute

In this episode of WichitaLiberty.TV: James Franko of Kansas Policy Institute joins Bob Weeks and Karl Peterjohn. Topics are the new Kansas school finance bill and the new tax bill. View below, or click here to view at YouTube. Episode 153, broadcast June 11, 2017.

Shownotes

WichitaLiberty.TV: Author Shari Howard McMinn

In this episode of WichitaLiberty.TV: Author and former Wichitan Shari Howard McMinn discusses her new book on adoption and her experiences with homeschooling. View below, or click here to view at YouTube. Episode 152, broadcast June 4, 2017.

Shownotes

Wichita, Kansas, and U.S. economic dashboards

Dashboards of economic indicators for Wichita and Kansas, compared to the United States.

Example of the Wichita economic dashboard. Click to view.
The Federal Reserve Bank of St. Louis gathers economic data from sources like the U.S. Bureau of Labor Statistics and the U.S. Bureau of Economic Analysis. This data is then available in an interactive graphing and charting system.

Example of the Kansas economic dashboard. Click to view.
Using this system, I’ve created dashboards (collections of charts) holding economic data for Wichita and Kansas. The charts, as they appear on the dashboard, are static, although they should show the most current data. At the bottom of each chart is the link “View on FRED.” By clicking on that link you gain access to the interactive version of the chart. You may then make many different types of customizations.

Click here for the Wichita dashboard, and click here for the Kansas dashboard.

Other Wichita data

The Center for Economic Growth and Business Research at Wichita State University produces data and forecasts for Wichita and Kansas. It has a dedicated site for these at kansaseconomy.org. Of special interest are these data series, available as tables and charts:

Coverage of Downtown Wichita workers

The Wichita Eagle’s coverage of the number of workers in Downtown Wichita isn’t fake news, just wrong news.

A recent Wichita Eagle article reported on the number of workers in downtown Wichita, designated as zip code 67202: “The 67202 ZIP code had lost nearly 15 percent of its businesses and 20 percent of its employees in the decade ending in 2015, according to the U.S. Census’s County Business Pattern data. The loss of the State Office Building in 2016 and the Wichita school district’s downtown office this summer — employees are moving to the former Southeast High School — will make that decline steeper.” 1

Trends of business activity in downtown Wichita. Click for larger.
In the first sentence, the reporter is correct. The trend in the number of business establishments, the number of employees, and the annual payroll is downwards. 2

But the second sentence reveals a misunderstanding of the meaning of two sets of Census Bureau data. According to the Census Bureau’s description of the County Business Pattern data — that’s the data referenced in the article — the two events mentioned will not change the CBP data. That’s because governmental agencies are not included in CPB data. The Census Bureau plainly explains:

“Statistics are available on business establishments at the U.S. level and by State, County, Metropolitan area, ZIP Code, and Congressional District Levels. … CBP covers most NAICS industries excluding crop and animal production; rail transportation; National Postal Service; pension, health, welfare, and vacation funds; trusts, estates, and agency accounts; private households; and public administration. CBP also excludes most establishments reporting government employees.” 3

LODES data for census block 201730043001036, showing 7,740 workers.
A second set of Census Bureau data known as LODES will change with the departure of USD 259 from zip code 67202. LODES is the source of 26,000 downtown Wichita workers claimed by Wichita State University’s Center for Economic Development and Business Research, the Wichita Downtown Development Corporation, the Greater Wichita Partnership, the City of Wichita, and other agencies. An earlier Eagle article from May 10 just scratched the surface on this topic. 4 That article described the Census Bureau data as erroneous. But there is no error in the data, as the Census Bureau plainly explains what the data means. 5 The error was in the application of the data by someone who used it to represent something it does not represent.

Readers of the Wichita Eagle may be thoroughly confused by now. Can we expect a correction or explanation? The Eagle says no.


Notes

  1. Voorhis, Dan. The hottest real estate spot in Wichita? Downtown on Douglas. Wichita Eagle, May 20, 2017. Available at http://www.kansas.com/news/business/real-estate-news/article151746232.html.
  2. Weeks, Bob. Downtown Wichita business trends. Note that CBP data includes businesses only, not most public sector workers. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  3. U.S. Census Bureau. County Business Patterns (CBP): About this Program. Available at https://www.census.gov/programs-surveys/cbp/about.html.
  4. Morrison, Oliver. Likely error overestimates downtown Wichita workers. Wichita Eagle, May 10, 2017. Available at http://www.kansas.com/news/local/article149848144.html.
  5. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.

Metro Monitor for the Wichita economy

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

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

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

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

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

Wichita’s productivity ranking is good, also.

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

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

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

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


Notes

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

WichitaLiberty.TV: Radio Host Andy Hooser

In this episode of WichitaLiberty.TV: Radio talk show host Andy Hooser joins Bob Weeks to discuss millennials, issues in Kansas state government, and the Donald Trump Presidency. View below, or click here to view at YouTube. Episode 151, broadcast May 21, 2017.

Shownotes

Explaining the Kansas budget, in a way

A video explaining the Kansas budget is accurate in many aspects, but portrays a false and harmful myth regarding school spending.

A popular video explaining the Kansas budget deserves scrutiny for some of the data presented. The video is available at the Facebook page of Loud Light.

The presentation makes a few good points. For example, the video is correct in that the sales tax is a regressive tax, affecting low-income households in greater proportion. During the capaign for a Wichita city sales tax in 2014 I analyzed Census Bureau data and found that the lowest income class of families experience an increase nearly four times the magnitude as do the highest income families, as a percentage of after-tax income.1 2

The video also rightly notes that Kansas is now, and it has in the past under other legislatures and governors, inadequately funding KPERS, the state employee pension plan.

Interestingly, the video praises Kansas for its early adoption of “progressive economics.” I think the narrator meant “progressive taxation,” as the video shows Kansas adopting an income tax in 1933. How has that worked for Kansas? There are a variety of ways to look at the progress of Kansas compared to the nation, but here’s a startling fact: For the 73rd Congress (1933 to 1935) Kansas had seven members in the U.S. House of Representatives. (It had eight in the previous session.) Today Kansas has four members, and may be on the verge of losing one after the next census. This is an indication of the growth of Kansas in comparison to the nation.

Kansas Department of Transportation Funding, partial. Click for larger.
The narrator states, “Kansas Department of Transportation is mostly funded by restricted revenue like fuel tax.” This was true at one time. But starting in 2011 KDOT has received more funding from sales tax than motor fuel tax.3 The gap is getting wider, as can be seen in the nearby chart. (By the way, there are proposals to increase the motor fuel tax. This tax is just like the sales tax, affecting low-income households greatest.)

School spending

The greatest problem in this video is its explanation of state spending on K through 12 schools. This is important, as the video correctly notes that this spending is half of the general fund budget. In introducing this section, the narrator notes “budget report gamesmanship that’s created a rhetorical paradox,” conceding it is “technically” true that education spending is at record levels.

The video then shows a chart titled “State Aid Per Pupil.” The chart starts with a value a little over $6,000 in 1993, declining to about $4,000 in 2013, then staying at that level. The citation is “Governor’s Budget Report” from the Kansas Division of Budget, and at the end of the video there is the explanation, “All financial data in this video is inflation adjusted to January 2017.”

A more accurate title for the chart is “Base State Aid Per Pupil.” That’s the actual name for the component of school spending that the video displays. This is important because base state aid is only the starting point for determining spending. Actual state aid to schools is much higher.

Kansas school spending, showing base state aid and total state aid. See article for notes about 2015. Click for larger.
Base state aid per pupil — the statistic the video presents — is an important number.4 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. 5

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. 6

While this may seem like a technical discussion that doesn’t make a difference, it’s very important. Some of the weightings are large and have increased by large amounts. 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.7

So in the nearby chart that I prepared using data adjusted for inflation in 2016, we see base state aid per pupil on a downward trend, just as the video shows. But I also plotted total state aid per pupil, which includes weightings. This number is on a mostly upward trend.

Kansas school spending, showing ratio of total state aid to base state aid. See article for notes about 2015. Click for larger.
Kansas school spending. See article for notes about 2015. Click for larger.
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.)

All this determines state aid to schools only. There is also local aid and federal aid.

The questions Kansans should ask are these: Why doesn’t this video explain that “base state aid per pupil” is not the same as “state aid per pupil?” And why not explain that total state aid per pupil is much higher than base state aid, and has been rising over the long term?


Notes

  1. Weeks, Bob. Wichita sales tax hike would hit low income families hardest. Analysis of household expenditure data shows that a proposed sales tax in Wichita affects low income families in greatest proportion, confirming the regressive nature of sales taxes. Available at https://wichitaliberty.org/wichita-government/wichita-sales-tax-hike-hit-low-income-families-hardest/.
  2. Weeks, Bob. Kansas sales tax has disproportionate harmful effects. Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households. https://wichitaliberty.org/taxation/kansas-sales-tax-has-disproportionate-harmful-effects/.
  3. Kansas Department of Transportation. Comprehensive Annual Financial Report for 2016.
  4. Weeks, Bob. Kansas school weightings and effects on state aid. In making the case for more Kansas school spending, the focus on base state aid per pupil leaves out important considerations. https://wichitaliberty.org/wichita-kansas-schools/kansas-school-weightings-and-effects-on-state-aid/.
  5. For the fiscal 2016 and 2017 school years, the formula was replaced by block grants.
  6. Amendments to the 1992 School District Finance And Quality Performance Act and the 1992 School District Capital Improvements State Aid Program (Finance Formula Components), Kansas Legislative Research Department, May 20, 2014
    http://ksde.org/Portals/0/School%20Finance/amends_to_sdfandqpa_2015.pdf
  7. 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.)

Census data for downtown Wichita workers

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

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

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

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

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

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

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

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

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

How was this missed?

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

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

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

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

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

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

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

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

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


Notes

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

Wichita post-recession job growth

Wichita has recovered from recessions, but after the most recent, the city is falling further behind.

Since 1990 the country has experienced three recessions. For the first two of these, Wichita was able to catch up with the employment growth experienced by the entire nation.

For the most recent recession, however, this hasn’t been the case. In fact, as time progressed since 2010, the gap between Wichita and the nation has grown.

Following are three charts of private sector employment for the Wichita metro area and the nation. Each is indexed starting with the end of a recession so that job growth may be compared. Click charts for larger version. You may access and alter the chart here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An isolated incident, long ago?

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

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

Except they’re not.

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

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

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

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


Notes

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

Medicaid expansion survey in Kansas

Should Kansans accept the results of a public opinion poll when little is known about it?

Recently American Cancer Society Cancer Action Network released results of a poll regarding Medicaid expansion in Kansas. What ACS CAN wants us to know is that 82 percent of Kansans favor expansion.

But before we accept these results, we need to know that ACS CAN will not release the full results of the survey, as other organizations have done.

In particular, last year Kansas Hospital Association conducted a poll on the topic of Medicaid expansion, and it released the complete poll and results.1

This year Kansas Center for Economic Growth conducted a poll. It released the full results.2 From this release, we learned that one of the questions was so vague as to be open to many different interpretations.3

Kansas Policy Institute conducts many polls and releases the full results.4

Sample results from the poll. Click for the full chart.
ACS CAN produced a short press release.5 Upon request, I received the text of one question and a chart of results.6

But ACS CAN, despite multiple requests to several contacts, will not release the full results of the poll, as other public policy advocacy groups have done.

It would be unfair to conclude that ACS CAN has something to hide, or that the poll was constructed in a way to be misleading. Conversely, it is not wise to give much weight to this poll when we know so little about it.


Notes

  1. Kansas Hospital Association. Public Opinion Poll: Medicaid Expansion and Access to Health Care in Kansas. Available at http://www.kha-net.org/communications/mediareleases/public-opinion-poll-medicaid-expansion-and-access-to-health-care-in-kansas_102768.aspx.
  2. Kansas Center for Economic Growth. Results of Kansas statewide poll. Available at http://realprosperityks.com/wp-content/uploads/2017/03/TSPolling_KCEG_KansasStatewide_PublicReleasePacket_2017.03.30-final-1.pdf.
  3. Weeks, Bob. Kansans are concerned about the level of state spending on schools. A public opinion poll asks whether Kansans are concerned about school spending, but leaves us wondering why they are concerned. Available at https://wichitaliberty.org/kansas-government/kansans-concerned-level-state-spending-schools/.
  4. See, for example Kansans say no to more taxes at https://wichitaliberty.org/kansas-government/kansans-say-no-taxes/, Poll: Wichitans don’t want sales tax increase8 at https://wichitaliberty.org/wichita-government/poll-wichitans-dont-want-sales-tax-increase/, and *New survey: Kansans remain misinformed regarding k-12 finance at https://kansaspolicy.org/new-survey-kansans-remain-misinformed-regarding-k-12-finance/.
  5. American Cancer Society Cancer Action Network. Poll: Kansas Voters Overwhelmingly Support Medicaid Expansion. Available at https://www.acscan.org/releases/poll-kansas-voters-overwhelmingly-support-medicaid-expansion.
  6. “Uninsured Kansans earning less than sixteen thousand dollars a year do not have access to any affordable healthcare coverage options. Kansas lawmakers are considering taking action that would provide these low?income residents access to coverage that would include primary care, preventive screenings, diagnostic testing, and cancer treatment services through the state’s KanCare program. The federal government would cover most of the cost to cover these state residents. Do you favor or oppose Kansas accepting the federal funds to increase access to healthcare coverage for thousands of hardworking Kansans through the state’s KanCare program?” Results at https://wichitaliberty.org/wp-content/uploads/2017/05/ACS-Kansas-Medicaid-poll-2017-exp-poll.pdf.

Breaking the statehouse budget deadlock

By Karl Peterjohn

The budget deadlock has begun at the Kansas statehouse. The legislature cannot leave Topeka until they have approved the next biennial state budget that will begin July 1. Usually, this includes the governor’s signature on that legislation. That might not happen this year. That’s the issue.

Governor Brownback is not willing to fund a multi-year, multi-billion spending bill demanded by the liberal legislative majorities in both houses. Earlier this year he vetoed a record-breaking income tax hike scheme. So far, the governor has been successful in having his vetoes sustained.

The pressure is going to be applied for the governor’s fiscally responsible Republican allies opposed to income tax hikes.

The powerful government employee spending lobbies, headed by arguably, the most powerful lobby in this state, the KNEA teachers’ union, that spending priorities for the reliably liberal Democrats in the legislature along with a large number of other self-described, “progressives,” or “moderates,” big spending Republicans now hold sizable majorities in both houses of the Kansas legislature. However, the bi-partisan spending factions are short of the two-thirds majorities required to override Governor Brownback’s repeated vetoes. The spending lobbies have come close, and did override the governor’s pass a record-breaking income tax hike proposal in the Kansas house, but that override effort ultimately failed by three votes in the senate.

The other powerful spending lobbies among the road contractors, hospitals, and the most powerful appointed body: ethically flawed and disciplined Chief Justice of the Kansas Supreme Court, Lawton Nuss, and his fellow band of black-robed lawyers on the Kansas Supreme Court continue to try and force massive state spending hikes. Several members of this court, including Nuss, represented school districts and school finance litigation issues before joining the court.

Massive tax hikes will be required to fund this spending spree. Spending estimates indicate the increases proposed would be $2.25 billion over five years according to State Representative John Whitmer. Expanding Obamacare under the guise of Medicaid expansion could be even more expensive after the first few years.

What is different with earlier Kansas budget battles besides another zero on the cost? In this digital age we are in, everything seems to have moved digitally into a win/lose, up/down, on/off configuration.

The lawyers on Kansas’ top court with their school funding edicts, will all be providing pressure and using the leftstream Kansas news media to try and push a handful of Republican legislators to shift their votes, so everyone can go home with a huge income tax hike. Sadly, this destructive tax hike is unlikely to be successful in funding all of the proposed state spending proposals.

This is the big spenders’ dream scenario for the next state budget.

The scenario for fiscally responsible legislators and Governor Brownback is less clear. In the analog days of the 20th century, when people looked for win-win, instead of zero-sum games where every winner means there must be a loser, compromise was the answer.

To his credit, Governor Brownback has expressed a willingness to compromise. Brownback has supported and signed smaller excise tax hike bills in recent years. He continues to be blasted by liberal media critics in the editorial pages across the state. These tax hikes tried to reach a legislative compromise that allowed a continued growth in state spending. This spending growth was being driven by the perpetual school finance lawsuits.

There is another solution if the legislative deadlock continues, and there is a recent and nearby example for Kansas elected officials to consider: let the people decide. The Kansas Constitution has a provision that, “…all political power in this state is inherent in the people.” This is in the Kansas Constitution’s Bill of Rights.

How would empowering Kansans work?

In 2016, in our neighboring state to the south, Oklahoma, the state spending lobbies convinced the legislature to place a one cent sales tax hike on the statewide ballot. In November 2016 Oklahoma voters decided the fate of this sales tax hike. It was rejected by the voters.

A compromise between Governor Brownback and his fiscally conservative GOP legislative allies on one side could be reached with the larger number of Democrat and Republican tax hike advocates in the legislature using this “let the people decide,“ approach. Kansas taxpayers need to have a say in the massive new spending schemes appearing at the statehouse.

The tax hike advocates can place their proposal for raising state taxes/spending on either the August or preferably the November 2017 election ballot where a statewide referendum could be held. Both sides could make their case to voters. All political power is inherent in the people, and letting the voters decide would certainly be preferable to having appointed lawyers in black robes setting state fiscal policy with big-spending legislators as their willing accomplices.

Karl Peterjohn is a former journalist and served two terms as a Sedgwick County commissioner between 2009-17. He advocated on behalf of Kansas taxpayers as the executive director of the Kansas Taxpayers Network between 1992-2009.

Wichita about to commit to more spending. Bigly.

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

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

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

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

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

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

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

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

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

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

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

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

Should Wichita do this?

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

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

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

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

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

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

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

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


Notes

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

WichitaLiberty.TV Sedgwick County Commissioner Richard Ranzau

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.

Shownotes

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

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

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

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

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

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

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

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

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


Notes

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

Individual liberty, limited government, economic freedom, and free markets in Wichita and Kansas

%d bloggers like this: