Voice For Liberty

Tag: Community Improvement Districts

  • Kansas and Wichita quick takes: Monday July 11, 2011

    TIF in Louisiana. Randal O’Toole recently examined the use of tax increment financing in Louisiana. He finds this: “Property tax TIFs are limited to that portion of property taxes that are not already obligated to some specific purpose — and most property taxes are so obligated, so most if not all Louisiana TIFs rely on sales and hotel taxes instead.” This is different from Kansas, where all the property tax, except for the usually small base, benefits the TIF district exclusively. … He describes sales-tax TIFs, which we in Kansas call community improvement districts or CID. While describing them as the least objectionable form of TIF, he notes problems: Why don’t stores just raise their prices? Stores that charge extra sales tax don’t have warning signage. And: “In the end, TIF is still just a way for elected officials to hand out favors to selected developers and other special interests. There is no reason to think that cities in Louisiana that use TIF grow any faster than ones that do not. Instead, all the TIFs do is shuffle new developments around, favoring certain property owners in the TIF districts over owners outside of the TIF districts. TIF may even reduce growth as developers who don’t get TIF subsidies may decide to build elsewhere where they won’t have to compete against subsidized developments.” … All these warnings have been raised before the Wichita City Council. … California has new legislation designed to kill redevelopment districts there, which are like TID districts in Kansas. … The full article is A Different Kind of TIF.

    Overland Park may see tax hike. Ben Hodge reports that Overland Park, the second largest city in Kansas and the largest in Johnson County, may increase its property tax rates. Hodge quotes a Kansas City Star editorial: “One plan from [Overland Park City Manager Bill] Ebel would boost the city’s mill levy by 46 percent and bring in more than $10 million a year in new revenue. The other option, a 41 percent increase, would create an extra $9 million annually.” To which Hodge replies: “So, those are the innovative ideas of today’s Overland Park Council: either a 41% increase, or else a 46% tax increase.” … The Overland Park Chamber of Commerce supports the proposal, which is simply more evidence of the decline of local chambers of commerce. … Hodge’s article is Between a Rock and a Tax Hike.

    Medicinal cannibis to be topic. This Friday’s (July 15th) meeting of the Wichita Pachyderm Club features Dr. Jon Hauxwell, a physician from Hays, speaking on “Medicinal Cannabis.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers: On July 22, Steve Anderson, Director of the Budget for Kansas. On July 29, Dennis Taylor, Secretary, Kansas Department of Administration and “The Repealer” on “An Overview of the Office of the Repealer.”

    Employment on a long slow, slide. Wichita’s Malcolm Harris takes a look at the dismal employment numbers from last week. But, there is some better news for Wichita regarding airplane orders.

    We already know it’s hot in Wichita. But now here’s proof. The Weather Channel ranks Wichita as fourth hottest city in the nation — and that’s based on weather, not economic growth or something really desirable. Wichita is also ranked as “Midwest” hottest city.

    Pursuing happiness, not politics. That’s the title of the prologue to the recently-published book The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong with America by Nick Gillespie and Matt Welch, both of Reason, the libertarian magazine of “Free Minds and Free Markets.” So far, the prologue is all I’ve read, but I can tell — okay, I already knew — that these guys get it. Here’s what I mean: “In 2011, we do not equate happiness with politics; the mere juxtaposition of the words feels obscene. And for good reason: Politics, John Adams’s great-grandson Henry famously observed, ‘has always been the systematic organization of hatreds.’ Every election cycle — and we are always in an election cycle — we are urged to remember that deep down inside we really despise the opposing gang of crooks. We hate their elite (or Podunk) ways, their socialist (or fascist) economics, their reliance on shadowy billionaires with suspect agendas. In a world where mutual gains from trade have lifted a half billion people out of poverty in just the past half decade, politics is one of the last remaining zero-sum games of I win, you lose, where the victor gets to spend everyone else’s money in ways that appall the vanquished, until they switch places again after the next election. We instinctively know that our tax dollars aren’t being spent efficiently; the proof is in the post office, or the permitting offices at city hall, or the neighborhood school. We roll our eyes when President Barack Obama announces a new national competitiveness initiative in his State of the Union address just five years after George W. Bush announced a new American Competitiveness Initiative in his, or when each and every president since Richard Milhous Nixon swears chat this time we’re gonna kick that foreign-oil habit once and for all. And yet, the political status quo keeps steering the Winnebago of state further and further into the ditch.”

    More ‘Economics in One Lesson.’ Tonight (Monday July 11th) Americans For Prosperity Foundation is sponsoring a continuation of the DVD presentation of videos based on Henry Hazlitt’s classic work Economics in One Lesson. The event is Monday from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. The event’s sponsor is Americans for Prosperity, Kansas. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Kansas and Wichita quick takes: Monday June 20, 2011

    CIDs to start collecting tax. Soon two community improvement districts in Wichita will start collecting their additional sales tax, and so a Wichita city webpage is now available to warn consumers of the extra taxes they’ll pay at these merchants. There were some — like me — who wanted the city to have a policy of stronger consumer protection, such as a sign at the entry to a merchant, but city council members recognized, as did developers, that this full disclosure would be bad for business. The website disclosure allows the city to say it’s doing its job warning consumers, but the website is such a weak form of disclosure that it is nearly meaningless. Still, it satisfies council members like Jeff Longwell, who expressed concern that Wichitans would be “confused” by signs at merchants. You see, some CIDs may charge different amounts of extra tax, and Longwell thought informing shoppers of these different rates would confuse them. It seems that Longwell doesn’t have a very high opinion of the cognitive processing abilities of the people of Wichita, and it’s not the first time he’s expressed this sentiment. A few years ago when citizens complained that documents were not made available until just hours before a city council meeting, Longwell said he doubted citizens would read them anyway. See Wichita Council Member Jeff Longwell: We Can, and Do, Read. … For more on the CID disclosure issue, see In Wichita, two large community improvement districts proposed.

    Wichita City Council. This week the Wichita City Council considers these items: A facade improvement program loan is requested for a building at 1525 E. Douglas to house GLMV Architecture. This action will loan $500,000 for the purposes of sprucing up the outside of the building, with that amount, plus interest, to be paid back in the form of special assessments collected with the regular property tax. It’s similar to the special assessment financing used in new housing developments, but here applied to existing structures. Interestingly, the city documents proclaim a “gap,” meaning that “applicants show a financial need for public assistance in order to complete the project, based on the owner’s ability to finance the project and assuming a market-based return on investment.” In other words, private financing was not available, so the city steps in, and we have another example of the city investing in money-losing projects. Although it is likely the city will be paid back, the program also includes a $30,000 grant for this project. That, of course, is a gift from Wichita taxpayers made by the city council, and will not be paid back. … The council will be asked to decide whether to proceed with a new airport terminal costing $160 million and parking facilities costing $40 million. It’s said by city leaders that this will not cost Wichita taxpayers a thing. That is, unless you use the airport or paid any taxes to the federal government. Federal grants are a source of some funds for the airport, and are thought by city leaders to be free money, without cost. … On a consent agenda item, we learn that the bridge over the Big Ditch is going to cost more, as a supplemental agreement for $521,369 in additional funds for the planning of the bridge is requested. The reason, according to the city is “additional work is needed to comply with Federal requirements.” This is just the planning, not the actual construction of the bridge. So far the budget for planning and design is $5,219,145. … Also on the consent agenda is something that’s become not unusual: the need to repeal an ordinance and replace it with a corrected ordinance. … As always, the agenda packet is available at Wichita city council agendas.

    Rich States, Poor States event this week. Kansas Policy Institute and the Wichita Independent Business Association are hosting a breakfast event this Friday (June 24th) featuring Jonathan Williams, one of the authors of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index. There’s still time to RSVP. For more information, see Rich States, Poor States author to be in Wichita.

    Wichita’s riverside parks to be topic. This Friday (June 24th), Jim Mason, Naturalist at the Great Plains Nature Center will have a presentation and book signing at the Wichita Pachyderm Club. Mason is author of Wichita’s Riverside Parks, published in April 2011. The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. Upcoming speakers: On July 1 there will be no meeting due to the Independence Day holiday. On July 8, Dave Trabert, President, Kansas Policy Institute, on “Stabilizing the Kansas Budget.”

    Pompeo noted for opposition to opposition to energy spending. Tax credits — mysterious to the general public, therefore increasingly used as a way to disguise government spending — come under attack from Chris Chocola in the Washington Examiner: “Last fall, voters sent a clear message to cut spending and get the country’s fiscal house in order. These same voters should take heed because some of the candidates they elected are suffering from temporary insanity when it comes to a classic Washington giveaway: the tax credit. Nearly 80 Republicans, many of whom ran on restoring fiscal sanity to Washington, have joined 100 liberal Democrats in sponsoring HR 1380, the New Alternative Transportation to Give Americans Solutions Act, known colloquially as the NAT GAS Act.” … The bill is a pet project of energy investor T. Boone Pickens in an effort to obtain billions in subsidy for his project to use natural gas as a transportation fuel. But, writes Chocola: “The goal should be creating a sustainable market, not a false one. It is not the role of Congress or the federal government to pick winners or losers in the broad field of energy alternatives. Backing any one industry over another distorts the market and destroys our system of free enterprise.” He criticizes those who campaigned on fiscal responsibility and support this bill. Chocola also calls out Wichita Republican U.S. Representative Mike Pompeo for his opposition to these energy tax and spending programs.

    Even quicker. Open Letter to Paul Krugman: The New York Times columnist taken to task by Donald J. Boudreaux. … House GOP retreats from borrowing freeze, more Republicans drift from pledge to deny debt-limit increase without conditions. … Rasmussen poll: 70% say default is bad for economy, 56% say failure to cut spending is worse. … The Metaphysics of Contemporary Theft: “The remedy to address theft would be not more government help — public assistance, social welfare, counseling — but far less, given that human nature rises to the occasion when forced to work and sinks when leisured and exempt.” … Investor’s Business Daily: Times’ Bias Shows In Palin Email Affair. … Michael Barone: Government Looks to Past, Free Enterprise to Future: “Republicans want less government spending and more leeway for entrepreneurs to create new businesses and jobs. No one knows what innovative products and services will emerge. That’s the beauty of free enterprise, but it also makes it a hard sell politically.”

  • For Wichita, Save-A-Lot teaches a lesson

    The announcement that a Save-A-Lot grocery store will proceed — contrary to the claims of developers and city staff who rely on their information — should provide a lesson that yes, economic development in Wichita can and will happen without public assistance. Additionally, examination of the public hearing for this matter before the Wichita City Council last September should teach us to be very cautious in relying on the claims of people who have a huge economic stake in obtaining public assistance.

    At a city council public hearing on both the Community Improvement District and Tax Increment financing district last September, developer Rob Snyder sought public assistance in the form of a tax increment financing district (TIF) and a Community Improvement District (CID). Over a period of years, the two forms of subsidy were estimated to be worth $900,000 to the developer. The project’s total cost was presented as slightly over $2 million.

    (By the way, in its recent coverage of this matter, the Wichita Eagle has an incorrect recording of events. The Eagle reported, referring to the Wichita City Council and Sedgwick County Commission: “The boards ultimately rejected the financing, despite support from some officials.” Actually, the city council unanimously approved both the CID and TIF. Then, the county commission exercised its statutory prerogative to veto the formation of a TIF district. The commission has no authority to intervene in the formation of CIDs.)

    As part of his presentation to the council Allen Bell, Wichita’s Director of Urban Development explained that to be eligible for TIF, developers must demonstrate a “gap,” that is, an analytical finding that conventional financing is not sufficient for the project, and public assistance is required: “We’ve done that. We know, for example, from the developer’s perspective in terms of how much they will make in lease payments from the Save-A-Lot operator, how much that is, and how much debt that will support, and how much funds the developer can raise personally for this project. That has, in fact, left a gap, and these numbers that you’ve seen today reflect what that gap is.”

    Snyder told the council that without the public assistance, there will be no grocery store: “We have researched every possible way, how do we make this project work with the existing funding that’s available to us. … We might as well say if for some reason we can’t figure out how to get this funding to go through, there won’t be a shopping center over there.”

    Greg Ferris, a former city council member who lobbies local government on behalf of clients, was adamant in his insistence that the grocery store could not be built without public financing: “There will not be a building on that corner if this is not passed today. … That new building would not be built. I absolutely can tell you that because we have spent months … trying to figure out a way to finance a project in that area. A grocery store is not going to move into the Planeview area to service those people just like they didn’t move into the area at 13th and Grove until the city subsidized that with several hundred thousand dollars of city money. … What you’ve heard is misinformation. … This project just won’t happen and the people of Planeview will suffer.”

    Now, we see that the financing gap has been closed, and without government assistance. The claims that a grocery store can’t be built in that neighborhood without welfare for developers have been demonstrated to be false.

    Wichita Mayor Carl Brewer has referred to those who oppose government intervention like TIF and CID as “naysayers.” Here’s an example where free markets, capitalism, and economic freedom have overcome Wichita’s true naysayers: those who say it can’t happen without government intervention.

    A message from John Todd: “This Wednesday (June 8th) at 2:00 pm there will be a groundbreaking ceremony for the new Planeview Save-A-Lot grocery store located on the southeast corner of George Washington Boulevard and Pawnee. This project was initially proposed with $900,000 in CID and TIF public subsidies for the developer that were approved by the Wichita City Council last fall. When the Sedgwick County Commission rejected giving the county’s portion of the TIF generated real estate taxes to the developer and away from the public treasury, the project appeared to be dead. The Wichita Eagle recently reported that the Save-A-Lot grocery store owner has now decided to develop the project on his own with his own financing. Perhaps it is appropriate for those citizens who appreciate businesses who develop market-driven projects in Wichita and Sedgwick County on their own nickel to show their appreciation to the grocery store owner/developer by attending the groundbreaking ceremony and personally thanking him.”

  • In Wichita, corporate welfare not needed, after all

    Last fall the City of Wichita awarded two forms of economic development subsidy to a proposed Save-A-Lot grocery store to be built in the Planeview neighborhood. The developer of the store was able to persuade Wichita economic development officials and city council members that the store could not be built without public assistance. But now a different developer is going ahead with the project — without any of the subsidies Wichita approved, raising questions as to whether the city’s original offer of public assistance was genuine economic development, or just another instance of corporate welfare.

    The subsidies approved were in the form of a tax increment financing district (TIF) and a Community Improvement District (CID). Over a period of years, the two forms of subsidy were estimated to be worth $900,000 to the developer.

    Kansas law allows affected counties and school districts to veto the formation of a TIF district. The Sedgwick County Commission did just that, and the developer said he would not proceed with the project.

    But now, according to Wichita Eagle reporting, a different developer is proceeding with the project, and without subsidy, according to the article. While TIF is not available, it seems the authorizing ordinance for the CID is still in effect, and could be used by the new developer, if desired.

    Economic development, or corporate welfare?

    That the Planeview Save-A-Lot grocery store is able to proceed, and in a larger and more expensive form than originally proposed, tells us that the arguments of its supporters — that economic development assistance was absolutely required — were not true. Actually, these arguments might have been true in the mind of Rob Snyder, the original developer. Developers who seek public subsidy have a powerful incentive to make the case to local governments that their projects need financial assistance. In this case, Snyder was able to convince Wichita city staff that there was indeed a “gap,” according to city documents, of “approximately $950,000 on a total project cost of over $2,000,000.” In other words, the purported “gap” was nearly half the total project cost.

    But in the hands of a different developer, that gap has evaporated, and the project is able to stand on its own without public assistance.

    We need to realize that the “gap” analysis performed by the City of Wichita is not thorough. There’s an imbalance of power in the relationship between city officials and developers. As mentioned above, developers have powerful financial motives to present their projects in a way that makes them eligible for public assistance. Government officials want these projects to happen. Economic activity is good for everyone, after all. So the motives of local economic development officials and elected representatives to turn over a lot of rocks — examining deals too closely — is weak. As a result, we’ve seen examples where outsiders brought information to the City of Wichita that would not have been considered otherwise.

    In one instance a former Wichita City Council member was unhappy that the Wichita Eagle uncovered negative information about a potential recipient of Wichita public assistance.

    Wichita officials and council members need to take a look at their economic development programs and decide whether the city is willing to — and wants to — distinguish between real and valid economic development programs and corporate welfare. In the case of Wichita’s public assistance offer to Rob Snyder’s Save-A-Lot grocery store, recent developments confirm what a few people suspected at the time — it was corporate welfare, plain and simple.

  • Eastgate CID should not be approved in Wichita

    Tomorrow the Wichita City Council will decide whether to grant the owners of Eastgate shopping center a Community Improvement District (CID). Granting the CID would force the merchants in the district to collect tax of an additional one cent per dollar sales from customers. These proceeds, less a small handling fee, would then be given to the center’s owners.

    There are many reasons why the council should not form the CID. Perhaps the primary reason is that it lets property owners establish their own private taxing policy for their exclusive benefit. This goes against the grain of the way taxes are usually thought of. Generally, we use taxation as a way to pay for services that everyone benefits from, and from which we can’t exclude people. An example would be police protection. Everyone benefits from being safe, and we can’t exclude people from participating in — benefiting from — police protection.

    So when we pay property tax or sales tax, many are comforted knowing that much of it goes towards things like police and fire protection. (Of course, some is wasted, and government is not the only way these services, especially education, could be provided.)

    But CIDs allow taxes to be collected for the benefit of one specific entity. This goes against the principle of broad-based taxation to pay for an array of services for everyone. But in this case, the people who benefit from the CID are quite easy to identify: the property owners in the district.

    CID advocates and council members make the case that CID taxes are good for the economy. It’s just another tool. But it’s a tool that has to be tapped with a velvet hammer. When people are armed beforehand with knowledge of taxes, they may alter their behavior and not shop at merchants located with CIDs. The council’s refusal to require signage that lets shoppers easily know, in advance, of taxes they’ll be paying recognizes that fact.

    The council members should also be aware that when Wichitans have to spend more when shopping at certain merchants, it leaves less money to spend at other merchants.

    There one was a time when if landlords wanted to make improvements to their property, they would pay for it themselves. Or they might raise their rents. These days of private enterprise are coming to an end as government is used to accomplish what private transactions and agreements once did.

    As CIDs start to spread across Wichita, it’s likely the pace of requests for more will accelerate. After Eastgate spruces up, what are the owners of Towne East Square, located catty-corner, to do? Why wouldn’t they want their own CID too? And so it goes, on and on, until most of our major shopping districts are located within CIDs.

    In this way the city will have experienced a sales tax increase, except that the usual recipient of tax revenue won’t be receiving it. And the usual recipient — government — will still be hungry.

  • Kansas and Wichita quick takes: Sunday February 27, 2011

    Boeing tanker contract. While almost everyone in Kansas is celebrating the award of the air fueling tanker replacement contract to Boeing, there are a few reasons we shouldn’t over-celebrate. First, we bought an expensive war weapon. This is guns, not butter. President Dwight Eisenhower warned against the creation of a permanent armaments industry. Now our leaders celebrate defense spending as a jobs creation program, forgetting the opportunity costs of this spending. … In 2008, when the contract was awarded to the foreign company European Aeronautic Defence & Space Co. (EADS) and Boeing successfully protested the award, the editorial page of the Wall Street Journal correctly analyzed the politics: “What’s really going on is a familiar scrum for federal cash, with politicians from Washington and Kansas using nationalism as cover for their pork-barreling.” The article correctly stated the goal of the contract: “The Pentagon’s job is to defend the country, which means letting contracts that best serve American soldiers and taxpayers, not certain companies.” Noting the aging fleet of tankers the contract would replace, and that the protest by Boeing would delay receiving them, the Journal concluded “Protectionists in Congress want to make America’s soldiers wait even longer for this new equipment, all to score political points at home. There’s a word for that, but it’s not patriotism.” … Of the contract awarded this week, the Journal wrote: “The military and Capitol Hill proved so good at fouling up this decade-long contest through political meddling, fake patriotism and sheer incompetence that a clean resolution may be near impossible.” Noting the international nature of manufacturing, the article wrote: “Boeing and Airbus each would have employed about 50,000 Americans to build up to 179 aerial refueling tankers.” Concluding: “The law tells the Defense Department to buy the best hardware at the best price on the global marketplace, regardless of any impact on domestic job creation. The fuel tanker debacle has undermined a competitive and open market for defense purchases free of political pressure. The losers are American taxpayers and soldiers.”

    Kansas Economic Freedom Index. This week I produced the first version of the Kansas Economic Freedom Index: Who votes for and against economic freedom in Kansas? for the 2011 legislative session. Currently I have a version only for the House of Representatives, as the Senate hasn’t made many votes that affect economic freedom. The index now has its own site, kansaseconomicfreedom.com.

    Elections this week. On Tuesday voters across Kansas will vote in city and school board primary elections. Well, at least a few will vote, as it is thought that only nine percent of eligible voters will actually vote. Many of those may have already voted by now, as advance voting is popular. For those who haven’t yet decided, here’s the Wichita Eagle voter guide.

    Civility is lost on the Wisconsin protesters. Lost not only in Wisconsin, but across the country, writes Michelle Malkin in Washington Examiner. “President Obama’s new era of civility was over before it began. You wouldn’t know it from reading The New York Times, watching Katie Couric or listening to the Democratic manners police. But America has been overrun by foul-mouthed, fist-clenching wildebeests. Yes, the Tea Party Movement is responsible — for sending these liberal goons into an insane rage, that is. After enduring two years of false smears as sexist, racist, homophobic barbarians, it is grassroots conservatives and taxpayer advocates who have been ceaselessly subjected to rhetorical projectile vomit. It is Obama’s rank-and-file “community organizers” on the streets fomenting the hate against their political enemies. Not the other way around.” … Malkin details the viciousness of some of the political activity across the country, some of which is especially demeaning to minorities — and women, as we’ve seen in Kansas this week.

    Help Wisconsin Governor Walker. Tim Phillips of Americans for Prosperity explains what’s happening in Wisconsin: “Governor Walker is simply repairing the Wisconsin budget by reining in the overly generous pension and benefits packages that are far beyond what people in the private sector receive. He’s also ending the government union collective bargaining that has been the chief reason why union benefits and pensions have gotten so out of control.” … Phillips recommends supporting Walker by signing a petition stating: “Union dues should be voluntary, and the state should not be in the business of collecting them. Union certification should require a secret ballot. Collective bargaining should not be used to force extravagant pension and health benefits that cripple state budgets. These common-sense reforms have made the union bosses desperate to disrupt Wisconsin government and overturn an election. They must not be allowed to succeed. In fact, every state should adopt Governor Scott Walker’s common sense reforms.” Click on Stand With Walker to express your support.

    Wichita city council. On Tuesday the Wichita City Council will take up these matters: First, the council will decide on a policy regarding soliciting charitable contributions at street intersections. Then, the council will decided whether to create a Community Improvement District for the Eastgate Shopping Center. While the council has enthusiastically granted other applicants this privilege of setting their own sales tax policy for their own benefit — and has voted against meaningful disclosure of this to potential shoppers — this CID may not pass. The Wichita Eagle has editorialized against this CID in particular — twice. Vice Mayor Jeff Longwell voted against accepting the petitions for this CID, although he did not explain his lone dissenting vote. … Then Chrome Plus, a manufacturer, seeks forgiveness from paying property taxes under the city’s Economic Development Exemption (EDX) Program. … In the consent agenda, the council will be asked to approve a payment of $235,000 to settle a lawsuit over “damages incurred in an accident between a Wichita Transit bus and a pedestrian in December 2008.”

  • Kansas and Wichita quick takes: Thursday February 10, 2011

    Politicians’ Top 10 Promises Gone Wrong. This Monday (February 14) Americans for Prosperity will show the 2010 John Stossel documentary “Politicians’ Top 10 Promises Gone Wrong.” For a preview and interview with Stossel, click here. For my reporting and review of the show, click on Stossel on politicians’ promises. … This event, sponsored by Americans for Prosperity, will be held on Monday, February 14 from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    Cabela’s to seek community improvement district tax. It should come as no surprise that when a major retailer comes to Wichita, they will take advantage of the state’s community improvement district law. If approved, formation of the CID would allow Cabela’s to charge an extra tax on its sales. In this case, according to Wichita Eagle reporting, the tax will be 1.2 cents per dollar. … Sources tell me that this is likely not the only special tax treatment Cabela’s will seek. Look for an application for tax abatements through IRBs or the EDX program. This would fit right in with Cabela’s notoriety for squeezing all it can from government. … As these CIDs spread across Wichita, we are, in effect, experiencing a sales tax increase, drip by drip.

    Kansas legislature website. The Kansas legislature’s website is improving. A huge irritation remains, however: when pdf documents are presented, they’re in a “fancy” non-standard window that reduces the usability of the site. On an Iphone, the documents can’t be read, as the fancy window wants to do its own scrolling. … Sometimes clicking on a link produces the wrong document, as just now on the house of Representatives page, I clicked on “Session 20 – Wed Feb 09 2011 PDF” and was presented with the Senate’s journal for January 31. … Judging by the log of completed features added each day and by the list of things promised, it’s clear that this site is still in development. Doing this during the session was a terrible lapse of judgment. … Listed are “Special reports for members” such as “House and Senate Subject Index with bill status.” Why, I wonder, should this be available only for members?

  • Wichita again to bet on corporate welfare as economic development

    This week the Wichita City Council will consider three measures that, if adopted, will further establish corporate welfare and rent-seeking as Wichita’s economic development strategy.

    When people are living on welfare, we usually see that as a sad state of affairs. We view it as a failure, both for the individual and for the country. We seek ways to help people get off welfare so that they become self-sufficient. We want to help them contribute to society rather than being a drain on its resources.

    But Wichita’s leaders don’t see corporate welfare as a bad thing. Instead, as these three measures — all of which will likely pass unanimously — illustrate, welfare is good when you’re a business in Wichita. Especially if you can raise speculation that your company might move out of Wichita.

    The term rent, or more precisely, economic rent is somewhat unfortunate, as the common usage of the term — paying someone money for the use of an asset for a period of time — contains no sinister connotation. But economic rent does carry baggage.

    What is rent seeking? Wikipedia defines it like this: “In economics, rent seeking occurs when an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic environment, rather than by earning profits through economic transactions and the production of added wealth.”

    This explanation doesn’t do full justice to the term, because it doesn’t mention the role that government and politics usually play. The Concise Encyclopedia of Economics adds this: “The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors.”

    The three deals the Wichita City Council will consider tomorrow are both corporate welfare and rent-seeking. All three are harmful to our city.

    The three deals

    The first item to be considered Tuesday concerns MoJack Distributors, LLC, a company that makes an accessory for riding lawn mowers. It is proposed that the City of Wichita and Sedgwick County each make a forgivable loan of $35,000 to this company. If the company maintains a certain level of employment, the loans do not need to be repaid.

    But this is not the only welfare being given to this company. The city also proposes a 100% Economic Development Exemption (EDX) property tax exemption. The term would be five years, with renewal for another five years if conditions are met. The city’s material on this matter may be read at Approval of Forgivable Loan Agreement, MoJack.

    The company will also receive tax credits and grants under programs offered by the State of Kansas.

    Another company, Apex Engineering International LLC, is proposed to receive forgivable loans of $220,000 each from Wichita and Sedgwick County. The company will also receive grants and tax credits totaling $1,272,000 from the state. Surprisingly, no property tax exemption is mentioned for this company. The city’s material on this matter may be read at Approval of Forgivable Loan Agreement (Apex Engineering International).

    For both companies, there was the threat of moving operations elsewhere, and the incentives offered made the difference.

    The final action of corporate welfare to be considered is a community improvement district (CID) for the Eastgate shopping center at Kellogg and Rock Road. The CID, if approved, would require merchants to add an additional tax of one cent per dollar on all sales. That money, less a five percent fee, would then be given to the shopping center’s owners for their exclusive use. This could be worth as much as $18,528,596 over 22 years, according to city documents.

    The Eastgate item is on the agenda for a second time after being withdrawn in January. At the time, Rhonda Holman of The Wichita Eagle wrote: “As it was, insufficient time had been allowed for staff vetting of the proposals and thorough consideration by the council and public.”

    The action the council is asked to take at tomorrow’s meeting is to accept petitions asking for formation of the CID, and to set March 1st as the date of a public hearing.

    Targeted investment, or welfare

    Government bureaucrats and politicians promote programs like these as targeted investment in our region’s economic future. They believe that they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by city hall that shapes the future direction of Wichita’s economy.

    Arnold King has written about the ability of government experts to decide what investments should be made with public funds. There’s a problem with knowledge and power:

    As Hayek pointed out, knowledge that is important in the economy is dispersed. Consumers understand their own wants and business managers understand their technological opportunities and constraints to a greater degree than they can articulate and to a far greater degree than experts can understand and absorb.

    When knowledge is dispersed but power is concentrated, I call this the knowledge-power discrepancy. Such discrepancies can arise in large firms, where CEOs can fail to appreciate the significance of what is known by some of their subordinates. … With government experts, the knowledge-power discrepancy is particularly acute.

    I emphasized the last sentence to highlight the problem of the dispersed nature of knowledge.

    Yet this week, our Wichita city bureaucrats feel they have the necessary knowledge to recommend to the city council that the citizens of Wichita make investments of public funds in these three instances. Our city council members are gullible enough to believe it.

    One thing is for sure: the city has the power to make these investments. They just don’t have — they can’t have — the knowledge as to whether these are wise.

    We need a dynamic job creation engine

    Furthermore, we have to question the wisdom of investing in these established companies, especially a company involved in aviation, as Wichita always is seeking to diversify its economy away from dependence on aviation.

    Through research conducted by Dr. Art Hall and others, we now know that it is dynamic young companies that are the main drivers of job creation in Kansas. Hall wrote: “Embracing dynamism starts with a change in vision. Simply stated, the state government of Kansas should abandon its prevailing policy vision of the State as an active investor in businesses or industries and instead adopt the policy vision of the State as a caretaker of a competitive “platform” — a platform that seeks to induce as much commercial experimentation as possible.” (While Hall wrote about the State of Kansas, the City of Wichita is playing the same role at a local level.)

    The “active investor” role that the city of Wichita is about to take with regard to these three companies is precisely the wrong role to take. These actions increase the cost of government for the dynamic small companies we need to nurture. Instead these efforts concentrate and focus our economic development efforts in an unproductive way.

    Sales tax increase spreading across Wichita

    These proposed Eastgate shopping center CID, and one still likely to be proposed for Westway shopping center, break new ground in that these shopping centers are not tourist destinations or trendy shops. They’re run-of-the mill shopping centers that have stores that Wichitans visit every day. Some council members like Vice Mayor Jeff Longwell have justified past CIDs on the basis that since they are tourist destinations, much of the tax will be paid by visitors to Wichita. This is not a wise policy, but even it it was, it does not apply to these two shopping centers.

    Instead, these two applications are more indications that soon Wichita — its major retail centers and destinations, at least — is likely to be blanketed with community improvement districts charging up to an extra two cents per dollar sales tax. Currently, merchants in a CID are running the very real risk that once their customers become aware of the extra sales tax, they will shop somewhere else. But as CIDs become more prevalent in Wichita, this competitive disadvantage will disappear.

    Step by step, a sales tax increase is engulfing Wichita, and our city council and mayor are fine with that happening. This is on top of the statewide sales tax increase from last year, which, despite claims of its supporters and opposition by conservatives, is likely a permanent fixture.

  • Kansas and Wichita quick takes: Sunday January 16, 2011

    Wichita swoons over Boston attention. The self-congratulatory back-patting by a group of Wichitans over attention paid by a Boston Globe travel writer is starting to be embarrassing for us. The Wichita Eagle article on this topic mentions chicken-fried steak and biscuits and gravy in its opening sentence, a sure sign that the article will attempt to draw a contrast between our image and our purported reality. Which is, if I understand, mostly street statues, the Old Mill Tasty Shop, and Exploration Place. … As it turns out, Geoff Edgers, the writer, has a financial motive in his praise of Wichita. On his initial visit: “Festival directors put up Edgers, his wife and two small children at the Hotel at Old Town.” Now Wichitans are raising money to help the writer, who is also a filmmaker, get his movie on television, and “the Wichita groups offered to raise money to help Edgers’ get his film shortened and syndicated for public broadcasting. … If he raises $2,500 while in Wichita next month, Edgers intends to include a ‘thank-you’ to Wichita in the credits of his syndicated film.”

    Harm of expanding government explained. Introducing his new book Back on the Road to Serfdom: The Resurgence of Statism, Thomas E. Woods, Jr. writes: “The economic consequences of an expanded government presence in American life are of course not the only outcomes to be feared, and this volume considers a variety of them. For one thing, as the state expands, it fosters the most antisocial aspects of man’s nature, particularly his urge to attain his goals with the least possible exertion. And it is much easier to acquire wealth by means of forcible redistribution by the state than by exerting oneself in the service of one’s fellow man. The character of the people thus begins to change; they expect as a matter of entitlement what they once hesitated to ask for as charity. That is the fallacy in the usual statement that ‘it would cost only $X billion to give every American who needs it’ this or that benefit. Once people realize the government is giving out a benefit for ‘free,’ more and more people will place themselves in the condition that entitles them to the benefit, thereby making the program ever more expensive. A smaller and smaller productive base will have to strain to provide for an ever-larger supply of recipients, until the system begins to buckle and collapse.” … Phrases like “smaller and smaller productive base” apply in Wichita, where our economic development policies like tax increment financing, community improvement districts, and tax abatement through industrial revenue bonds excuse groups of taxpayers from their burdens, leaving a smaller group of people to pay the costs of government.