Tag Archives: Downtown Wichita revitalization

Articles about the redevelopment of downtown Wichita and its impact on the economic freedom of Wichitans.

Briefs

Reminds me of the Wichita flag

Wichita Eagle Opinion Line, December 5, 2017: “So Wichita wants to put its flag on license plates. I hope not. Every time I see it, it reminds me of how much it looks like the KKK emblem.” I’ve noticed this too. Have you? Here is the center of the Wichita flag along with the blood cross used by the Ku Klux Klan.

Wichita hotel resurgence?

At the meeting of the Wichita City Council today, there was self-congratulation on the success of the city and its convention and tourism bureau in generating business for Wichita hotels. But: Looking at hotel guest tax receipts, which are a surrogate for total hotel room revenue, we observe that of the largest markets in Kansas, Wichita has experienced the least growth in hotel guest tax collections since 2010. While Wichita is the largest city in Kansas, Overland Park collects the most hotel guest tax. See Kansas hotel tax collections.

Guest tax collections in largest hotel markets in Kansas, indexed change. Click for larger.

Customer-focused vs government

Wichita Eagle Opinion Line, December 5, 2017: “Why did the mailbox get taken down at the corner of Pershing and Douglas? No outcry from those who use it. Citizens arise! Demand the mailbox be returned. It was an ill-conceived action and should be corrected.” Writer, welcome to the world of government bureaucracy. Wouldn’t it be great if mail could be delivered by organizations that actually want your business? Although, I have to say that the new Informed Delivery service from USPS is pretty good. It’s the rare exception, however, that confirms the usual.

All this for one weekend?

Writing about the plans to transform Naftzger Park in downtown Wichita, the Wichita Eagle opined, “The plan seemed to come out of nowhere and with a goal of looking good for the NCAAs — an awful lot to ask for one weekend of tourists.” (What we learned in six busy months of Naftzger Park design project. Wichita Eagle editorial, November 22, 2017.) This is a rare admission from the Wichita elite, that the upcoming NCAA mens basketball tournament is just one weekend of activity. Yet, the tournament was cited as a justification for building the downtown arena and for the remodeling of an entrance. We were told that having the NCAA tournament would transform Wichita. We’d be famous!

Living in downtown Wichita

Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates.

Recently the Wichita Business Journal reported:

Getting more people to live in the core was clearly one of the most important tasks for the city. Back in 2010, the report said downtown Wichita was ripe for an additional 1,000 housing units.

That goal seems to have been met. According to a recent report from the group Downtown Wichita, 835 residential units have been completed since 2010. An additional 742 units are in development downtown, where about 2,100 people live today. 1

The report referred to is the 2017 State of Downtown Report. 2 While this report highlights the number of people living in downtown Wichita, it no longer reports the number of people working in downtown. 3

How does Downtown Wichita arrive at the number of residents in downtown? An endnote from the report gives the details:

The 2010 U.S. Census states the population in the 67202 area code is 1,393. Per Downtown Wichita records, 702 units rental units have opened in the Downtown SSMID district since 2010 when the Census was taken. Per data provided directly from the Downtown residential rental properties, the absorption rates of the market rate units has an average of 85%. Per the U.S. Census Bureau, 2011-2015 American Community Survey 5-Year Estimates, the average size of renter-occupied units is 1.25 persons. Therefore, an estimate for the current population is 2,138. 4

What DW has done is to take a reliable figure (the 2010 decennial census) and extrapolate forward to 2016. (Presumably 2016, as the report doesn’t say.)

But there are a few issues, as follows:

First, the calculation includes 702 rental units that have opened since 2010. Have any rental units closed since then? That would be good to know. Curious is that the report prominently mentions “835 units completed since 2010.” There have been condominiums that have opened since 2010. Why would DW use only rental units in its calculation?

Second, the DW calculation makes use of two estimates, absorption rate 5 and size of renter-occupied units. (What about size of owner-occupied units?) Each of these is an estimate that has its own error probabilities, and those errors compound when multiplied.

Third, there is no need to go through this roundabout calculation, as the Census Bureau has provided an estimate for the population of downtown in 2015. Data from the American Community Survey 6 estimates that the population in downtown Wichita for 2015 was 1,438, with a 90 percent confidence interval of plus or minus 242. 7 This means the Census Bureau is confident the population of downtown Wichita in 2015 was in the range of 1,196 to 1,680, that confidence factor being 90 percent.

But DW says the population of downtown is 2,138, which is far — really far — outside the range the Census Bureau gives for the 2015 population. While DW’s population estimate is probably for 2016, it still lies far outside the range of probability, based on Census Bureau estimates.

It’s really curious that DW doesn’t use the Census Bureau estimate of population. That population estimate comes directly from the Bureau’s American Community Survey 5-Year Estimates for 2011 to 2015. DW didn’t use that number, but it relied on the same body of data to get “average size of renter-occupied units” for 2015.

Why would DW use the Census Bureau for one datum but not another, especially when the Census Bureau data reports the statistic DW is trying on its own to estimate in a roundabout manner?

It’s simple. DW’s calculations produce 2,138 people living in downtown. The Census Bureau estimate is a much smaller number: 1,438.

By the way, DW’s calculations start with the 2010 Census Bureau population for downtown. Of the downtown population of 1,393 that year, 253 were men living in institutions like the Kansas Department of Corrections Wichita Work Release facility at Emporia and Waterman Streets. It has a capacity of 250. 8


Notes

  1. Horwath, Brian. Wichita making good on downtown master plan. Wichita Business Journal, October 26, 2017. Available at https://www.bizjournals.com/wichita/news/2017/10/26/wichita-making-good-on-downtown-master-plan.html.
  2. Downtown Wichita. 2017 State of Downtown Report. Available at https://downtownwichita.org/user/file/2017-state-of-downtown-report-download.pdf.
  3. Weeks, Bob. Downtown Wichita report omits formerly prominent data. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-report-omits-formerly-prominent-data/.
  4. 2017 State of Downtown Report, page 42.
  5. “Absorption is the amount of space or units leased within a market or submarket over a given period of time (usually one year). Absorption considers both construction of new space and demolition or removal from the market of existing space.” Institute of Real Estate Management. Calculating Absorption. Available at https://www.irem.org/education/learning-toolbox/calculating-absorption.
  6. U.S. Census Bureau, 2011-2015 American Community Survey 5-Year Estimates
  7. U.S. Census Bureau. American Community Survey Accuracy of the Data (2015). Available at https://www2.census.gov/programs-surveys/acs/tech_docs/accuracy/ACS_Accuracy_of_Data_2015.pdf.
  8. See https://www.doc.ks.gov/facilities/wwrf.

Downtown Wichita report omits formerly prominent data

The new State of Downtown Wichita report for 2017 is missing something. What is it, and why is it missing?

Recently the Wichita Business Journal reported:

When you’re Jeff Fluhr, you don’t spend much time in park — it’s usually full speed ahead.

It was no different when a couple of members of the Wichita Business Journal’s newsroom visited with the president of Downtown Wichita and the Greater Wichita Partnership in early October.

On this day, Fluhr was excited to pass out copies of the 42-page 2017 “State of Downtown” report, which had just been released. 1

The new report is something better than before. 2 Actually, it’s what is left out that marks a step forward for Downtown Wichita, which is the new name for the Wichita Downtown Development Corporation.

Downtown Wichita brochure.
Previous versions of the report prominently mentioned the number of daytime workers in downtown Wichita. 3The number most often given was 26,000. But that number is missing from this year’s report. Unless I overlooked it, there is no mention of the number of workers in downtown Wichita.

Why was this number omitted from this year’s report? Earlier this year I found out that the U.S. Census Bureau data series which was the source of this statistic is not a valid measure of the number of people working downtown. That’s because the series counts all the employees of the Wichita public school district as downtown workers solely because the district’s headquarters building is downtown. 4 This means the statistic is not valid and meaningful, because most school workers don’t work at the downtown building. Instead, they’re working in schools and other facilities dispersed throughout the district. A similar anomaly exists for Wichita city workers: All are counted as though they work in the city hall building. 5

When I asked Jeff Fluhr, the president of Downtown Wichita, about this he referred my question to Jeremy Hill, the Director of Center for Economic Development and Business Research at Wichita State University. This was — seemingly — reasonable as CEDBR supplied the number to Fluhr’s organization. Hill’s response was unsatisfactory in resolving the issue. In conclusion, Hill wrote to me: “Although the center systematically questions all data sources (federal, state, private, and nonprofit) for reasonableness, limited resources (e.g. time and costs) prevent us from validating and/or cross checking every statistic. In this situation, the center used the appropriate source for the research question and the total number of people estimated to work downtown was within reason.”

The Census Bureau OnTheMap application for downtown Wichita, zip code 67202. Click for larger.
LODES data for census block 201730043001036, showing 7,740 workers.
Here’s what concerns me. This data comes from a Census Bureau application called “OnTheMap.” When using the OnTheMap application for downtown Wichita, which is zip code 67202, there are two large bright blue dots that stand out from all others. These represent the two highest concentrations of workers in downtown Wichita. One is Census block 201730043001036, which has 7,740 employees. This is a one square block area from First to Second Streets, and Wichita to Water Streets. That block, for the year of this data, held the Wichita school district headquarters building.

7,740 employees is a lot. It’s about one-fourth of the total downtown employee count claimed by Downtown Wichita and CEDBR. It’s more employees than McConnell Air Force Base has, and about twice as many that work at Koch Industries in Wichita.

Importantly, this number is eleven times the number that work at Cargill, a company which Wichita is granting many millions of dollars in incentives just to retain the company in Wichita.

Promotional material on the former Henry’s building. Click for larger.
We just have to wonder: Didn’t anyone look at this data in a serious and critical manner? A quick glance at the data by CEDBR, much less “systematically” checking for “reasonableness” should have led to questions. A quick look by Downtown Wichita staff should have spurred these inquiries: Who do all these people work for in that one block? This is a wonderful success story! How can we replicate this great accomplishment in other blocks in downtown Wichita?

And didn’t anyone at the City of Wichita — council members and bureaucrats alike — wonder about these numbers?

That didn’t happen. Or maybe it did, and someone in authority nonetheless decided to proceed to use a statistic that doesn’t mean what city leaders say it means.

That’s why I wrote it was seemingly reasonable for Fluhr to refer me to CEDBR with my questions about the data. In retrospect, it is clear this is a multi-year episode of incompetence, ineptitude, or dishonesty.

But at least this statistic is no longer used.

I asked Cindy Claycomb, who is Chair of the Executive Committee of Downtown Wichita, about this. She replied that all data sources are listed in the report, and that the board relies on the expertise of the Wichita Downtown Development Corporation staff to decide what is presented in each year’s report. She said Jeff Fluhr was the best person to address my concerns. He, as we saw, demurred to CEDBR at WSU.

(By the way, Claycomb is nearly certain to be elected to the Wichita City Council in November. Jeff Fluhr is now, besides president of Downtown Wichita, also president of Greater Wichita Partnership, the new organization regional governments rely on for economic development.)

Trends of business activity in downtown Wichita. Click for larger.
So: How many jobs are in downtown Wichita? There is another series of census data that is better, but not perfect, as it counts private-sector employees only. That data shows 13,581 workers in downtown Wichita for 2015. 6 But what’s remarkable — and disappointing — about this data series is its trend: It’s going down. The recent peak was 16,658 workers in 2008. By 2015 that number was down by 18 percent. (Again, these are private sector workers only.)


Notes

  1. Horwath, Brian. Downtown positioned for growth, despite area’s labor issues. Wichita Business Journal, October 12, 2017. Available at https://www.bizjournals.com/wichita/news/2017/10/12/downtown-positioned-for-growth-despite-areas-labor.html.
  2. Downtown Wichita. 2017 State of Downtown Report. Available at https://downtownwichita.org/user/file/2017-state-of-downtown-report-download.pdf.
  3. See, for example, the second page of the 2016 report at https://downtownwichita.org/user/file/2016_State_of_Downtown_Report_2.pdf.
  4. In summer 2017 the district moved its headquarters away from downtown to the former Southeast High School. It will be a few years before this is reflected in Census Bureau data.
  5. Weeks, Bob. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.
  6. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.

WichitaLiberty:TV: Wichita economy, Kansas schools

In this episode of WichitaLiberty.TV: Karl Peterjohn and Bob Weeks discuss some statistics regarding downtown Wichita and then the Kansas school finance court decision. View below, or click here to view at YouTube. Episode 169, broadcast October 14, 2017.

Now, WichitaLiberty.TV has new broadcast times. The regular Sunday broadcasts on KGPT TV channel 26.1 (AT&T U-Verse 49) at 8:30 am, repeated at 4:30 pm, are unchanged. Here is the full broadcast schedule:

Saturdays on KGPT channel 26.9 (Newsmax TV)
10:00 am: The new episode
10:30 am: Repeat of last week’s episode
5:00 pm: Repeat of new episode
5:30 pm: Repeat of last week’s episode

Sundays on KGPT channel 26.1/AT&T channel 49 (Cozi TV)
8:30 am: Repeat of the new episode
4:00 pm: Repeat of the new episode
4:30 pm: Repeat of last week’s episode

Shownotes

  • Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice.
  • The Kansas Supreme Court decision in Gannon v. State.
  • Wichita Eagle coverage of USD 259 internet contract: Wichita district pays more in hopes of preventing internet service disruptions, Wichita school district leaving out the details, and Spending was response to cyber attacks, Wichita board president says.
  • The Rose Standards for Kansas students, as codified in K.S.A. 2016 Supp. 72-1127:
    (1) Sufficient oral and written communication skills to enable students to function in a complex and rapidly changing civilization;
    (2) sufficient knowledge of economic, social, and political systems to enable the student to make informed choices;
    (3) sufficient understanding of governmental processes to enable the student to understand the issues that affect his or her community, state, and nation;
    (4) sufficient self-knowledge and knowledge of his or her mental and physical wellness;
    (5) sufficient grounding in the arts to enable each student to appreciate his or her cultural and historical heritage;
    (6) sufficient training or preparation for advanced training in either academic or vocational fields so as to enable each child to choose and pursue life work intelligently; and
    (7) sufficient levels of academic or vocational skills to enable public school students to compete favorably with their counterparts in surrounding states, in academics or in the job market.

Wichita, youthful and growing from the core

A letter writer tells Wichitans that “We have an opportunity to show the country the future of Wichita is youthful and bright, and its growing from the core out.”

In support of replacing Century II with something “no less than absolutely spectacular in ambition,” a letter in the Wichita Eagle states, “We have an opportunity to show the country the future of Wichita is youthful and bright, and its growing from the core out.” 1

Sadly, these observations are not true. Data from the U.S. Census Bureau shows that the median age of Wichitans is rising, the proportion of the population in the millennial category is static or shrinking slightly, and the proportion that are senior citizens is rising. Wichita is growing older, not younger.

As far as “growing from the core out,” the downtown population is up. Although: The increase from 2010 to 2015, proportional to the entire city, was only slightly greater. In 2010, 0.36 percent of Wichitans lived in downtown, rising only slightly to 0.37 percent in 2015. (These are Census figures for zip code 67202, which is downtown Wichita.)

Trends of business activity in downtown Wichita. Click for larger.
Click for larger.
If we gauge growth by the number of jobs, business establishments, and payroll in downtown, we find that downtown Wichita is shrinking. There is some controversy regarding how to measure the number of jobs in downtown Wichita, but by any measure, the number of jobs is declining. 2 3


Notes

  1. Think big on Century II. Wichita Eagle. Letters, September 14, 2017. Available at http://www.kansas.com/opinion/letters-to-the-editor/article174129391.html.
  2. Weeks, Bob. Growth in Downtown Wichita Jobs. Available at https://wichitaliberty.org/wichita-government/growth-downtown-wichita-jobs/.
  3. Weeks, Bob. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.

Downtown Wichita jobs decline

By the measure of jobs used by the City of Wichita, downtown jobs declined in 2015.

Jobs in downtown Wichita, according to LEHD Origin-Destination Employment Statistics. Click for larger.
Annual change in jobs, according to LEHD Origin-Destination Employment Statistics. Click for larger.
According to a series of data from the United States Census Bureau, the number of jobs in downtown Wichita declined by 1.6 percent from 2014 to 2015.

The data, known as LEHD Origin-Destination Employment Statistics, or LODES, was updated in September to include data from 2015. 1. Washington, DC: U.S. Census Bureau, Longitudinal-Employer Household Dynamics Program Available at https://lehd.ces.census.gov/data/#lodes.] Downtown Wichita is defined in this case as zip code 67202, which is the same definition used by the city of Wichita, Wichita Downtown Development Corporation, and Center for Economic Growth and Business Research at Wichita State University.

As can be seen in the nearby charts, the number of jobs has been on a mostly downhill trend.

There is, however a serious problem with this data series, as it includes workers whose “administrative home” is downtown, even though they work somewhere else. The Census Bureau makes this caveat clear to users of this data. 2 Because all Wichita school district employees have an “address” of 201 N. Water in downtown Wichita, they appear in the LODES data series as employees with that address.

Trends of business activity in downtown Wichita. Click for larger.
It is a serious mistake to count all Wichita school district employees as downtown workers. Most school employees work in schools and other sites scattered throughout the city, not in downtown. Further, this year the school district moved its administrative offices to the former Southeast High School building at Lincoln and Edgemoor. That’s in zip code 67218, not 67202. The effect of this on the LODES statistics (it will appear that some 7,000 workers have moved out of downtown Wichita) probably won’t appear for two or three years.

Click for larger.
Even if we use the data series promoted by the Wichita Downtown Development Corporation, the trend in jobs is in the wrong direction. WDDC promotes the large investment in downtown Wichita, by both private and public sources. 3 But employment is trending in the opposite direction. 4

But this data series is not useful as a measure of the number of people working in downtown Wichita, as it overstates the true number. The LODES data is widely cited by the City of Wichita and affiliated agencies such as WDDC and the Wichita Chamber of Commerce. 5 It appears prominently in the State of Downtown report produced by WDDC, generally released on May of each year. So far, there is no report for this year.


Notes

  1. U.S. Census Bureau. LEHD Origin-Destination Employment Statistics Data (2002-2015) [computer file
  2. Weeks, Bob. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.
  3. Weeks, Bob. Growth in Downtown Wichita Jobs. Available at https://wichitaliberty.org/wichita-government/growth-downtown-wichita-jobs/.
  4. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  5. Weeks, Bob. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.

WichitaLiberty.TV: Century II, Again

In this episode of WichitaLiberty.TV: Karl Peterjohn and Bob Weeks continue discussing Century II, Wichita’s convention and performing arts center. But first, some unfortunate economic news for Wichita. View below, or click here to view at YouTube. Episode 166, broadcast September 24, 2017.

Shownotes

Century II: The consultant’s disclaimer

The report produced for the City of Wichita on Century II has a disclaimer that absolves pretty much everyone from any accountability.

The document is titled “Funding and Delivery Options Analysis for the Century II Facility Expansion: Delivery and Funding Strategy.” It was produced by Arup Advisory Inc. at a cost to the city of $294,000. The entire document is available at https://goo.gl/hq9iqR.

Following is the disclaimer at the front of the report. It is typical of what is found in reports produced by economic development consultants. It establishes several large loopholes for Arup, the City of Wichita, and boosters of public spending on downtown like Wichita Downtown Development Corporation and the Chamber of Commerce.

Disclaimer

Current accepted professional practices and procedures were used in the development of this report. However, as with any forecast, there may be differences between forecasted and actual results. The report contains reasonable assumptions, estimates, and projections that may not be indicative of actual or future values or events and are therefore subject to substantial uncertainty. Future developments cannot be predicted with certainty, and this may affect the estimates or projections expressed in this report, consequently Arup specifically does not guarantee or warrant any estimate or projections contained in this report.

This document is intended only for the information of the City. It is not intended for and should not be relied upon by any third party, and no responsibility is undertaken to any third party.

Our findings are based on limited technical, financial, and commercial data concerning the project and its potential delivery options. Arup has relied upon the reasonable assurances of independent parties and is not aware of any facts that would make such information misleading.

We must emphasize that the realization of any prospective financial information set out within our report is dependent on the continuing validity of the assumptions on which it is based. We accept no responsibility for the realization of the prospective financial information. Actual results are likely to be different from those shown in the prospective financial information because events and circumstances frequently do not occur as expected, and the differences may be material.

Century II resource center

Here is a resource of information about the Century II Performing arts and Convention Center in Wichita. Send suggestions for additions to [email protected].

WichitaLiberty.TV: Century II, Its Future

In this episode of WichitaLiberty.TV: Community influencer John Todd joins Karl Peterjohn and Bob Weeks to discuss Century II, Wichita’s convention and performing arts center. View below, or click here to view at YouTube. Episode 165, broadcast September 17, 2017.

Shownotes

WichitaLiberty.TV: Wichita and Kansas economies

In this episode of WichitaLiberty.TV: Bob Weeks and Karl Peterjohn discuss issues regarding the Wichita and Kansas economies. View below, or click here to view at YouTube. Episode 163, broadcast September 3, 2017.

Shownotes

  • Wichita employment trends. While the unemployment rate in the Wichita metropolitan area has been declining, the numbers behind the decline are not encouraging.
  • Downtown Wichita business trends. There has been much investment in Downtown Wichita, both public and private. What has been the trend in business activity during this time?
  • Wichita downtown plan focused on elite values, incorrect assumptions. One of the themes of those planning the future of downtown Wichita is that the suburban areas of Wichita are bad. The people living there are not cultured and sophisticated, the planners say. Suburbanites live wasteful lifestyles. Planners say they use too much energy, emit too much carbon, and gobble up too much land, all for things they’ve been duped into believing they want.
  • Charts shown in the show: (Click charts for larger versions.)

In Wichita, not your tax dollars

At a Wichita City Council meeting, citizens are told, “These tax dollars are not your tax dollars.”

At the meeting of the Wichita City Council this week, Wichita City Council Member Lavonta Williams (district 1, northeast Wichita) lectured the audience, saying: “These tax dollars are not your tax dollars.”

The matter under consideration was a redevelopment plan for Naftzger Park in downtown Wichita. Approval was necessary if tax increment financing (TIF) funds could be spent on the park. 1 TIF is a mechanism whereby future tax revenues are redirected towards a specific purpose, usually to the benefit of a private property owner. 2

The “plan” under consideration was solely the financing plan. No actual design for a future Naftzger Park was considered or selected.

At the council meeting — and at many other meetings and online discussions — people have noted that the city is planning to spend money on the redesign of Naftzger Park while at the same time there are, according to them, unmet needs throughout the city: Closing swimming pools, assistance for homeless, inadequate staffing of the police department, etc. Why, they ask, can’t the Naftzger Park money be used to solve these problems?

The admonishment of Williams — “These tax dollars are not your tax dollars” — was directed at this criticism. She is correct: The mechanism of TIF allows for these dollars to be spent on just one thing, and that is the redesign of Naftzger Park. 3

So in one way, they aren’t our tax dollars. They are being spent in the way that TGC Development Group, the owner of adjacent property, wants them spent. 4

But this upends the rationale and justification for taxation.

In Wichita, as in most cities, the largest consumers of property tax dollars are the city, county, and school district. All justify their tax collections by citing the services they provide: Law enforcement, fire protection, education, etc. It is for providing these services that we pay local taxes.

Within a TIF district, however, the new property tax dollars — the increment — do not go to the city, county, and school district to pay for services. Instead, these dollars are used in ways that benefit private parties.

Yet, the new development will undoubtedly demand and consume the services local government provides — law enforcement, fire protection, and education. But its incremental property taxes do not pay for these, as they have been diverted elsewhere. (The base property taxes still go to pay for these services, but the base is usually low.) Instead, others must pay the cost of providing services to the TIF development, or accept reduced levels of service as existing service providers are saddled with increasing demand.

Supporters of TIF argue that TIF developers aren’t getting a free ride. The city isn’t giving them cash, they say. The owners of the TIF development will be paying their full share of higher property taxes in the future. All this is true. But, these future tax dollars are spent for their benefit, not to pay for the cost of government.

In the case of Naftzger Park, the situation is murkier. Usually TIF funds are spent on things that directly benefit the private development, things like property acquisition, site preparation, utilities, and drainage. In this case, the TIF funds are being spent to redesign a public park — and a park that many people like.

But it’s clear that the present state of Naftzger Park is a problem for TGC. A newly redesigned park will effectively serve as the “front yard” for TGC’s projects, and will greatly benefit that company. Now that the park redesign will be financed with TIF, this new park comes at no cost to TGC.

Contrary to Council Member Williams and the others who voted in favor of the TIF redevelopment plan: These are our tax dollars. Redirecting them for private benefit has a cost. A real cost that others must pay. If we don’t recognize that, then we must reconsider the foundation of local tax policy.


Notes

  1. Weeks, Bob. Naftzger Park tax increment financing (TIF). Available at https://wichitaliberty.org/wichita-government/naftzger-park-tax-increment-financing-tif/.
  2. Weeks, Bob. Wichita TIF projects: some background. Available at https://wichitaliberty.org/wichita-government/wichita-tif-projects-background/.
  3. The Center City South TIF district is an unusual case in that only 70 percent of the incremental taxes are redirected.
  4. Weeks, Bob. Naftzger Park contract: Who is in control? Available at https://wichitaliberty.org/wichita-government/naftzger-park-wichita-contract-who-controls/.

Redesigned Naftzger Park likely not only subsidy

The developers of property near Naftzger Park in downtown Wichita will possibly receive millions in other subsidy.

The powerful impetus to redevelop Naftzger Park in downtown Wichita is attributed to two sources: The NCAA basketball games in March and the desire of TGC Development Group to develop property it owns near the park.

How much motivation comes from which source depends on who you ask. But it’s clear that the present state of the park is a problem for TGC. A newly redesigned park will effectively serve as the “front yard” for TGC’s projects, and will greatly benefit that company. If the park redesign is paid for with tax increment financing, or TIF, this new park comes at no cost to TGC.

But this is likely not the only benefit TGC will receive from taxpayers. The building TGC owns near Naftzger Park is commonly known as the “Spaghetti Works” building. Before that it was known as the Wichita Wholesale Grocery Company. Under that name, the property was listed on the National Register of Historic Places in 1983. 1 Then, in 2016 conditional approval was given for federal historic preservation tax credits. 2

These federal tax credits are worth 20 percent of the cost of rehabilitating historic structures. 3 These credits may be used dollar-for-dollar when paying federal income taxes, or they may be sold for cash, usually at a discount, and someone else uses them — instead of cash — to pay taxes they owe.

Wichita Wholesale Grocery Company faded sign. Click for larger.
So when TGC spends, say, $1,000,000 on the building, it will receive — conceptually — a slip of paper valued at $200,000. It may use this instead of cash to pay its taxes, or it may sell it to someone else.

That’s not all. Although there is no application at this time, it’s likely that TGC will also apply for Kansas tax credits. These are like the federal credits, except they are for 25 percent of the rehabilitation costs. 4

Together these tax credits can pay up to 45 percent of the costs of rehabbing this building.

These tax credits have a real cost. As long as state or federal government does not reduce spending by the amount of these credits, and specifically because of these credits, other taxpayers have to pay.

Additionally, these tax credits are inefficient. When Kansas Legislative Post Audit looked at Kansas tax credits, it found that when sold, the state receives 85 cents of project value for each dollar foregone. 5

There are many reasons why historic preservation tax credits should be eliminated. 6 7 But for now, it’s important to know that a redesigned Naftzger Park is not the only economic subsidy the nearby private property owners are likely to receive.


Notes

  1. National Park Service, National Register Digital Assets. Available at https://npgallery.nps.gov/AssetDetail/NRIS/83000440.
  2. Wichita Wholesale Grocery Company search at National Park Service, Technical Preservation Services. Captured August 14, 2017. Available at https://drive.google.com/file/d/0B97azj3TSm9MN292dHVZZ2NLcWs/.
  3. National Park Service, Technical Preservation Services. Tax Incentives for Preserving Historic Properties. Available at https://www.nps.gov/tps/tax-incentives.htm.
  4. Kansas Historical Society. State Historic Rehabilitation Tax Credit. available at http://www.kshs.org/p/state-historic-rehabilitation-tax-credit/14666.
  5. “The Historic Preservation Tax Credit isn’t cost-effective. That credit works differently than the other three because the amount of money a historic preservation project receives from the credit is dependent upon the amount of money it’s sold for. Our review showed that, on average, when Historic Preservation Credits were transferred to generate money for a project, they only generated 85 cents for the project for every dollar of potential tax revenue the State gave up.” Kansas Legislative Post Audit. Kansas Tax Revenues, Part I: Reviewing Tax Credits. Available at http://www.kslpa.org/assets/files/reports/10pa03-1a.pdf.
  6. Weeks, Bob. Kansas historic preservation tax credits should be eliminated. Available at https://wichitaliberty.org/kansas-government/kansas-historic-preservation-tax-credits-should-be-eliminated/.
  7. Weeks, Bob. Kansas historic preservation tax credits should not be expanded. https://wichitaliberty.org/kansas-government/kansas-historic-preservation-tax-credits-should-not-be-expanded/.

Naftzger Park land ownership

One of the issues surrounding Naftzger Park in downtown Wichita is land ownership.

Naftzger Park land ownership from Sedgwick County Online Map Portal. Click for larger.
Information from the Sedgwick County Online Map Portal shows land parcels and ownership. The nearby illustration shows Naftzger Park and its environs. (I don’t think it’s possible for me to save a link that brings you directly to the map as I’ve shown it.) On this map, the two parcels owned by private owners are outlined in orange. The City of Wichita or the Board of Park Commissioners own the other parcels north of William Street.

We can see that the park is built partially on land owned by private owners. City officials have said that a narrow strip of land on the east side of the park is involved. From this map we can see that the situation is more complex.

It would be interesting to learn how this mistake — if that’s what it is — occurred. At one time the city owned the entire block after it acquired land to reform what was skid row.

Naftzger Park public hearing

On Tuesday August 15 the Wichita City Council will hold a public hearing to consider authorizing spending TIF funds on Naftzger Park.

This week the Wichita City Council is scheduled to hold a public hearing on a new redevelopment project plan for a tax increment financing (TIF) district in downtown Wichita. The redevelopment project plan contemplates transforming Naftzger Park. The hearing is part of the regular council meeting at 9:00 am Tuesday August 15 at city hall.

While the city has held four public meetings on the topic of Naftzger Park redesign, these meetings were not legally required. But the Tuesday public hearing is required, as city documents explain: “In order to establish the legal authority to use tax increment financing the City Council must adopt a redevelopment project plan for a project area, within the district, which provides more detailed information on the proposed project, how tax increment financing would be used and demonstrates how the projected increase in property tax revenue will amortize the costs financed with tax increment financing.” 1

As for providing “more detailed information on the proposed project,” the redevelopment project plan supplied by the city is quite generic. This week the project architect presented four plans at public meetings. But these drawings cannot be found online — not on the city’s website, its Facebook page, or the Wichita Downtown Development Corporation — except for unclear photographs.

The redevelopment project plan describes how to pay for the redesign of Naftzger Park: “Improvements on the adjacent site are anticipated to generate the revenue necessary to fund the improvements to Naftzger.” This is the mechanism of tax increment financing: Future property taxes are redirected from their normal course and funneled back to benefit the development. The city correctly notes that the TIF funds are being used to develop a public park, not a private development. But the private property owner obviously considers the present park a problem. A new park will effectively serve as the “front yard” for new development and will be of great benefit to the owner. And, many people are opposed to changing the park.

From the redevelopment project plan: “The City will provide public funding, including tax increment financing and general obligation bond financing to finance the project costs.” 2 That is, there is additional spending contemplated.

“Tax increment funds may also be used to pay for eligible improvements financed through general obligation bonds and to reimburse additional eligible project costs when additional tax increment revenues are available.” 3 Here, the redevelopment project plan hints at more property tax being redirected to the development.

“It is assumed that Project construction will begin in 2018 and be completed before the end of 2023, and therefore achieve full valuation by January 1, 2024. It is estimated that in 2024 the property tax increment will be $163,970.” 4 These projections are highly speculative. The city’s record in projecting future development in current TIF districts is spotty. See WaterWalk, Ken-Mar, etc.

“Park improvements are projected to costs approximately $3,000,000, with $1,500,000 of such costs to be financed from proceeds of the City’s full faith and credit tax increment bonds (the “Bonds”).” 5 Here the redevelopment project plan reminds readers that if future property taxes are insufficient to pay the bonds, the city itself is liable. The city exacts an agreement from TIF developers that if TIF revenue is insufficient that the developers will pay the difference, but the city’s record in enforcing these agreements is spotty. 6

“Incremental tax revenue available after the payment of such Bonds may be used to pay for additional TIF-eligible Project costs related to Park improvements on a pay-as-you-go basis or reimburse the debt service on City general obligation bonds issued to finance a portion of the cost of the Park improvements, if any.” 4 Again, the redevelopment project plan hints that future park spending may be paid for with TIF.

The table titled “Projected Tax Increment Report” is subtitled with the name of a different project. This is probably an error without much consequence, as someone in the city probably reused a spreadsheet from a similar project and forgot to revise the title. The same error appears in a second table of figures titled “Projected Bond Cash Flow Report.” Except: The city made this same error in previous versions of this document, as I reported earlier. 8 We’re left to wonder whether anyone — at city hall, the Wichita Downtown Development Corporation, or the private developers who will benefit from this spending — care to correct errors like this.

The first table projects the assessed value — and by implication, also the appraised or market value — of property through the year 2036. These projections are highly speculative.

Excerpt from city documents. Click for larger.

In a section titled “Description of Naftzger Park Project” we see an item titled “TIF Pay-as-you-go Costs” with the amount given as $1,500,000. This spending was mentioned in earlier city documents, but hasn’t received much public discussion. The $1.5 million figure that is in the news is from “regular” TIF financing. In that case, the city borrows money, and the debt is repaid from future property taxes. With the pay-as-you-go TIF, the city simply spends future property taxes in the project. 9 The difference is that in regular TIF, the city is liable for the debt if future incremental taxes are insufficient to cover bond payments. In pay-as-you-go TIF, there is no debt, only redirection of property taxes from their normal distribution.

For more about Naftzger Park, see these articles and other information from Voice for Liberty:


Notes

  1. Wichita City Council Agenda Packet for August 15, 2017. Item IV-2. Available at http://www.wichita.gov/Council/Agendas/08-15-2017%20City%20Council%20Agenda%20Packet.pdf.
  2. City of Wichita. Comprehensive Financing Feasibility Study for the Naftzger Park Project within the Center City South Redevelopment District City of Wichita, Kansas. Available in the August 15 agenda packet.
  3. Ibid.
  4. Ibid.
  5. Ibid.
  6. See, for example, Weeks, Bob. Ken-Mar TIF district, the bailouts. Available at https://wichitaliberty.org/wichita-government/ken-mar-tif-district-the-bailouts/. Also
  7. Ibid.
  8. Weeks, Bob. Naftzger Park public hearing to be considered. Available at https://wichitaliberty.org/wichita-government/naftzger-park-public-hearing-to-be-considered/.
  9. Weeks, Bob. Wichita TIF projects: some background. Available at https://wichitaliberty.org/wichita-government/wichita-tif-projects-background/.

WichitaLiberty.TV: Naftzger Park

In this episode of WichitaLiberty.TV: Wichita Assistant City Manager and Director of Development Scot Rigby joins hosts Bob Weeks and Karl Peterjohn to discuss the plans for Naftzger Park. Then, Bob and Karl continue the discussion. View below, or click here to view at YouTube. Episode 161, broadcast August 13, 2017.

Shownotes

Naftzger Park construction manager

The City of Wichita seeks a construction manager for the construction of Naftzger Park.

The request for qualification is titled “CONSTRUCTION MANAGER AT RISK to Construct Naftzger Park.” On the city’s purchasing website the relevant information is contained in five separate documents. I’ve gathered them together in one document, which you may access here.

The city may be getting ahead of itself. The RFQ sets the deadline for submissions as 2:00 pm Tuesday August 15. That morning is when the Wichita City Council will consider approval of the redevelopment project plan. 1 Until that plan is approved by a two-thirds majority of the council, there exists no authorization to spend funds from a tax increment financing district. 2

Trends of business activity in downtown Wichita. Click for larger.
Referring to the planning process for downtown Wichita in 2008 and 2009, the document says, “Since that time downtown Wichita has experienced record growth.” This statement isn’t true. Since that time there are fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower. 3 There is growth in people living downtown.

Something new appears in this paragraph: “Design and construction are planned to be implemented in phasing to accommodate budget, with the first phase budget of $1,500,000 for design, project administration and construction. The first phase budget will provide for an open and usable park that accommodates as many programming features as budget allows. In addition to the $1,500,000 for phase one, there will also be approximately $500,000 worth of cross site work, demolition, and infrastructure to be completed on the adjacent property.”

The document doesn’t specify the source of the $500,000, and this is the first mention of that sum, as far as I know. But the fact that management of it is included in this RFQ is more evidence that the redesign of Naftzger Park is really a project being done for the benefit of the nearby private landowner.

Later, more evidence of the park’s importance to, and benefit of, one company: “Because of the adjacent location and utilization of the park as it relates to the Spaghetti Works Development, it is necessary that TGC’s team play an integrated role; so that the flow and function developed in the park work seamlessly together with the TGC project.”

Just to emphasize, the proposals are not sent to city hall but to the private company that will benefit from the park redesign: “Sealed Request for Proposal will be received in the office of the TGC Development Group, 125 N Emporia, Suite 202, Wichita, KS 67202, Attn: Blake Heiman.”

A possible plan for Naftzger Park from the City of Wichita
And who will make the decision? An addendum to the RPQ holds: “A Selection Committee consisting of staff from various City department and TGC will evaluate submissions.”

The city has provided an illustration of what a potential redesign might look like. There has been much criticism — including by city council members — especially for the covering of the park with artificial turf. But, the RFQ states: “A summary of programmatic elements will include a flexible use lawn area (with potential of artificial turf).”

For more about Naftzger Park, see these articles and other information from Voice for Liberty:


Notes

  1. Weeks, Bob. Upcoming Naftzger Park legislative action. Available at https://wichitaliberty.org/wichita-government/upcoming-naftzger-park-legislative-action/.
  2. Weeks, Bob. Background on tax increment financing (TIF) as applied to Naftzger Park in downtown Wichita. Available at https://wichitaliberty.org/wichita-government/naftzger-park-tax-increment-financing-tif/.
  3. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.

Naftzger Park contract: Who is in control?

The City of Wichita says it retains final approval on the redesign of Naftzger Park, but a contract says otherwise.

As part of the proposed redesign of Naftzger Park in downtown Wichita, an architectural firm has been engaged, and a contract agreed to. I’ve made the document available through Google Drive here.

In responding to my request for the contract, the city included this information:

The Naftzger Park design contract you requested is between SWA Balsley and TGC Development Group. SWA has provided a copy of the draft agreement. The City has coordinated with TGC in this effort to ensure that the selection process followed City procedures. The City Council has taken action to select SWA as the design team and did accept the design funding proposal of SWA Balsley, but is not a party to the design contract. The City is utilizing this collaborative approach to take advantage of the experience and expertise in project management of TGC Development in this unique project. Any final Naftzger Park design approval is retained by the Parks Board and the City of Wichita. 1 (emphasis added)]

As stated, and according to the language of the contract, the parties to the contract are SWA/Balsley Landscape Architects, P.C. (“SWA/Balsley”) and TGC Development Group, which is referred to as the “Client.” The City of Wichita is not the Client; that party is a private business firm. And not just any private firm, but one that owns property abutting Naftzger Park and is clearly looking to rebuild the park according to its needs and profitability, not what is good for the city at large.

As to the city’s contention that final approval is retained by it alone, the contract holds language like this:

“Upon the Client’s authorization to commence design development …”

“Upon the Client’s approval of the design development plans and preliminary cost estimate …”

“SWA/Balsley shall prepare and process change orders only with prior approval of the Client.”

Example from the contract. Click for larger.
(The document is covered with a large watermark that obscures parts of its text. As the document is encrypted, there is no way to remove the watermark without the password, as far as I know.)

Remember, the city is not the Client. TGC Development is the Client.

Here is a paragraph near the end of the contract:

“As material inducement to SWA/Balsley to enter into this agreement, Client represents it warrants that it has full authority to bind the City to the terms of this Agreement, and that the City will assume full responsibility for payment.” (emphasis added)

There’s a discrepancy here. The city says final approval rests with it alone, but TGC Development has agreed to a contract which states it can bind the city to an agreement.

By the way, if you thought the Naftzger Park redesign was a $1.5 million project, think again, as this language from the contract shows:

“Based upon our understanding of the project, the park design should encompass the vision as described in the RFQ and be planned with phased implementation. Conceptual and Schematic Design phases were based on a complete vision of an estimated $3,000,000 budget. Design Development, Construction Documentation, and Construction Observation, which are to be completed under Phase One, are established at $1,500,000. The fee quoted in this proposal is based upon this present understanding and these budgetary figures.”


Notes

  1. Correspondence from Lauragail Locke of the Wichita City Manager’s Office, August 3, 2017.