Voice For Liberty

Tag: Carl Brewer

Wichita Mayor Carl Brewer

  • Resurrecting urban renewal in Wichita?

    Thank you to John Todd for this excellent article.

    Resurrecting Urban Renewal in Wichita?
    By John Todd

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

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

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

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

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

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

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

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

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

  • Local economic development in Wichita

    Writing from Memphis, Tennessee

    Today’s Wichita Eagle (November 5, 2005) tells us of a new economic development package that our local governments have given to induce a call center to locate in Wichita. The deal is described as “one of the biggest the two-year-old economic development coalition [Greater Wichita Economic Development Coalition] has landed.”

    There is an interesting academic paper titled “The Failures of Economic Development Incentives,” published in Journal of the American Planning Association, and which can be read here: www.planning.org/japa/pdf/04winterecondev.pdf. A few quotes from the study:

    Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

    On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

    The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

    On the surface of things, to the average person, it would seem that spending to attract new businesses makes a lot of sense. It’s a win-win deal, backers say. Everyone benefits. This is why it appeals so to politicians. It lets them trumpet their achievements doing something that no one should reasonably disagree with. After all, who could be against jobs and prosperity? But the evidence that these schemes work is lacking, as this article shows.

    Close to Wichita we have the town of Lawrence, which has recently realized that it as been, well, bamboozled? A September 29, 2005 Lawrence Journal-World article (“Firms must earn tax incentives”) tell us: “Even with these generous standards for compliance, to have 13 out of 17 partnerships fail [to live up to promised economic activity levels] indicates that the city has received poor guidance in its economic development activities.” Further: “The most disconcerting fact is that Lawrence would probably have gained nearly all of the jobs generated by these firms without giving away wasteful tax breaks.”

    On November 6, 2005, an article in the Lexington (Kentucky) Herald-Leader said this:

    The Herald-Leader’s investigation, based on a review of more than 15,000 pages of documents and interviews with more than 100 people, reveals a pattern of government giveaways that, all too often, ends in lost jobs, abandoned factories and broken promises.

    The investigation shows:

    Companies that received incentives often did not live up to their promises. In a 10-year period the paper analyzed, at least one in four companies that received assistance from the state’s main cash-grant program did not create the number of jobs projected.

    A tax-incentive program specifically for counties with high unemployment has had little effect in many of those areas. One in five manufacturing companies that received the tax break has since closed.

    There is spotty oversight of state tax incentives. The state sometimes does not attempt to recover incentives, even when companies don’t create jobs as required.

    …

    Unlike some other states, Kentucky makes little information about incentives public. The Cabinet for Economic Development refuses to release much of the information about its dealings with businesses, citing proprietary concerns. The cabinet has never studied its programs’ effectiveness, and it blocked a legislative committee’s effort to do so.

    The Herald-Leader’s examination of Kentucky’s business-incentive programs comes when, nationally, questions are mounting about the effectiveness and legality of expensive government job-creation efforts. The U.S. Supreme Court is expected to decide by spring whether trading tax breaks for jobs is legal or whether they amount to discrimination against other companies.

    Meanwhile, states continue engaging in costly economic battles for new jobs, even though research strongly suggests that few business subsidies actually influence where a company sets up shop.

    We might want to be optimistic and hope that our local Wichita and Sedgwick County leaders are smarter than those in Lawrence and Lexington. Evidence shows us, however, that this probably isn’t the case. Our own local Wichita City Council members have shown that they aren’t familiar with even the most basic facts about our economic development programs. How do we know this? Consider the article titled “Tax break triggers call for reform” published in the Wichita Eagle on August 1, 2004:

    Public controversy over the Genesis bond has exposed some glaring flaws in the process used to review industrial revenue bonds and accompanying tax breaks.

    For example, on July 13, Mayans and council members Sharon Fearey, Carl Brewer, Bob Martz and Paul Gray voted in favor of granting Genesis $11.8 million in industrial revenue bond financing for its expansion, along with a 50 percent break on property taxes worth $1.7 million.

    They all said they didn’t know that, with that vote, they were also approving a sales tax exemption, estimated by Genesis to be worth about $375,000.

    It is not like the sales tax exemption that accompanies industrial revenue bonds is a secret. An easily accessible web page on the City of Wichita’s web site explains it.

    But perhaps there is hope. The Wichita Business Journal has recently reported this: “The city and county are getting $2 back for every dollar they spent over the past 18 months on economic development incentives, according to an analysis of GWEDC-supplied data. The report was presented at Thursday’s GWEDC investor luncheon at the Hyatt Regency by Janet Harrah, director of the Center for Economic Development and Business Research at Wichita State University.” Personally, I am skeptical. I have asked to see these figures and how they are calculated, but I have not been able to obtain them.