Tag Archives: Downtown Wichita arena

In Sedgwick County, is there slack time?

As reported in the Wichita Eagle, the Sedgwick County Commission decided to reimburse the county for time its employees spent working on arena-related matters. The money will come from the sales tax that was collected to build the Intrust Bank Arena in downtown Wichita. The amount of money the commission decided to transfer is $1.6 million, although according to the Eagle, the total cost could reach $2.6 million.

Here’s something of concern to me in the story: “But he [Sedgwick County chief financial officer Chris Chronis] pushed for the money to remain in the arena and pavilions’ operating and maintenance reserve fund, which last month had just less than $14 million, because taking money out of the fund would drain it four years earlier than expected — in 2024.”

Evidently the county has financial projections for the arena all the way out to 2018, and possibly beyond. That is a very long time into the future, and any projections about the performance of the arena over this period would be based on assumptions that can’t be estimated with anything approaching certainty.

Projections with this precision made about events so far in the future surrounded by so much uncertainty remind me of the saying that economists use a decimal point to show they have a sense of humor.

Back to the present: Commissioner Dave Unruh told the Eagle that the county did not hire any new staff to perform work that has an estimated value of $2.6 million. My question is this: Is this evidence that there was $2.6 million of slack time in county employee’s schedules? How were they able to get this vast amount of work accomplished? Perhaps after the arena work that has occupied $2.6 million of staff time is complete, we could hire out this staff to earn revenue for the county, as it seems they will have time on their hands.

Regarding the contention that voters in 2004 were promised that no property tax money would be used on the arena, Unruh was quoted by the Eagle as saying: “I do think that we made a very strong commitment that all the sales tax money would be used for the arena and pavilions.”

It seems that now Sedgwick County voters have a new concern: When politicians make a promise, do we have to ask them if this is a regular commitment or a very strong commitment? Or are there other types of commitments that we don’t know about?

Assessment of Wichita’s Intrust Bank Arena’s success premature

Any rational assessment of the success of the Intrust Bank Arena in downtown Wichita must realize that the arena is in its honeymoon period. Will the parade of big-name stars playing to a packed arena continue for long? Will the Wichita Eagle and local television stations continue to breathlessly announce every upcoming event?

Until initial enthusiasm dies down and the arena has a track record of a year or more, we simply have no idea what the financial performance of the arena will be. That’s what’s important.

This premature glowing assessment of the arena’s success is dangerous in that it leads us to believe that there is a positive role for large government projects in Wichita. Worse, people are lead to think that taxation is a good way to pay for such things. As an example, the one cent sales tax used to pay for the arena is presently touted as a model for funding other government spending, ranging from Governor Parkinson’s proposal for a sales tax to fund state government to what surely will be a proposal for a sales tax to fund the revitalization of downtown Wichita.

Proponents say that the sales tax was painless, so why not do it again? Some were sorry to see it expire. As the sales tax that funded the arena was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)

But the tax was not painless. Undoubtedly, the employment landscape was shifted in Sedgwick County because of the tax, and that caused some people to be unemployed. My post Prepare for sales tax-induced job effects now reports on what happened in Little Rock when that city’s arena was built. It would be reasonable to think that similar effects happened here.

Last year in Portland, a proposal to build a new minor league baseball stadium was found to produce a net job loss. An economics consulting firm reported: “Thus, the Lent’s project would have a net impact of a 182 job-year loss on the City’s economy (a gain of 175 from the construction less a loss of 357 due to reduced spending by households and businesses because of higher taxes).”

It also concluded that “If those individuals who put their money into baseball via taxes are allowed to put that money into the private market, that same amount of money would actually yield more jobs.” Reportedly, Portland’s mayor “appears to have sat on” the study and was not eager to release it.

This effect — a shiny, highly touted public works project being much more visible than private dispersed economic activity — was known long ago and explained by Henry Hazlitt in his classic work Economics in One Lesson:

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

We were also told that the arena would be a driver of downtown development. But in its first test, the Wichita City Council evidently didn’t believe what arena boosters told them, as it voted to grant several million dollars in subsidy to the developer of a hotel just a few blocks from the arena. Will all future development around the arena — if it happens — require similar subsidy?

Intrust Bank Arena’s missing name

A note to readers: I served as co-manager of Peterjohn’s campaign in 2008.

The commemorative plaque on the Intrust Bank Arena in downtown Wichita, Kansas.The commemorative plaque on the Intrust Bank Arena in downtown Wichita, Kansas.

On the commemorative plaque outside the Intrust Bank Arena in downtown Wichita, there’s a missing name.

The names of eight Sedgwick County commissioners appear, including all who were members of the Commission when the arena sales tax passed in November 2004, all who have served since then, and all present commissioners.

Except for one: current third district commissioner Karl Peterjohn.

In 2004 Peterjohn led opposition to the sales tax ballot measure that funded the arena. When he decided early in 2008 that he would run for the commission against long-time Republican incumbent Tom Winters, Peterjohn told Winters that the next commissioner would have their name on a plaque on the arena. On primary election night, when Peterjohn defeated Winters, Peterjohn told me “I told him [Winters] he could have that spot, and I’m keeping my word.”

It was a gracious gesture.

There’s been a small controversy surrounding Peterjohn in his new role as arena supporter. He participated in the arena’s recent ribbon-cutting ceremony. More importantly, he voted last February for a $1.7 million seating upgrade. That upgrade would reduce the cost of transition between events, and also improve seating and viewing.

That vote, along with participation in the ribbon-cutting, is central to Peterjohn’s goal of seeing that the arena is a success and doesn’t become a fiscal burden on taxpayers. Although the contract with SMG, the arena’s management firm, shields Sedgwick County from losses, that contract comes to an end someday. It’s also full of loopholes that, in my opinion, would allow SMG to make an early exit if arena finances are not favorable.

Working for the success of the arena, therefore, is a logical continuation of Peterjohn’s concern for the taxpayer, the same concern as when he opposed the arena in 2004, he said.

There’s also been grumbling that county commissioners and bureaucrats will receive perks such as tickets and premium parking passes to arena events. Peterjohn said he’s received no tickets or parking perks.

A Wichita Eagle blog post by Deb Gruver on this topic is Karl Peterjohn’s name not on Intrust Bank Arena sign.

Ticket scalping is a market function, not a criminal activity

At the Intrust Bank Arena in downtown Wichita, some concerts are very popular, which leads to people frustrated at two things: the inability to buy tickets when they go on sale, and then the high prices that ticket scalpers ask for tickets on the aftermarket.

I understand the frustration of the stymied ticket buyers. Who wants to pay $300 for a ticket that was sold by the arena’s box office for $50? It would be great if everyone who wanted to attend could do so for $50 — or for $5, for that matter. And that gets to the heart of the problem and why it isn’t likely to be solved: human behavior and economics.

Walter Block has a chapter in his book Defending the Undefendable that defends the ticket scalper. (The book in pdf form is here.)

As it turns out, scalping is a beneficial economic activity. But even if you don’t believe this, scalping could be avoided if venues like the arena would sell tickets in a different manner.

According to Block, scalping requires “a fixed, invariable supply of tickets.” After all , if the supply of tickets was unlimited, everyone could buy all they wanted at list price (the price printed on the ticket, and what the venue sells them for).

Also, scalping requires “the ticket price chosen by management be lower than the ‘market clearing price.'” Markets clear when people want to buy the same number of tickets that are for sale. This balance is achieved by allowing the price of the tickets to freely adjust. When the list price of the ticket is less than what some people are willing to pay, that’s when scalpers have an opportunity to earn profits.

This points to one way that scalping could be eliminated, if concert promoters wanted to: They could sell tickets like shares of stock or bushels of wheat are sold. These items don’t have a list price. Instead, their price is whatever people are willing to pay.

Why would concert promoters price tickets at less than some people are willing to pay? If a scalper can get say, $300 for a ticket that the box office sells for $50, why doesn’t the box office price the ticket at $300? Or maybe $200? Here’s what Block writes:

For one thing, lower prices invite a large audience. Long lines of people waiting to enter a theater or ballpark constitutes free publicity. In other words, management forgoes higher prices in order to save money it might have had to spend on advertising. In addition, managers are loath to raise ticket prices — even though they would have little difficulty selling them for a big event or special movie — for fear of a backlash. Many people feel that there is a “fair” price for a movie ticket, and managers are responsive to this feeling.

There are several other motivations, less compelling, for keeping prices fixed at below equilibrium levels. Taken together they ensure that this pricing policy — the third condition necessary for scalping — will continue.

In other words, better for scalpers to bear the brunt of public ire for setting market-clearing prices. Can you imagine the public backlash at the Intrust Bank Arena and Sedgwick County if ticket prices for very popular concerts were set at market-clearing prices?

The chapter goes on to explain the two ways that scarce goods — concert tickets in this care — are rationed: price rationing, and non-price rationing. Price rationing, as you might imagine, relies on the price mechanism to determine a market-clearing price so that supply equals demand.

Non-price rationing, on the other hand, relies on something else. Block mentions “first-come, first served” (camping out the night before at the box office window) and favoritism (those connected to or favored in some way by arena management get special privileges) as two methods of non-price rationing. The Intrust Bank Arena has used another method — a lottery — for some concerts.

So which is “fair?” Does price rationing favor those with the ability to pay high prices? Certainly scalping makes it easier for rich people to obtain scarce tickets. But Block says that scalping provides entrepreneurial opportunities. Someone with a small amount of capital (just enough to buy one or more tickets) but a lot of spare time (someone without a job) can camp out in line and earn profits by selling the tickets. Or, they could simply wait in line and be paid a wage.

By the way, scalpers are not guaranteed profits. If there is not much demand for tickets for an event, scalpers will have to sell the tickets at a loss — or they may not be able to sell them at any price.

Back to Wichita: According to a Wichita Eagle article, a group named Taxpayers for Tickets has been formed to take action against scalping. Reading the website, it seems that the group’s focus is on more laws and enforcement of them to effect the goal of getting tickets in the hands of the taxpayers who paid for the construction of the Intrust Bank Arena.

I don’t favor this approach. First, as we’ve seen, scalping is a socially beneficial activity that provides market-clearing prices for tickets.

Second, there is plenty of actual crime in our community that causes death, injury, and loss of property. We don’t need to squander law enforcement resources on victimless crimes like people willingly and voluntarily engaging in market transactions.

In a letter published in the Wichita Eagle, Todd Allen, head of Taxpayers for Tickets, wrote “I figured that since the taxpayers paid for the arena, that makes us the owners.” I hate to disappoint Mr. Allen, but that’s far from the case. Try requesting a contract, as in Sedgwick County keeps lease agreement secret. Not even Sedgwick County Commissioners are able to see the lease of the arena’s flagship tenant.

Another article on ticket scalping is Ticket Scalpers Are Hidden Heroes.

Wichita arena lands a whopper

The Intrust Bank Arena in downtown Wichita has landed NCAA women’s basketball first- and second-round tournament games in 2011.

Recently, the NCAA bypassed the Wichita arena when selecting sites for men’s NCAA games. On KAKE TV, arena manager Chris Presson said women’s games are a testing ground for something “perceived to be bigger. … Certainly the women’s to us is as big as the men’s and is as big a deal to us as the men’s would be. We’re more than content, more than happy with what we’ve got.”

According to Associated Press reporting from earlier this year, “The first two rounds drew an average of 4,100 people.” The Wichita Eagle reports 4,915 averages attendance for all tournament games.

Is Presson being reasonable: women’s games, at 4,100 per game, are equivalent to men’s games, which are likely to sell out the arena? It’s his job to promote the arena, but statements like this are not reasonable.

The publicly-supported arena in downtown Wichita remains a contentious issue. Comments left to a recent post of mine about the arena provide some insight into the thinking of arena tax supporters.

One comment writer said that instead of complaining, I should be supporting the arena. He may have forgotten the extra sales tax that I contributed to pay for the arena. Doesn’t that count?

Another wrote: “My question to you is since the arena has been built, do you want it to succeed or fail?” I guess this writer didn’t read the final sentence of the post, which is: “Ultimately, it is the Sedgwick County taxpayer who is financially responsible for the arena, and it is they who must hope for success.”

So yes, I do hope that the arena is a success. As someone who is opposed to taxation — that’s why I opposed the arena sales tax ballot measure — I sincerely hope that tax revenues are not required to support the arena. Arena tax supporters have already shown that they’re willing to tax one person to build a playhouse for themselves, so I don’t suspect they’ll be opposed to future tax support of the arena, should it become necessary.

Low NBA attendance in Wichita danger sign for Intrust Bank Arena

The Intrust Bank Arena management firm SMG must be wondering what it bit off in Wichita. Last night NBA professional basketball players put sneaker to floor in Wichita for the first time in 14 years, and only an estimated 8,000 fans showed up. (Estimate is by the Wichita Eagle.)

The game was held at the Charles Koch arena on the campus of Wichita State University. That arena has a capacity, according to the goshockers website, of 10,400.

Wichita downtown arena boosters told voters that if we passed the tax, we’d have lots of events like this, and lots of fans would attend. But in this trial run of big-time professional sports in Wichita, the fans that did attend would fill barely more than half of the new downtown Wichita arena.

Arena apologists are likely to come up with a variety of excuses for this embarrassingly poor turnout: It was only an exhibition game. It wasn’t at the downtown arena. It wasn’t the right teams. It was drizzling rain. There will always be excuses.

The citizens of Sedgwick County are going to have to hope that the Intrust Bank Arena can do a better job drawing fans. Even though the SMG contract puts that firm on the hook for losses, that contract has a lot of ways for SMG to wiggle out, even before its five year management term expires. Ultimately, it is the Sedgwick County taxpayer who is financially responsible for the arena, and it is they who must hope for success.

Downtown Wichita parking plan at odds with revitalization goals

Currently, Wichita is struggling to find enough parking spots downtown to meet the demand expected to be created by the new Intrust Bank Arena. It’s been a contentious issue, with many Wichitans skeptical of the city’s ability to supply enough parking at prices that people are willing to pay for.

But did you know that there is likely to be fewer parking spots in downtown Wichita if the firm likely to lead downtown revitalization planning has its way?

Here are a few excerpts from the proposal submitted by Goody Clancy, the firm the city is likely to choose to lead the planning process:

Because transit, walking and biking will be viable options, less parking will be needed. … Parking policy will also unlock opportunity to redevelop parking lots … The effects of visionary choices such as increasing downtown residential development, expanding transit service, and constraining parking supplies will be investigated. … A sound and coordinated approach, encompassing economics, engineering and urban design, is needed to free up existing parking lots for redevelopment. (emphasis added)

I wonder: do city leaders know that their herculean effort to develop more parking downtown is an obstacle to downtown Wichita revitalization?

Welshimer files for re-election to Sedgwick County Commission

Gwen Welshimer campaign announcement 2009-10-09Sedgwick county commissioner Gwen Welshimer files for re-election.

Today, Sedgwick County Commissioner Gwen Welshimer filed for re-election to her position as a member of the commission. Her statement is below.

Welshimer, a Democrat, is so far the only candidate in that party. There are three Republicans who have either filed or are considering filing.

Welshimer campaigned and has voted as a fiscal conservative. I asked her given your fiscal conservatism, how will these Republicans differentiate themselves from you? Welshimer said that she’s not heard their campaign platforms. They are all city people, she said, likely to support funding of downtown Wichita.

Responding to my question about the downtown Wichita revitalization planning and the likelihood of a tax to fund it, she said that we’ve given the city a $210 million economic development tool called the downtown Wichita arena. The county has also given many years of property tax incentives, both in the past and in the future. The other 19 cities in the county have not enjoyed this treatment, she said.

In 2006, Welshimer signed a pledge to not raise taxes if elected, and she has fulfilled that pledge so far. Her opponent in that election, incumbent Ben Sciortino, received the endorsement of the Wichita Eagle. Welshimer narrowly won that election, 10,081 votes to 9,941.

Analysis

Given Welshimer’s fiscal conservatism, Republican candidates will find it difficult to run to her right. Her stand against tax increment financing (TIF) districts and subsidies to downtown developers means she’s not likely to get the support of those downtown developers who thrive on taxpayer subsidy. Those people contribute heavily to political campaigns. Additionally, her support for the dismissal of Sedgwick County Manager Bill Buchanan — a position I support — puts her at odds with the Chamber of Commerce crowd. They make political contributions, too.

In this district (district 5), my analysis of a recent voter file shows voter registration runs 29% Democratic, 40% Republican, and 31% unaffiliated. (The remainder are Libertarian and Reform party registrants.)

Considering recent voters (those who voted in an election in 2008), the numbers change a bit. In this case, 30% are Democratic, 44% Republican, and 26% unaffiliated.

Welshimer’s statement

I have filed as a candidate for re-election to the 5th District Seat on the Sedgwick County Commission. I want to continue holding the line for Sedgwick County taxpayers.

At this time, center Downtown redevelopment is the number one issue for this race. I want the tax dollars paid by Southeast Wichita, Derby, and Mulvane to be used for paving roads, drainage, infrastructure, traffic controls, township assistance, and business district enhancements in District #5. The $210 million sales tax arena and decades of property tax incentives for center Downtown have been a weight around the neck of my district. I will support redevelopment of Downtown through private investment only in the future.

I want more property tax reduction. I want to pay for it with new revenues and more efficient policies.

If re-elected, I will continue to work for safe, sensible, and reasonable alternatives to a costly new jail.

The Coliseum site has the potential for 1,000 new jobs and $10 million in new revenue over the next five years. I want to work to make this happen.

I want to continue to work for the success of the National Center for Aviation Training at Jabara Airport. This is evolving into a job training destination center for employers around the world and it offers an incredible new future for Sedgwick County.

I believe in the power of progressive new ideas. I have not been a commissioner who gives in to the out-of-touch “good old boy” network.

I am ready for a rigorous campaign.

Wichita sales tax likely to be proposed

Two recent events have led me to suspect that as part of the plan for the revitalization of downtown Wichita, we’re going to see a sales tax proposed.

The first is Phillip Brownlee’s editorial in last Friday’s Wichita Eagle, which carried the title Taxes are lower than many think. While this editorial focused on property taxes, it’s easy to see this as an argument that Wichitans can bear the burden of more taxation. Softening up the electorate, so to speak.

Then, there’s this email sent to the Wichita city council and Sedgwick county commission members:

I recently received the attached information on Oklahoma City’s next plan for their downtown area. This is their MAPS program that spurred their downtown developed. I thought you might find this of interest.

http://www.okc.gov/maps3/

Sincerely,

John Rolfe
President and CEO
Go Wichita Convention & Visitors Bureau

MAPS — that’s the program that funded Oklahoma City’s downtown improvements through a sales tax, with a second version funding school projects — will be voted on in December. If approved, a 1% sales tax will raise funds for more downtown projects. This email, without saying so directly, endorses the idea of a sales tax for downtown development.

What’s the sales tax in Oklahoma City, you may be wondering? It’s 8.375%. It won’t change if the new MAPS plan is approved by the voters, as a current 1% tax will expire.

That sales tax was billed as “temporary,” and it does appear that it will expire as planned. But, city leaders are recommending approval of the new sales tax. This is similar to the sales tax for the downtown Wichita arena, when as that tax was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)

The sales tax for Wichita is 6.3%.

City leaders are likely to use the the Intrust Bank Arena in downtown Wichita as an example of a successful project funded through a sales tax. But any assessment of the success of this project is about two years away. The fact that the arena exists is evidence of a minimum level of competence. It will be some time before we know whether the arena can support itself without being a drain on taxpayers, despite the provisions of the SMG management contract.

In Wichita, we’re going to have to be watchful. The drumbeats of new taxation have started.

Wichita downtown arena parking promises not fulfilled

In 2004, as residents of Sedgwick County were considering whether to vote for a sales tax to fund the downtown Wichita arena (now known as the Intrust Bank Arena and nearly ready to open), people wondered about parking.

So on a campaign literature piece, the arena supporters made this claim: “With the proposed garage structures, more than 10,000 parking spaces will be available within a three-block radius of the Arena (compared with the Coliseum’s 4,500 spaces.)”

Today, on the eve of the arena’s opening, these parking garages don’t exist.

What about surface parking spaces? According to the draft version of the parking plan submitted to the city council last week, there is “available weekday parking supply at peak of approximately 3,040 spaces within the Arena District.” That district is, approximately, a three-block radius around the arena.

The parking structures promised by arena boosters might be built. The city has approved a TIF district that surrounds the arena, and there is the potential, by my reckoning, to spend around $9 million on parking structures. But at a cost of $20,000 to $25,000 per space, this money buys 450 parking spots at most.

By the way, I learned that the number of parking spaces around the arena is likely to decrease. At least that’s the goal of one of the firms who pitched their planning services to Wichita last week. That’s because if there is development of the area immediately surrounding the arena, there won’t be room for so much parking. Travel by automobile is something to be reduced, according to most of the planners, and we should rely on transit and bicycles instead.

I realize that the arena boosters who put out this information weren’t government officials (although some may have been involved). They put out a few other whoppers, too. It’s too bad that so many citizens believed them.

Goody Clancy proposal for Downtown Wichita revitalization master plan

Last Friday a selection committee selected one company from four finalists to lead the planning effort for the revitalization of downtown Wichita. If some city leaders and a few citizen elites had their way, citizens of Wichita wouldn’t be able to see the company’s proposal document until after the city council makes a decision to follow — or not — the recommendation of the selection committee. But thanks to city manager Robert Layton’s decision, this document is now available for all to read. (Thanks also go to council member Jim Skelton, for his unsuccessful effort to release the documents.)

This proposal is available because I requested it (and paid for it) under the provisions of the Kansas Open Records Act. The Wichita Eagle requested it too, and as of the time I received my copy, only that newspaper and I had requested it (along with the other three proposals from the finalists).

I didn’t scan all the pages, leaving out a section about the personnel involved and an appendix of related articles. Still, there’s 109 pages to read — but there are a lot of pictures. Click on
Goody Clancy Proposal for Downtown Wichita Revitalization Master Plan
to view or print the document.

(Update: The Wichita Eagle has obtained and posted a much better version of the proposal. It’s complete and in color. Click here and here.)

There are danger signs all over this document. Under the heading “Fiscal Responsibility,” for example, we see “Know the full range of effective public-private finance tools at hand.” Which means, of course, that developers will have their hands in the pockets of taxpayers through devices such as TIF districts, grants, tax credits, abatements, and other forms of subsidy.

Another sign: as a challenge to downtown, the document cites “The impact of relatively low development costs (inexpensive land, tenant-borne special assessment districts for infrastructure) at Wichita’s perimeter have a direct impact on Downtown land value and infrastructure economics.” (emphasis added)

What’s wrong with this statement? First, inexpensive land is a good thing. It means more people can afford what they want.

Second, note that people developing on the perimeter pay their own infrastructure costs. This statement hints that downtown developments won’t be expected to pay theirs.

There are just a few hopeful signs: “Indeed, WaterWalk might be struggling to fill its space because it has, simply put, hit a ceiling: it is focusing on food and fun, and perhaps there is room for only one such district (Old Town) in Downtown Wichita. The Arena could help in this regard, but until the publicly subsidized WaterWalk is a rousing success, it might not make sense to split the pie still further.”

Indeed. While we’re at it, let’s etch the names of the developers of WaterWalk on a large monument somewhere downtown, so that they are properly excluded from any further consideration as beneficiaries of the taxpayer. (Here’s the list, in case this monument isn’t built.)

But if there’s not demand for another food and fun district in Wichita, what about the promise of all the food and fun surrounding the Intrust Bank Arena? (A campaign piece from that election reads “It [the arena] will enrich our quality of life as new restaurants, shops and clubs spring up in the area …”)

It’s unknown how seriously the city council will take the steering committee’s recommendation. The council plans to vote on October 13.

Lutz, Hanson, Fahnestock owe Wichita an apology

In the campaign for the sales tax to build the downtown Wichita arena (Intrust Bank Arena), the idea of hosting NCAA men’s basketball games was promoted as something that would happen if voters approved the arena.

This week we learned that for this event, our arena has been rejected for the next three years.

Three arena boosters in particular — Bob Hanson of the Greater Wichita Area Sports Commission, businessman George Fahnestock, and Wichita Eagle sports columnist Bob Lutz — owe Wichita and Sedgwick County voters an apology.

As it turns out, Lutz was quite the visionary in a June 18, 2004 Wichita Eagle column, in which he wrote: “Imagine our city bidding for an NCAA Tournament subregional or the Big 12 Tournament.”

We don’t have to imagine anymore.

DeBoer plan for Wichita downtown redevelopment largely realized

The following is a lightly edited version of an insightful comment left on this site by an unknown writer, the “Wichitator.” Since many readers don’t read comments, I’ve promoted this to a post.

Hundreds of millions have already been spent for downtown redevelopment and what do we have to show for it? In contrast, look at the benign neglect the city has had on the thriving east and west sides of town where projects on Maize and Webb roads have prospered despite heavy property taxes.

Over 20 years ago the current downtown developer of the languishing East Bank (WaterWalk) project, Jack DeBoer, provided his vision for revitalizing downtown. There was a lot of public discussion about DeBoer’s proposal including front page Wichita Eagle articles at that time. No one in the local news media wants to talk about this now apparently.

Ironically enough, at that time, DeBoer’s plan did not include the struggling East Bank (Waterwalk) project that he is currently involved in. DeBoer’s vision of downtown projects were largely implemented by taxpayers over time.

The largest and most expensive of these projects will be the Intrust Arena with its $200+ million price tag. The only one that has been partially rejected was turning the Keeper of the Plains into a 500 foot community version of a Seattle Sky Needle that one might argue was at least partially implemented when this statue was placed on a much higher pedestal at a more prominent point where the two rivers meet at high cost to city taxpayers.

Lesser downtown projects that were part of DeBoer’s plan and were a lot less expensive than the new arena, were completed years ago. This public infrastructure is now in place at a very expensive cost to taxpayers of the past few decades. Another example, Exploration Place, still has years before its mortgage will be paid off, I believe.

Where has been the return for this community? It is invisible to this taxpayer. Look at the downtown taxing district. It takes in about the same level of property tax revenues as it has always received. It is clear that there is no private sector growth downtown. So tax revenues are stagnant. This publicly funded but privately selected downtown board operates with almost no media oversight. There is some taxpayer subsidized remodeling going on but outside of that, I can only think of the Garvey Center where significant private funds are being spent on a partial remodel of their downtown property.

The philosopher George Santayana said, “Those who do not remember the past are condemned to repeat it.” Since the downtown development plans are NOT being made public it looks like we’ll soon have another, 21st century version of the 1980s DeBoer plan that the taxpayers in our community will be expected to fund. In Washington, nothing fails like excess (see GSE’s Fannie & Freddie) and in Wichita we are trying to follow in our federal masters’ footsteps. Since local government can’t print money like the political fools in Washington can through the Federal Reserve Bank, the fiscal chickens will come home to roost a lot more quickly here. Mr. Weeks is right in trying to see the details of these proposals. If we did, the price tag would probably take our collective breaths away. The downtown development folks who want to be the 21st century reincarnation of Mr. DeBoer are just as right in wanting to keep this information hidden.

Light rail not good for Wichita

A recent letter in the Wichita Eagle by Alden Wilner of Bel Aire worries that “flat, dusty and hot” parking lots in the neighborhood of the Intrust Bank Arena (formerly known as the downtown Wichita arena) in downtown Wichita will hamper downtown revitalization.

I don’t know if this claim is true or not, but I do know that the solution Wilner proposes — “an area wide light-rail system” — would be an absolute disaster for Wichita. These systems are costly to build and operate, suffer from low ridership almost everywhere they are built, and have many other problems.

In a recent article, Randal O’Toole presented the costs of light rail versus highways:

The average mile of light-rail line costs two to five times as much as an urban freeway lane-mile. Yet in 2007 the average light-rail line carried less than one-seventh as many people as the average freeway lane-mile in cities with light rail.

Do the math: Light rail costs 14 to 35 times as much to move people as highways.

The Government Accountability Office found that bus-rapid transit—frequent buses with limited stops—provided faster, better service at 2 percent of the capital cost and lower operating costs than light rail.

Light rail is the mantra of those who hate cars. They must love waste and failure in its place. Portland is an example of an area that’s built a lot of light rail in recent years. O’Toole points out that in 1980 — before the light rail building boom — 9.8 percent of the region’s commuters took transit to work. Now that number, despite the light rail building boom, has declined to 7.6 percent.

Another article by O’Toole (Light Rail Doesn’t Work) tells of the huge costs, inconvenience, congestion, misallocation of economic development, and increased energy consumption and greenhouse gas output that light rail projects produce.

O’Toole is the author of The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future. As Wichita prepares to undertake large-scale planning for the revitalization of downtown, I would urge our leaders to read this book.

Wichita downtown arena parking problem

This week the Wichita Eagle printed a letter submitted by Sedgwick County Commissioner Karl Peterjohn. The printed letter is quite a bit shorter than what Peterjohn submitted. The unabridged letter follows.

The Wichita Eagle editorial written by Rhonda Holman on June 29, 2009 now claims that the new Intrust Bank Arena in downtown Wichita lacks adequate parking. This is a major change by the Eagle editorial board’s position. I have repeatedly asked county staff about the available parking in and around this soon-to-open facility since I became a commissioner in January. I have been repeatedly told by county staff that adequate parking will be available when the Intrust Arena opens next year. The most recent public assurance I have received was only a few days ago.

In 2004, while I led the opposition to the proposed downtown arena in my role as the executive director of the Kansas Taxpayers Network, I repeatedly raised the parking availability issue. In 2004 the arena advocates claimed that arena parking would not become a problem and that the critics were wrong.

Voters were repeatedly assured that there was plenty of parking that would be available downtown for the arena. The Wichita Eagle editorial page was among the leading advocates for this project and ignored opponents arguments concerning this $206 million (back then it was described as a $185 million) project. At that time there was only a general area for this new facility’s location so this argument lacked specificity. The exact location was unknown when voters cast their ballots.

The Friday before the 2004 election I held a news conference pointing out the dimensions of the parking problem downtown in particular and the related location and capacity issues in great detail. At this news conference I provided a map of the Kansas Coliseum’s Britt Brown Arena and adjacent parking area available for comparison purposes with the existing 3,500 parking spaces for this 12,000 seat facility along I-135. I still have a few extra copies of this Britt Brown Arena aerial view. Arena proponents attended this 2004 news conference and claimed that the arena opponents concerns were invalid because of existing downtown parking. The Eagle editorial page repeatedly backed these arena proponents’ claims.

The 2004 election is now political history. I want the Intrust Arena to be a success because this project has now become very important to the entire community. The reservations I expressed in 2004 have not disappeared just because of time. The decision to eliminate some of the one-way streets with two-way streets will not be an improvement in traffic flow in my opinion. There will be challenges for people to become comfortable with access into and out of this new facility while participating in high attendance events when the arena opens in a few months. To get beyond this challenge for any new facility, the county staff and parking consultant need to be correct about the adequacy of parking for the Intrust Arena and I believe are working to accomplish this objective.

The empty arena

Kansas City’s Sprint Center (that’s their new downtown arena) is suffering from underuse.

The Atlantic article The Empty Arena tells the story. Its subtitle is “If you build it, they might not come.” Despite being managed by a well-connected and experienced management group, no professional basketball or hockey team has moved in. Here’s bit more:

For now, Kansas City remains cautiously optimistic that the decision to build the Sprint Center was an enlightened one. The taxes that fund it are largely being paid by visitors, after all, and the concerts and NCAA games it has already attracted would have bypassed the old, outdated Kemper Arena. Mayor Mark Funkhouser, formerly the city auditor, had struggled to understand how spending $222 million on an arena made economic sense. “Now that I’ve inherited it,” he says, “I tell people it’s a shotgun wedding, but I have to make the marriage work. And if you look at it just in terms of the performance of the facility itself, it has exceeded expectations. It’s shiny and new. People like it.”

Who paid for the arena? As the snippit above approvingly states, someone else besides the people of Kansas City did. $222 million from hotel and car-rental taxes funded the arena.

In Wichita, the Intrust Bank Arena (formerly known as the downtown Wichita arena), set to open next year, was paid for largely by its own hometown, as it was funded through a sales tax.

The Wichita arena, unlike Kansas City’s, has a tenant, a minor league hockey team. Even though the arena is owned by the citizens of Sedgwick County, details are kept secret from the people.

Sedgwick County keeps lease agreement secret

A few months ago in March, SMG, the company that is managing the Intrust Bank Arena (formerly known as the downtown Wichita arena) signed a lease with the Wichita Thunder Hockey team.

Details of that lease weren’t made available to the public. Not to Sedgwick County Commissioners, either. So the public and even elected government officials don’t know anything about this contract, except for its term of five years.

This strikes me as bad government. The county has a deal with SMG that gives the management company broad latitude in operating the arena, including some profit-and-loss responsibility.

The arena, however, is still taxpayer-owned property. Furthermore, reading the management contract between SMG and Sedgwick County, I can see several ways in which SMG can wrangle free of its obligations. Believe me, the taxpayer is still on the hook.

So I believe we need to know the details of this lease made to the arena’s signature tenant. I made my case, based on my reading of the contract, in my post Wichita downtown arena contract seems to require Sedgwick County approval.

An inquiry sent to Assistant Sedgwick County Manager Ron Holt, the county’s point man for the arena, produced a response (see below) that indicates that the county has no intention of disclosing the terms of this lease agreement. Citizens must simply trust the county.

Part of the problem is that the arena has a competitor in the private sector, the newly-opened Hartman Arena. SMG is justifiably concerned about its contracts with tenants, which it considers proprietary information.

That’s fair enough — if SMG was a private company. But it’s one-half of a public-private partnership. It gets to use an asset valued at roughly $200 million, provided at no charge by the taxpayers of Sedgwick County, to see if it can earn a profit for itself. Our stake in this means we should get a look. The fact that SMG and the county will not disclose means that citizens will always wonder about the details of the deal.

This is especially true when government competes with private industry. Holt is already on record as being opposed to the privately-held Hartman Arena, remarking “overall, it would not be in the best interest of the community.”

Without disclosure, there will always be questions. It would be in the best public relations interest of SMG to agree for public disclosure of the terms of the Wichita Thunder lease.

Thunder – SMG Lease Inquiry

Bob Weeks Inquiry The Thunder – SMG Lease May, 2009 Issue # 1: Since SMG has committed to a contract/lease agreement with the Thunder in which there is a major revenue stream for the facility and with terms greater than one year, does the County have to approve the Thunder contract/lease agreement? Response: No, the County does not have to approve the Thunder contract/lease agreement because it is in the sole discretion of the Contract Administrator whether or not to approve the agreement, and even then such approval cannot be unreasonably withheld. It is important to understand that there are two types of contracts covered by section 2.3 (c) of the agreement—contracts that involve paying money out (Section 2.3 (c) i), and contracts involving a revenue stream for SMG (Section 2.3 (c) ii). Contracts that involve paying money out, such as a contract to provide security for the facility, must be approved in writing by the County if it involves a term beyond the management term of SMG. As will be discussed later, this approval can be a simple letter from the Contract Administrator and such approval cannot be unreasonably withheld. The Thunder agreement involves a revenue stream and Section 2.3 (c) ii provides that “SMG and the County will have joint approval rights (which approval right shall be at each party’s sole discretion, not to be unreasonably withheld) for all major revenue streams that can impact the profitability of any Facility …with terms of greater than one year.” Section 2.1 (d) provides that “to the extent that the approval of the County is required under the terms of this Agreement, the written approval of the Contract Administrator shall constitute the approval of the County,” Under the definitions in Section 1, the “Contract Administrator” is defined as – the senior administrative official of the County as from time to time appointed by the County Manager, or such individual person as may from time to time be authorized in writing by such administrative official to act fro him/her with respect to any or all matters pertaining to this Agreement. So to address the first issue, it is in the discretion of the Contract Administrator whether or not to approve the agreement with the Thunder. This approval could take many forms and could be established by policies within the County Manager’s Office. While the initial review of the Thunder contract/lease agreement was limited to a discussion between the Contract Administrator and the SMG’s General Manager, subsequently a more thorough review by the Contract Administrator and an Assistant County Counselor with the SMG General Manager revealed the following notable provisions of the agreement: 1.) The term of the agreement is for 10 ½ years with provisions to terminate in the event of default by either party. 2.) There is a provision for a base rental that we agree is standard in the market with accelerators for future years based upon established indicators. 3.) There are other provisions in the agreement for revenue to be derived by SMG to cover staffing costs and other maintenance considerations. 4.) There is appropriate insurance coverage to protect the operator of the facility. After such subsequent review it is our opinion that the agreement provides adequate protection for the County for the entire term of the agreement and there is no reasonable basis for exercising our discretion to disapprove the agreement. For future contracts/lease agreements that fall under the conditions of the SMG Agreement as identified above, the Contract Administrator will meet with the SMG General Manager of the INTRUST Bank Arena and review any agreement in order to understand the terms and conditions of the agreement and how this might affect the County’s interest. Issue # 2: How can Sedgwick County give its approval to a contract/lease agreement that SMG will not let the county see (wouldn’t approval in a meaningful way mean that the commissioners and the public can read the contract/lease agreement)? Response: Obviously the County can’t give meaningful approval to a contract that we can’t see, but our agreement with SMG specifically allows us to review any agreement in order to understand the terms and conditions of the agreement and how this might affect the County’s interest. See Section 2.6 (a) (i) which provides:. (i) To the extent that SMG has any confidential or proprietary information that it reasonably believes is a privileged trade secret and/or should not be disclosed to a third party to protect the privileged, confidential and/or proprietary nature of such information, and upon the approval of the Contract Administrator, which shall not be unreasonably withheld, SMG shall not be required hereunder to deliver such information to the County, but instead, will afford the County an opportunity to review such information at the Facility during reasonable business hours and upon reasonable advance notice, or on terms mutually agreed upon by the parties in order to protect the privileged, confidential and/or proprietary nature of such information. As mentioned above, we have had the opportunity to review this agreement with SMG in a meeting with the General Manager of the Intrust Bank Arena. In our negotiations with SMG, we intended to give SMG significant authority to run the business of the new arena as they deem necessary as a means for them to sign off on an agreement that puts the risk of losses solely on them. The only reason we wanted the authority to review/approve long term agreements was for the purpose of making sure that SMG wasn’t putting the County in a bad financial position for years that they might not be operating the arena. While initially this is a five year agreement, we have provisions in the agreement that will automatically extend the agreement for an additional five years if they meet certain performance criteria. In other words, there is no reason at this point in our business dealings to think that SMG is operating in anything but the best interest of SMG and the County and such there would be little reason to formally approve the Thunder agreement – let alone have a reasonable basis to withhold approval. With Hartman Arena and Sprint Center (non SMG operated facilities) as competitors in this market, it is of high importance to SMG of keeping their proprietary information from being disclosed publicly. In addition, the County’s financial interest is protected with a provision in the agreement requiring SMG to maintain a system of bookkeeping adequate for its operations and for the use of our auditors. SMG is furthermore required to give the County’s authorized representative access to such books and records. The County has the right at any time, and from time to time, to audit and/or cause nationally recognized independent auditors to audit all the books of SMG relating to the operating revenues and operating expenses of the arena.

More money to Wichita government

A letter in today’s Wichita Eagle places a lot of faith on things not yet seen, and in things we know don’t work.

“I think it is dumb that people are complaining about the new Intrust Bank Arena. It will bring money and tourists to Wichita, not to mention great entertainment. That means more money brought to our government, and that’s a good thing. — Caleb Beeson, Wichita”

First, since the Intrust Bank Arena is not yet open, it has no track record. We have absolutely no idea how well it will do, financially or otherwise. A lot of people think it’s “dumb” to count chickens before eggs have hatched.

Then, there’s this letter writer’s idea that more money in the hands of government is a “good thing.”

To believe that paying taxes to the government is good requires believing that government spends wisely. There’s little evidence of that.

Perhaps the writer means that when tourists from out of town travel to Wichita and spend money, our local government will be gathering tax revenue from out of our area. Better to tax someone else than ourselves — that’s the underlying message.

These taxes serve to suppress travel to cities that levy them. How does it feel to have a city add 13% to the cost of your hotel room, as I have paid in some cities? Or how do you think travelers feel when a city levies fees and charges that add 26% to the cost of renting a car, as some places do?

Since demand falls with rising prices, these high taxes reduce demand for travel to high-tax cities. Probably worse than that, they leave a bitter aftertaste for those who pay them. Do we want travelers to Wichita to feel that they’ve been soaked by our local taxes? They won’t feel good about coming back again.

Articles of Interest

Education reform, downtown Wichita arena, Kansas smoking ban, downtown developers

Education’s Ground Zero (Nicholas D. Kristof in The New York Times) Describes the efforts of Washington D.C. public schools chancellor Michelle Rhee to reform the system. She’s fired one-third of the principals. Kristof reminds us of the importance of teachers: “The reform camp is driven partly by research suggesting that great teachers are far more important to student learning than class size, school resources or anything else. One study suggests that if black kids could get teachers from the profession’s most effective quartile for four years in a row, the achievement gap would disappear.” In Wichita, however, USD 259 is taking the opposite approach.

Intrust Bank Arena management contract unusual, but not necessarily bad (Bill Wilson in the Wichita Eagle) Explores the nature of the arrangement between Sedgwick County and SMG as compared to other arenas. “The bottom line for these officials: Sedgwick County has a good deal with SMG, but has a responsibility to closely monitor the arena’s performance for taxpayers who paid for the building with a sales tax increase.” More coverage of related issues is Wichita downtown arena contract seems to require Sedgwick County approval.

Details of Intrust Bank Arena contract with Thunder are a secret (Bill Wilson in the Wichita Eagle) This is an earlier story, interesting for the confusion it raises or exposes, I’m not sure which. Reported in the story: “The arena’s financial performance would be monitored by the county through what [Sedgwick County assistant manager Ron] Holt characterized as limited records access. But [Sedgwick County Commissioner Gwen] Welshimer said she didn’t know how the county would track the arena’s financial performance. ‘We don’t have any access to their books that I know of,’ she said.” Read the county’s contract with SMG, however, and you learn that SMG will maintain accounting records, have them audited, and give Sedgwick County access to them “upon reasonable advance notice.” Also, the county has the right to audit the records at any time.

Why state smoking ban seems inevitable Rhonda Holman in the Wichita Eagle Editorial Blog) In this post, Wichita Eagle editorialist Rhonda Holman makes explicit the connection between state-paid health care and the state’s interest in controlling behavior: “That’s [passing the statewide smoking ban] the only responsible action the Legislature can take, given the increasing cost burden of smoking-related illnesses on the state …” If the state (that includes the U.S. Federal government) starts taking responsibility for more health care, smoking bans are just the start of state meddling in behavior.

Minnesota Guys ready to start face-lifts of downtown Wichita buildings (Bill Wilson in Wichita Eagle) Real Development starts work on the improvement of facades of some of its buildings. In the article developer Michael Elzufon manages to use the word “iconic” twice. This article doesn’t tell how these improvements are paid for: a confusing arrangement where the city loans money and recoups it in special assessment taxes. A hefty development fee is being paid to the developers, which allows them to profit for fixing up their own buildings. But they’ll pay that back in the form of the special taxes — or will they? It’s hard to tell where the money is going in these agreements. This benefits developers like Elzufon and politicians on the Wichita city council, as if citizens knew what was really going on, they wouldn’t be happy.

Wichita downtown arena contract seems to require Sedgwick County approval

Sedgwick County, owner of the Intrust Bank Arena (the downtown Wichita arena), has a five-year contract with SMG that outsources the management of the arena.

Yesterday, SMG announced a 10.5 year lease with the Wichita Thunder hockey team. Terms of the deal weren’t disclosed, and SMG is resisting their release, as explained in Wichita Eagle reporting referred to in my post Wichita downtown arena open records failure.

But this much is clear: SMG has committed to a contract that lasts longer than their contract with the county.

Sedgwick County could choose to renew SMG’s contract, of course. The contract also contains a provision where if the county receives at least $1,700,000 from the profit sharing agreement with SMG, the contract automatically renews.

But it seems like SMG is getting a little ahead of itself.

It also appears that the lease contract SMG made with the Thunder requires approval by Sedgwick County.

The management agreement between Sedgwick County and SMG grants authority to SMG to negotiate contracts without county approval, but there is an exception: “… if any such license, agreement, commitment or contract other than those involving the license, lease or rental of the Facility in the ordinary course has a term that extends beyond the remaining Management Term or, if this Agreement has been renewed, the Renewal Term, such license, agreement, commitment or contract must prior thereto be approved in writing by the County (which approval shall be at the County’s sole discretion, not to be unreasonably withheld) …”

(The management term referred to is five years.)

So it seems that this contract, extending beyond the management term as it does, is subject to Sedgwick County approval.

There’s more from the SMG-Sedgwick County agreement: “SMG and the County will have joint approval rights (which approval right shall be at each party’s sole discretion, not to be unreasonably withheld) for all major revenue streams that can impact the profitability of any Facility, including ticketing, sponsorships, food and beverage, and tenant leases with terms of one year or greater.”

The Thunder is certainly a major revenue stream for the arena. In fact, they’re the anchor tenant. The lease, at 10.5 years, is much longer than the one year mentioned.

So there’s another clause of the contract that seems to indicate that Sedgwick County has approval rights for this lease agreement.

Here’s a question: can Sedgwick County give its approval to a contract that SMG will not let the county see?