Voice For Liberty

Tag: Downtown Wichita

  • Facade improvement program raises issues in Wichita

    Facade improvement program raises issues in Wichita

    An incentive program in Wichita should cause us to question why investment in Wichita is not feasible without subsidy.

    At its February 5, 2019 meeting, the Wichita City Council will consider an item regarding economic development in Delano. The owner of a building there has applied for financial assistance under the city’s facade improvement program.

    The purpose of the facade improvement program, according to city documents, is to provide “low-cost loans and grants” to help improve the appearance of buildings “located in defined areas needing revitalization, including the City’s core area.”

    The matter before the council this week is to accept the petition of the property owner and set February 19, 2019 for the public hearing.

    Undoubtedly council members will praise the property owner for deciding to invest in Wichita. I’m glad he is, and it sounds like the project will improve the Delano area. But the need for this item raises a few questions regarding public policy in Wichita that are more important than any single project.

    First, city documents state: “The Office of Economic Development has reviewed the economic (‘gap’) analysis of the project and determined there is a financial need for incentives based on the current market.” In other words, the city has determined that this project is not economically feasible unless it receives a government subsidy. Will any council members ask why is it not possible to renovate a building in the core of Wichita without subsidy? What factors in Wichita — specifically Delano — make it impossible to have investment like this without subsidy?

    Second: Wichita officials, especially Wichita Mayor Jeff Longwell, tell us that the city doesn’t use cash as an economic development incentive. But this proposal includes a cash grant of $30,000. This is not a low-cost loan that must be repaid. Instead, it is an incentive, a gift — and it’s cash.

  • Naftzger Park cost rising, and we’re not to talk about it

    Naftzger Park cost rising, and we’re not to talk about it

    The cost of the Naftzger Park makeover is rising, will be paid for with borrowed funds, and possibly handled without public discussion.

    The cost of the Naftzger Park project in downtown Wichita is rising, according to an item the Wichita City Council will consider at its Tuesday February 5, 2019 meeting. According to city documents, an additional $85,000 is needed for stormwater retention, a function the former pond provided.

    This seems like a major oversight in the original project plans. The city has regulations regarding stormwater retention that private sector developers must follow. Didn’t any city planners consider these regulations as the project was planned? Didn’t any council member or bureaucrat look at the plans and wonder about stormwater drainage? Wasn’t there a highly-regarded architect designing the park? What about TGC Development, the developer of the surrounding property, to whom the city effectively outsourced the development of Naftzger Park? The construction manager?

    The extra cost is proposed to come from savings realized in another nearby project. That requires a waiver of policy, according to the agenda: “Staff requested waiver of City Council Policy No. 2 regarding the use of projects savings to allow this transfer of funds.”

    On top of that, this money will be borrowed. An accompanying resolution (number 19-048) provides the authorization: “Section 2. Project Financing. All or a portion of the costs of the Project, interest on financing and administrative and financing costs shall be financed with the proceeds of general obligation bonds of the City.”

    Borrowing this money, even though it is a small amount, is a significant public policy issue. The city decided to use tax increment financing (TIF) to pay for this project. City officials pitch this as a method of financing that costs the general public nothing, as the TIF bonds are repaid from a project’s future property taxes.

    In this case, as the surrounding development by TGC starts to pay higher property taxes, these taxes would be used to pay for Naftzger Park. (Never mind who pays for the public services the development will consume.)

    But now, some expenses of the project have been shifted away from TIF to the general city.

    The equitable way of handling this is to charge this expense to the TIF district. Either that, or to the responsible parties whose oversight, we now see, was lacking.

    By the way, this item is on the consent agenda, meaning there will be no discussion unless a city council member requests the item to be “pulled” for discussion and a potentially separate vote. (A consent agenda is a group of items that are voted on in bulk with a single vote. An item on a consent agenda will be discussed only if a council member requests the item to be “pulled.” If that is done, the item will be discussed. Then it might be withdrawn, voted on by itself, or folded back into the consent agenda with the other items. Generally, consent agenda items are considered by the city to be routine and non-controversial, but that is not always the case.)

    Following, an excerpt from the February 5, 2019 city council agenda:

    Background: Naftzger Park currently has a small pond that acts as a storm water retention facility during rain events. Proposed improvements to Naftzger Park will eliminate the pond and all available storm retention. The project does not include funding for replacing the retention capacity.

    Analysis: With the elimination of the existing pond, underground on-site storage is necessary to prevent a negative impact on the area storm sewer system and the surrounding developments during rain events.

    Financial Considerations: Currently, the Stormwater Utility does not have funding available for these improvements. Staff proposes transferring $85,000 in General Obligation bond funding from the Douglas Underpass project. Funding is available for transfer due to underruns of bid items upon project completion and favorable bid pricing. Staff requested waiver of City Council Policy No. 2 regarding the use of projects savings to allow this transfer of funds. The total budget for the stormwater retention facility would be $85,000 and the revised budget for Douglas Underpass would be $2,015,000.

  • Business improvement district proposed in Wichita

    Business improvement district proposed in Wichita

    The Douglas Design District proposes to transform from a voluntary business organization to a tax-funded branch of government (but doesn’t say so).

    Update: On August 21, the council approved the formation of the planning committee.

    This week the Wichita City Council will consider taking the first step in forming a business improvement district (BID) in east-central Wichita. Some explanation from the agenda packet for the meeting: 1

    First, there already exists a voluntary organization: “The Douglas Design District (DDD) is a voluntary organization of over 300 local businesses located near Douglas Avenue between Washington Avenue and Oliver Avenue. In 2017, the DDD established a five-year strategic plan to become a financially self-sustaining organization that is not reliant on elective membership.”

    The purpose of a business improvement district: “A BID provides for the administration and financing of additional and extended services to businesses within the district and is funded by the City levying a mandatory service fee on the businesses within the district.”

    Who will collect, and who will spend? “While the City levies the service fee, it can contract with a third-party organization such as the DDD to operate the BID. The approach is similar to that used by the City to contract with the Wichita Downtown Development Corporation in downtown.”

    The action on the agenda this week is to establish a planning committee to develop things like district boundaries, services to be provided, and a budget. Although city documents aren’t specific, it’s likely this “service fee” will be levied as a property tax.

    Are BIDs a good idea? Most information about them is provided by their boosters, that is, those who directly benefit from the service fee, which is really a tax. But there are some doubters. The New Republic, by no means a conservative publication, printed a piece arguing against BIDs, stating: “But too often BIDs have turned against the businesses they were meant to serve, making the cost of entry into a new area even higher for local merchants, or lacking the transparency needed to instill trust from the community.” 2

    A larger and more balanced look at BIDs comes from Washington Monthly this summer:

    The privatized structure of BIDs may raise liberals’ hackles, but it’s clear that BIDs can be a useful tool to remake neighborhoods into places where people actually want to spend their time. Many big-city mayors — who are overwhelmingly Democratic — have thrown their weight behind them. D.C. Mayor Muriel Bowser recently doled out grants totaling $300,000 to five neighborhoods thinking about forming their own BIDs. (One of the grantees, Dupont Circle, with the decaying park, will start collecting taxes from business owners in the fall.)

    Still, there are real downsides to BIDs for renters and small business owners, who will not benefit from rising property values and may ultimately be pushed out of the area. Luckily, this isn’t a hugely difficult problem to remedy. The best, and easiest, way to revamp how BIDs are run is through city halls; they’re the ones who legislate what BIDs can and can’t do, while holding them accountable to the public. But too often, they renege on that responsibility. 3

    From Canada, harsh criticism:

    In this paper, we propose and develop the concept of “socio-economic hygiene” to denote the ways in which neoliberal Western urban space is spatially regulated and re-oriented towards consumption in a way that reinforces social exclusion. … We conclude by tracking how sociological strategies of “hygiene” have moved from racial and biological features to features of place and socioeconomic status, and how BIDs, resembling genocidal states in certain ways, use these strategies to continually justify their own existence. 4

    Civil society, or government?

    What should trouble everyone is the replacement of civil society with political society. Edward H. Crane explains: “There are basically only two ways to organize society: Coercively, through government mandates, or voluntarily, through the private interaction of individuals and associations. … In a civil society, you make the choices about your life. In a political society, someone else makes those choices.”

    Right now DDD is a voluntary organization. Civil society, in other words. But now it is proposed to replace it with political society.

    Why trade voluntary cooperation for the force of government? The annual report of the DDD (included in the city council agenda packet) explains: “Approximately 1/3 of businesses in DDD’s project area are DDD members yet ALL businesses benefit from DDD’s efforts. A BID eliminates this ‘free rider’ problem and, if implemented, would allow DDD to have a singular focus on implementing the BID business plan rather than always chasing membership.” For emphasis, the report notes: “THE PAYMENT OF THE BID ASSESSMENT WILL REPLACE MEMBERSHIP DUES.”

    Another term for chasing membership is selling your product by showing how it creates value. If the formation of the BID is successful, the Douglas Design District will be relieved of this necessity. Will having a guaranteed source of revenue make DDD more or less responsive to its members?

    Also, the DDD annual report states: “A BID assessment is not a tax.” I wonder what will happen to anyone who decides to skip paying this tax. After a few years, they will experience the blunt power of government tax collection.

    Taxation without transparency

    The agenda packet states this about the relationship between the city and the district: “While the City levies the service fee, it can contract with a third-party organization such as the DDD to operate the BID.”

    Wichita has similar organizations. One is the Wichita Downtown Development Corporation, now known as Downtown Wichita. This organization is funded nearly entirely by tax revenue from an improvement district. Yet, it refuses to make its spending records public, and the city supports that decision. 5

    Another similar taxpayer-funded organization is the city’s convention and tourism bureau, which has gone by several names over the years. Regarding it, in 2012 I wrote:

    We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.” 6

    Of interest is a segment from the KAKE Television public affairs program “This Week in Kansas” where the failure of the Wichita City Council, especially council member Pete Meitzner (district 2, east Wichita), to recognize the value of open records and open government is discussed. Video is here.

    Since this time, the city has formed a business improvement district known as a TBID. It covers all hotels in the city and imposes an additional 2.75 percent tax to hotel bills, although the city and hotels call it a “City Tourism Fee.” 7 I’ve not asked for records of this spending, but I am sure the request would be rejected.

    Will the Douglas Design District follow the standard set by Wichita’s other improvement districts and evade accountability and transparency?

    Results from current improvement districts

    The Washington Monthly piece mentions that city halls can hold BIDs accountable. But lack of transparency works against oversight and accountability.

    Then, if anyone wonders what about the results of Wichita’s improvement districts, here are a few findings:

    • For the past decade business activity in downtown Wichita has been on a downhill trend. The data for 2016 (the most recent year for data) is a bit of good news, with the decline stopping and business activity remaining mostly unchanged. It isn’t the vibrant growth we’ve been told is happening in downtown Wichita, but at least things are not getting worse. 8
    • Truthfulness is in short supply. The Downtown Wichita organization has been caught in either a huge lie or gross incompetence regarding its claim of the number of people working in downtown Wichita. After brought to its attention, the number is no longer used. 9
    • Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates. 10
    • 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. 11

    Despite this record, Wichita City Hall seems satisfied with these results.

    —
    Notes

    1. City of Wichita. Agenda for August 21, 2018, Item IV-1. Available at http://www.wichita.gov/Council/Agendas/08-21-2018%20City%20Council%20Agenda%20Packet.pdf. ↩
    2. Max Rivlin-Nadler. Business Improvement Districts Ruin Neighborhoods. The New Republic, February 19, 2016. Available at https://newrepublic.com/article/130188/business-improvement-districts-ruin-neighborhoods. ↩
    3. Saahil Desai. One Landlord, One Vote. Available at https://washingtonmonthly.com/magazine/july-august-2018/one-landlord-one-vote/. ↩
    4. Sanscartier, Matthew D.; Gacek, James. Out, Damned Spot: Socio-economic Hygienic Practices of Business Improvement Districts. Canadian Journal of Urban Research. Winter 2016, Vol. 25 Issue 2, p73-85. ↩
    5. Weeks, Bob. Wichita’s open records policy is contrary to the interests of citizens. Available at https://wichitaliberty.org/wichita-government/wichita-open-records-policy-contrary-interests-citizens/. ↩
    6. Weeks, Bob. Wichita, again, fails at open government. Available at https://wichitaliberty.org/open-records/wichita-again-fails-at-open-government/. ↩
    7. Weeks, Bob. Wichita seeks to add more tax to hotel bills. Available at https://wichitaliberty.org/wichita-government/wichita-seeks-add-tax-hotel-bills/. ↩
    8. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends-2016/. ↩
    9. Weeks, Bob. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/. ↩
    10. Weeks, Bob. Living in downtown Wichita. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends-2016/. ↩
    11. Weeks, Bob. Kansas hotel tax collections. Available at https://wichitaliberty.org/kansas-government/kansas-hotel-tax-collections/. ↩
  • Project Wichita survey

    Project Wichita survey

    The Project Wichita survey is about to end. Will it have collected useful data?

    Project Wichita is “a community engagement process to identify the future we want for our home and the steps necessary to achieve it.” 1 So far it has held focus groups that collected ideas for the future of Wichita, in which “an astounding 3,800+ people 2 shared their vision in 239+ focus groups,” according to the project’s Facebook page. The survey, which is ending on July 6, is another component of the “listen” phase of the project, with “focus” and “share” phases still to come.

    The survey may be taken on-line or by paper. The online survey is implemented as a number of pages, each concerning a topic. The first page is titled “Vision for Our Region: Please indicate your level of agreement with the following for developing a vision for the Wichita region. Our region should be a place that:” Following are several items like “all children have the chance to succeed.” Respondents are asked to select one of these responses for each item:

    • Strongly Disagree
    • Disagree
    • Undecided
    • Agree
    • Strongly Agree

    The second page is titled “Strong Neighborhoods. Please indicate the importance of investing resources (time, human resources, money) in the following for developing and supporting safe and strong neighborhoods throughout our region.” A sample item is “Repair deteriorating homes to improve neighborhoods.” Respondents may choose from these responses:

    • Not important investment
    • Slightly important investment
    • Moderately important investment
    • Very important investment
    • Essential investment

    There is no opportunity to answer in any way other than these responses. There is no possibility of leaving a comment.

    The question of the importance of investment continues with slight variation for six more pages on these topics:

    • Economic Advantage and Opportunity
    • Transportation
    • Cultural Arts
    • Attractions and Entertainment
    • Education; Community Wellness
    • Wichita Riverfront and Downtown Development

    Then a page titled Regional Perspectives: “Please tell us your thoughts about the following regional questions” where participants are asked to indicate their degree of agreement or disagreement with the following:

    • I think an increase in population would make the Wichita region thrive.
    • I am optimistic about the future of the Wichita region.
    • I think the Wichita region has to be willing to change to keep and attract the next generation.

    Then there are some demographic questions.

    Problems

    First, the responses that the project will collect are from a self-selected group of respondents. There is no way to guarantee or know that the respondents are a representative sample of area residents. The focus groups had the same problem. This has been a problem with Wichita’s outreach in the past. In 2014 the city was quite proud of its engagement and positive response regarding the proposed city sales tax. Then, on election day, 62 percent of voters said no. 3 (Of course, those who vote are also a self-selected group of respondents. On the sales tax question, 103,290 people cast a vote. 4 For that year, the Census Bureau estimated there were 283,780 people of voting age in Wichita. 5 So 36.4 percent of the eligible voters made the decision for the rest, voters and non-voters, and also for those too young or ineligible to vote. But when we ask to settle issues by voting, voters are the people who make the decisions.)

    Another problem has to do with the preface to the many questions asking about the importance of making investments in various things. What is missing is whose resources are to be invested? Yours? Mine? Someone we don’t know?

    Related is that almost all the items participants are asked to rate are things that almost everyone agrees are good. Who could not strongly agree with investing so that “all children have the chance to succeed?” I suppose that some people might select “Very important investment” instead of “Essential investment” for some items. That might produce a shade of difference in the importance of items.

    What would really be useful, however, is asking participants to rank the importance of investing in each item, from most important to least important, with no ties allowed. Instructions might be worded like “Rank the importance of investing in the following five areas. 1 is the most important investment, while 5 is the least important. You must assign a rank to each item, and there may be no ties.”

    Then, to make things really useful: Ask participants to produce rankings for the importance of public sector investment, and separate rankings for the importance of private sector investment.

    Understanding and distinguishing the difference between public and private investment is vital. When people believe that others will be paying, there is no limit to what people want. Milton Friedman knew this: “When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else’s money to buy something for himself, he is very careful about what he buys, but doesn’t care at all how much he spends. And when a man spends someone else’s money on someone else, he doesn’t care how much he spends or what he spends it on. And that’s government for you.” (For more, see Friedman: The fallacy of the welfare state.)

    People recognize this. Remarks left on Facebook on the Project Wichita page 6 included this by one writer:

    Just took survey! One would think “they” want to convert Wichita or Kansas to socialism. I’m a liberal conservative Democrat and yet questions are very concerning and disturbing.

    Following up, the same person wrote:

    Applaud the effort however many of the questions concerning me as it relates to governments role in community and well-being of such. … At what point should community and individuals be primarily responsible for many of the topics you address in your survey?

    Another Facebook user wrote:

    Your survey is great but you left out a very important piece of information. WHO is going to provide the money for the investments that are queried in your survey? A lot of areas need investment of funds but, those funds should come from the private sector, not public sector. As a result of the inability to discern a difference in the source of required investments, the survey is somewhat useless.”

    Yet another from Facebook:

    Each of your questions should be followed by the question, “How much are you personally willing to pay for this line item” or “Which government service should be eliminated to pay for this line item”. Your list will get quite short when people are asked to spend their own money rather than other people’s money.

    These basic defects preclude this effort as being serious social science research. Yet, that is likely how it will be presented, especially since a university agency is involved.

    Of note: Project Wichita has no official opinion as who should pay for these investments. Cynics — that is, realists — believe that programs like Project Wichita are designed to convince citizens to support increased taxes or debt issues to be repaid with future taxes, with those future taxes undoubtedly higher.

    One reason for this suspicion is that portions of the Project Wichita process are being managed by Wichita State University’s Public Policy and Management Center. 7 Its director and its associated academics have a clear preference for higher taxes, at one time writing a paper advising cities to create “more willing taxpayers.” 8

    Other people and companies that Project Wichita identifies as part of the “Vision Team” (or “funders”) also made large contributions to the campaign for a Wichita City sales tax in 2014:

    • Allen Gibbs & Houlik, L.C.
    • Jon Rolph and his company Sasnak
    • The Chandler family and Intrust Bank
    • GLMV Architecture
    • Emprise Bank
    • Spirit Aerosystems
    • Commerce Bank
    • Equity Bank
    • Cox Machine
    • Westar Energy
    • Professional Engineering Consultants
    • Star Lumber
    • Bothner & Bradley and its principals
    • Envision
    • Lubrication Engineers
    • Jeff Fluhr, head of Downtown Wichita and now also Greater Wichita Partnership

    Some of these companies regularly receive economic development incentives from the City of Wichita or do business with the city. Some are subject to the city’s regulations such as zoning and permitting.

    It’s difficult to digest all this without concluding that Project Wichita project is designed to develop a case — an appetite — for higher taxes. That’s even before realizing that the driving force behind Project Wichita — according to word on the street — is Jon Rolph, who was the chair of the campaign for the Wichita city sales tax in 2014. Further, Project Wichita is sharing offices with the Greater Wichita Partnership and Downtown Wichita, two organizations always in favor of the expansion of government.

    Individual questions

    Besides general problems with the survey instrument, there are these problems with individual items:

    “Improve the current public transit system (e.g. expand routes, expand hours).” There may be support for spending public funds on this, even if it means raising taxes. This was one of the uses for the proposed Wichita city sales tax in 2014. It was bundled with other items, and voters defeated the tax.

    “Make flights from Wichita Eisenhower National Airport more affordable.” We’ve spent a lot doing this. The city and the airport say the programs have been successful.

    “Increase direct flights from Wichita Eisenhower National Airport.” This is an area that could use improvement. The number of departures and the number of available seats on departing flights has been underperforming the nation, despite much investment in the forms of tax-funded subsidies for airlines. There is also a new airport terminal.

    “Offer more diverse entertainment options (e.g. music festivals, restaurants, theme parks).” There are many people trying to figure out what type of restaurants are wanted in Wichita, and where. These people are motivated by profit. It’s difficult to believe that government could do a better job of deciding upon, and operating, restaurants.

    “Support entrepreneurial opportunities.” There is an organization doing this, e2e. More broadly, when the city offers economic development incentives, it makes it harder for young, entrepreneurial companies to survive as they must bear the cost of incentives and compete with incentivized companies for labor and capital. 9

    Under education, a topic that is glaringly omitted is school choice. Parents like having the possibility of school choice, especially parents who can’t afford private school tuition. Plus, school choice, like charter schools, could help control “sprawl,” something that is often seen as a negative factor. If parents who want to live in central Wichita could have access to school choice in nearby schools, it might counter the commonly-held perception that if you want good schools for your children, you must buy a home outside the Wichita school district.

    “Provide modern performing arts center (e.g. symphony, music theater, opera) that meets the region’s needs.” and “Provide a modern convention center that attracts more conventions and events.” These are topics that Wichita will likely be grappling with soon, and in a real way. Wichita has already hired a consultant to study this issue. (More information is at Century II resource center.) A task force is studying the issue. Soon, it is quite likely that residents of Wichita or Sedgwick County may be asked to approve a sales tax to fund a convention center and possible a performing arts center. Or, citizens suffer the implementation of Design Build Finance Operate and Maintain (DBFOM), or P3. In this model as applied to Wichita, a third party would do all the work of designing, financing, building, and operating a convention center and possibly a performing arts center. Then, the city simply pays a fee each year to use the center, called an “availability payment.” This is simple a way to disguise long-term debt. See Wichita about to commit to more spending. Bigly. for more about this.

    Cynics — that is, realists — believe that programs like Project Wichita are designed to convince citizens to support these taxes or debt issues. (By the way, the convention center business is a poor way to build a city’s economy. See Should Wichita expand its convention facilities?.)

    —
    Notes

    1. Project Wichita. Available at https://www.projectwichita.org/. ↩
    2. With the population of the city of Wichita at about 388,000, (U.S. Census Bureau. 2012-2016 American Community Survey 5-Year Estimates), nearly one percent participated. ↩
    3. Sedgwick County Election Office. Available at https://www.sedgwickcounty.org/elections/election-results/2014-general/. ↩
    4. Ibid. ↩
    5. U.S. Census Bureau. 2010-2014 American Community Survey 5-Year Estimates. ↩
    6. Available at https://www.facebook.com/ProjectWichita/. ↩
    7. “Volunteers wanted the regional 10-year vision and action plan Project Wichita process to include big discussions from as many people as possible. So Wichita State University’s (WSU) Public Policy and Management Center team built a custom process for gathering input across the region. The process includes focus groups with individuals and organizations, gathering feedback at diverse community events, online surveys and robust social media engagement.” Project Wichita. Process. Available at https://www.projectwichita.org/process. ↩
    8. Misty Bruckner is the Director. A few years ago Brucker she and her colleagues co-authored a paper titled “Citizen Attachment: Building Sustainable Communities. See http://www.gfoa.org/sites/default/files/GFR_OCT_10_24.pdf. My reporting on it was titled Wichita needs more, and willing, taxpayers. An excerpt: “Increasingly, citizens are retreating from their responsibilities to community and demanding more from government than they are willing to pay for. But changes in local government behavior can be instrumental in reversing this trend, by strengthening citizens’ commitment to the well-being of their communities. Citizens who are committed to community are more willing to accept responsibility for the well-being of their fellow citizens and are also more likely to join with government and other parties to improve their communities. Citizens who are committed to community are also more willing taxpayers — that is, when government demonstrates that it can be trusted to invest public resources in ways that strengthen the community. The central thrust of this model is getting citizens and governments to work together, but realistically, many communities will require new revenue — including additional tax dollars — if they are to assemble the critical mass of resources necessary for meaningful change. Accordingly, citizens who are willing to pay increased taxes are an important component of building sustainable communities.” (emphasis added) ↩
    9. See Weeks, Bob. Job creation at young firms declines. https://wichitaliberty.org/economics/job-creation-at-young-firms-declines/. Also: “Part of the cost of these companies’ investment, along with the accompanying risk, is spread to a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. But we can’t identify which firms will be successful. So we need an economic development strategy that creates an environment where these young entrepreneurial firms have the greatest chance to survive. The action the Wichita city council is considering this week works against entrepreneurial firms.” Weeks, Bob. Wichita to grant property and sales tax relief. Available at https://wichitaliberty.org/wichita-government/wichita-grant-property-sales-tax-relief/. ↩
  • WichitaLiberty.TV: Project Wichita

    WichitaLiberty.TV: Project Wichita

    In this episode of WichitaLiberty.TV: Project Wichita co-chairs join Bob Weeks to explain the goals and process of Project Wichita. View below, or click here to view at YouTube. Episode 198, broadcast June 2, 2018.

    Shownotes

    For more WichitaLiberty.TV, click here.

  • Wichita in ‘Best Cities for Jobs 2018’

    Wichita in ‘Best Cities for Jobs 2018’

    Wichita continues to decline in economic vitality, compared to other areas.

    NewGeography.com is a joint venture of Joel Kotkin and Praxis Strategy Group. Its annual “Best Cities for Jobs” project ranks metropolitan areas according to growth in employment.

    Of 422 metropolitan areas considered, Wichita ranked 383, dropping 28 spots since the previous year.

    Among 100 medium size metropolitan areas, Wichita ranked 93, dropping 5 spots from the previous year.

    NewGeography.com uses employment data from the United States Bureau of Labor Statistics from November 2006 to January 2018. 1 Last year’s publication contains a more detailed explanation of how the rankings capture current year-growth, mid-term growth, and momentum. 2

    In the analysis for 2017, Wichita had also fallen in ranking.

    Wichita has momentum, they say

    Despite this news, Wichita leaders are in denial. Recently Greater Wichita Partnership president Jeff Fluhr told a group of young people this:

    From the innovation campus at Wichita State University and development along the Arkansas River in downtown, including a new baseball stadium, to the conversations happening now about a new convention center and performing arts facility, Fluhr said the momentum is pushing to keep Wichita on par with the development of other communities around the country.

    That development, which has in recent years expanded to incorporate the entire region, is a critical component to attracting and retaining talent — the exact kind of talent in the ICT Millennial Summit crowd. 3

    In January Wichita Mayor Jeff Longwell said, “It’s hard to find a time when we’ve had more momentum.” 4

    In March Sedgwick County Commissioner David Dennis penned a column for the Wichita Eagle praising the county’s efforts in economic development. 5 Dennis is also chair of the commission this year. In his column, the commissioner wrote: “Economic development is a key topic for the Board of County Commissioners and for me in particular. Right now we have a lot of momentum to make our community a more attractive place for people and businesses.”

    At the same time, the Wichita Eagle editorialized: “Wichita’s economy struggled to rebound from the last recession, which held the city back. But there have been positive economic signs of late, including a renewed focus on innovation and regional cooperation. … There also is a sense of momentum about Wichita. Yes, challenges remain, but the city seems to have turned a corner, with even greater things ahead.”6

    In announcing his candidacy for Sedgwick County Commission, Wichita city council member Wichita City Council Member Pete Meitzner (district 2, east Wichita) said, “We have enjoyed great progress and growth during my two terms as a City Council member and I plan to do my part to assure Sedgwick County is part of this continued success.” 7

    Given all this, it ought to be easy to find economic data supporting momentum, progress, and growth. Besides the NewGeography.com report cited above, let’s look at some other indicators.

    Personal income. For the Wichita metropolitan statistical area, personal income in 2016 rose slightly from the 2015 level, but is still below the 2014 level. In real (inflation-adjusted) dollars, personal income fell in 2016. 8

    Personal Income Summary, Wichita, through 2016. Click for larger.

    Population. In 2000 Wichita was the 80th largest metropolitan area. In 2017 its ranking had fallen to 89. See Wichita metropolitan area population in context for more on this topic.

    Trends of business activity in downtown Wichita. Click for larger.
    Downtown Wichita. There’s been a lot of investment in downtown Wichita, both public and private. But since 2008 the trend is fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. Almost every year these numbers are lower than the year before. This is movement in the wrong direction, the opposite of progress. There may be good news in that the number of people living downtown may be rising, but business activity is declining. 9

    Employment. While officials promote the low Wichita-area unemployment rate, there is an alternative interpretation. First, the good news: The unemployment rate for the Wichita metro area declined to 3.9 percent in March 2018, down from 4.2 percent in March 2017. The number of unemployed persons declined by 8.3 percent for the same period. 10

    Is Wichita’s declining unemployment rate good news, or a byproduct of something else? The unemployment rate is the ratio of the number of unemployed persons to the labor force. While the number of unemployed persons fell, so too did the labor force. It declined by 3,367 persons over the year, while the number of unemployed persons fell by 1,056. This produces a lower unemployment rate, but a shrinking labor force is not the sign of a healthy economy.

    A further indication of the health of the Wichita-area economy is the number of nonfarm jobs. This number declined by 1,200 from March 2017 to March 2018, a decline of 0.4 percent. This follows a decline of 0.7 percent from February 2017 to February 2018.

    Of the metropolitan areas in the United States, BLS reports that 308 had over-the-year increases in nonfarm payroll employment, 72 (including Wichita) had decreases, and 8 had no change.

    Growth in output. The worst news, however, is that the Wichita-area economy shrank from 2015 to 2016. In real (inflation-adjusted) dollars, the Wichita metropolitan area gross domestic product fell by 1.4 percent. For all metropolitan areas, GDP grew by 1.7 percent. Since 2001, GDP for all metropolitan areas grew by 29.3 percent, while Wichita had 12.3 percent growth. 11

    Wichita MSA employment, annual change. Click for larger.
    The GDP figures are for 2016, and figures for 2017 won’t be available until September. So what happened in 2017? Could 2017 be the genesis of momentum to drive our economy forward?

    While GDP figures aren’t available, jobs numbers are. For the year 2016, total nonfarm employment in the Wichita metropolitan area grew by 0.62 percent. For 2017, the growth rate was 0.56 percent — a slowdown in the rate of job growth. These job growth figures are far below the rate for the nation, which were 1.79 and 1.58 percent respectively.

    Annual change in job growth, Wichita and USA through 2017. Click for larger.

    Furthermore, Wichita’s job growth rate in 2016 was lower than 2015’s rate of 1.07 percent. This is momentum in the wrong direction. Nearby charts illustrate. 12

    What to do?

    The failure of the Wichita-area economy to thrive is a tragedy. This is compounded by Wichita leaders failing to acknowledge this, at least publicly. While we expect people like the mayor, council members, and the chamber of commerce to be cheerleaders for our city, we must wonder: Do these people know the economic statistics, or do they choose to ignore or disbelieve them?

    From private conversations with some of these leaders and others, I think it’s a mix of both. Some are simply uninformed, while others are deliberately distorting the truth about the Wichita economy for political or personal gain. The people who are uninformed or misinformed can be educated, but the liars are beyond rehabilitation and should be replaced.

    —
    Notes

    1. “The methodology for our 2018 ranking largely corresponds to that used in previous years. We seek to measure the robustness of metro areas’ growth both recently and over time, with some minor corrections to mitigate the volatility that the Great Recession has introduced into the earlier parts of the time series. The ranking is based on three-month rolling averages of the U.S. Bureau of Labor Statistics’ ‘state and area’ unadjusted employment data reported from November 2006 to January 2018.” 2018 How We Pick The Best Cities For Job Growth. Available at http://www.newgeography.com/content/005973-2018-how-we-pick-best-cities-job-growth. ↩
    2. 2017 How We Pick The Best Cities For Job Growth. Available at http://www.newgeography.com/content/005618-2017-how-we-pick-best-cities-job-growth. ↩
    3. Daniel McCoy. ICT Millennial Summit: Wichita is having a moment. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2017/11/30/ict-millennial-summit-wichita-is-having-a-moment.html. ↩
    4. Heck, Josh. Emerging Leaders panel offers insight into eco-devo strategies. Available at https://www.bizjournals.com/wichita/news/2018/01/11/emerging-leaders-panel-offers-insight-into-eco.html. ↩
    5. David Dennis. Sedgwick County part of drive to strengthen area workforce. Wichita Eagle, March 5, 2018. Available at http://www.kansas.com/opinion/opn-columns-blogs/article203559734.html. ↩
    6. Wichita is moving forward. March 1, 2018. Available at http://www.kansas.com/opinion/editorials/article135573253.html. ↩
    7. Bill Wilson. Wichita council member unveils bid for county commission. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2018/02/13/wichita-council-member-unveils-bid-for-county.html. ↩
    8. Weeks, Bob. Wichita personal income up, a little. Available at https://wichitaliberty.org/wichita-government/wichita-personal-income-up-2016/. ↩
    9. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
    10. Weeks, Bob. Wichita unemployment rate falls. Available at https://wichitaliberty.org/economics/wichita-unemployment-rate-falls-2018-03/. ↩
    11. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/. ↩
    12. In some presentations these figures may differ slightly due to data revisions and methods of aggregation. These differences are small and not material. ↩
  • Project Wichita right to look ahead at city’s future

    Project Wichita right to look ahead at city’s future

    We can understand self-serving politicians and bureaucrats. It’s what they do. But a city’s newspaper editorial board ought to be concerned with the truth.

    In February the Wichita Eagle editorialized about Project Wichita, a ramping-up effort to do something about the future of Wichita. 1 It’s worthwhile to take a look at the op-ed, if only to learn something about the quality of Wichita Eagle editorial writing.

    I understand civic boosterism; the desire to paint a positive image of the future. But this rosy outlook has to be based, at least loosely, on facts. Following, a look at a few claims made in the editorial.

    “Our downtown is becoming more of a destination and place to live.”
    The problem is this: Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates. Downtown Wichita, the city’s economic development agency responsible for downtown, says the population of downtown is 2,138, which is far — really far — outside the range the Census Bureau gives. For more about this, see Living in downtown Wichita.

    As far as a destination for business, the U.S. Census Bureau tracks business trends by zip code. For zip code 67202, which is downtown Wichita, results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower. For more about this, see Downtown Wichita business trends.

    Further, Wichita leaders have exaggerated the number of people working in downtown. For years our leaders told us there were 26,000 daytime workers in downtown Wichita. But this claim is based on misuse of data so blatant it can be described only as malpractice. In fact, this figure is now omitted from the state of downtown reports. No one will accept responsibility for this mistake. See Downtown Wichita jobs, sort of and Downtown Wichita report omits formerly prominent data.

    “But Wichita feels pretty good about itself, which suggests the community is at the perfect time to think about its future.”
    I have to say, we’ve been hoodwinked, and by our top leaders. Recently both the mayor of Wichita and chair of the county commission penned upbeat editorials praising our economy. See Mayor Longwell’s pep talk and Sedgwick County’s David Dennis on economic development.

    But the reality is quite different. See:

    Given this, why do the mayor, county commission chair, and our newspaper’s editorial board say what they do? The first two are politicians, but we ought to ask that our newspaper seek the truth, not personal political gain.

    “It will get more serious in March, when students and volunteers from Wichita State University’s Public Policy and Management Center …”
    This is the same organization on which the city relies for many services, including the gathering of public input in past campaigns like the 2014 sales tax election. The city seemed sure that tax would pass, but voters rejected it by a wide margin. 2

    “Public Policy director Misty Bruckner and her group will deliver feedback and conclusions to Project Wichita’s four co-chairs.”
    A few years ago Bruckner co-authored a paper titled “Citizen Attachment: Building Sustainable Communities.” 3 My reporting on it was titled Wichita needs more, and willing, taxpayers. An excerpt: “Increasingly, citizens are retreating from their responsibilities to community and demanding more from government than they are willing to pay for. But changes in local government behavior can be instrumental in reversing this trend, by strengthening citizens’ commitment to the well-being of their communities. Citizens who are committed to community are more willing to accept responsibility for the well-being of their fellow citizens and are also more likely to join with government and other parties to improve their communities. Citizens who are committed to community are also more willing taxpayers — that is, when government demonstrates that it can be trusted to invest public resources in ways that strengthen the community. The central thrust of this model is getting citizens and governments to work together, but realistically, many communities will require new revenue — including additional tax dollars — if they are to assemble the critical mass of resources necessary for meaningful change. Accordingly, citizens who are willing to pay increased taxes are an important component of building sustainable communities.” (emphasis added)

    Please don’t fault me for being cynical when I suspect that this entire operation is designed to prepare Wichitans (or the region) for a tax increase.

    “Community input will be as wide as the city limits.”
    Wait a moment. I thought we were supposed to think regionally.

    “Project Wichita seems similar to Visioneering Wichita …”
    I wonder if anyone remembers anything positive that resulted from Visioneering Wichita. After a few years, the organization’s website went stale, and staff discontinued making presentation to the city council and county commission See Visioneering asks for money. Let’s ask these questions.

    “Unlike Visioneering, Project Wichita isn’t headed by city or county government.”
    Visioneering Wichita was led by the Chamber of Commerce, not government. Local governments made financial contributions to Visioneering, just as they are also contributing to Project Wichita. 4

    —
    Notes

    1. Wichita Eagle Editorial Board. Project Wichita right to look ahead at city’s future. Available at http://www.kansas.com/opinion/editorials/article198178899.html. ↩
    2. Ryan, Kelsey. Voters soundly defeat Wichita sales tax proposal. Available at http://www.kansas.com/news/politics-government/election/article3567045.html. ↩
    3. See http://www.gfoa.org/sites/default/files/GFR_OCT_10_24.pdf. ↩
    4. Wichita Business Journal. Sedgwick County Commission approves Visioneering Wichita funding. Available at https://www.bizjournals.com/wichita/blog/2012/12/sedgwick-county-commission-approves.html. ↩
  • Naftzger Park private use plans unsettled

    Naftzger Park private use plans unsettled

    An important detail regarding Naftzger Park in downtown Wichita is unsettled, and Wichitans have reason to be wary.

    In the developer agreement regarding Naftzger Park passed on December 19, 2017, there was this: “The City and the Board will cooperate with Developers, upon Developers’ request, to create an Annual Master Calendar of private and public events for the Park, with the expectation that the Developers will have the use of the Park for certain private events.” 1 (In this agreement, “Board” refers to the Board of Park Commissioners of the City of Wichita, Kansas.)

    Recently I asked the city if this master calendar had been created, or if there was a framework for determining how many private events can be held. According to the city, decisions are ongoing, and “According to Park & Recreation officials, what can be shared now is that the City will create and maintain a master calendar of events and programming. The developer will share in the programming responsibility and host several events throughout the year. Collaborating will ensure that the park is programmed well and active.”

    Wichitans should not take comfort in learning this. We can easily imagine where the developer will want to have private events often, especially if homeless people continue using the park as a gathering spot, as is their right. “TGIF kickoff, tonight at Naftzger Park! Drinks and hot hors d’oeuvre! $15 to enter, free to residents of Lofts at Spaghetti Works and partners at Martin Pringle.”

    Could this happen? How often could this happen? These are open questions, and we’re being asked to trust that city bureaucrats will negotiate a good deal for the entire city.

    A panoramic view of Naftzger Park at winter’s end. Click for larger.

    We shouldn’t trust the city to get a good deal for the average Wichitan. Even if the city strikes a deal that looks good, we should not trust the city to enforce the deal. Here’s an example to illustrate why.

    In 2012 the city negotiated a deal with a private developer regarding an apartment development. As part of the deal, the city negotiated a provision that requires the apartment developer to pay “Additional Annual Rent” if certain conditions were met. To the casual observer, that might seem like a magnanimous gesture by the apartment developer. It made it look like the city was been a tough negotiator, hammering out a good deal for the city, letting citizens profit along with the apartment developer.

    But the list of costs the developer could deduct before determining “additional annual rent” was broad, including the ability to contribute to reserve funds that would be owned by the developer. At the time, I observed, “We can be sure that if this project was ever in the position where it looked like it might have to remit ‘Additional Annual Rent’ to the city, contributions to these reserve funds would rise. Then, no funds paid to the city.” 2

    As it turns out, the city did not enforce this agreement. It didn’t even ask for the information needed. Last year I became aware that the city did not ask for, and the developers did not produce, annual reports. 3

    So might it happen that the private developments adjacent to Naftzger Park treat the park as their own? Recall that these developers have taken advantage of nearly every available program to fund their private developments. 4 Included in the list of benefits is a new benefit the city has offered only once before, to my knowledge: The city is paying the developer for parking spaces, on the theory they will be available to the public when the development does not need them.

    Many of these benefits to the developer appeared only after the Wichita city manager said the development would not proceed, as the Wichita Eagle reported: “Plans to tear up and rebuild Naftzger Park downtown have been shelved indefinitely, after developers who own neighboring property pulled out of working with the city, Wichita City Manager Robert Layton said Friday [November 17, 2017].” 5 Somehow the deal was quickly revived, with even more taxpayer-funded benefits to the developer.

    Should Wichitans trust the city to negotiate a good deal, and if it does, to enforce it? In my experience, the answer is no.

    —
    Notes

    1. DEVELOPMENT AGREEMENT between the CITY OF WICHITA, KANSAS, BOARD OF PARK COMMISSIONERS OF THE CITY OF WICHITA, KANSAS, SENECA PROPERTY, LLC, and SUNFLOWER WICHITA, LLC Dated as of January 19, 2018. Section 3.12. In the agenda packet for the December 19, 2017 Wichita city council meeting. ↩
    2. Weeks, Bob. Wichita WaterWalk apartment deal not good for citizens. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-apartment-deal-not-good-for-citizens/. ↩
    3. Weeks, Bob. Wichita WaterWalk contract not followed, again. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-contract-not-followed/. ↩
    4. Weeks, Bob. Naftzger Park project details. Available at https://wichitaliberty.org/wichita-government/naftzger-park-project-details/. ↩
    5. Lefler, Dion. Naftzger Park won’t be torn down, rebuilt after Spaghetti Works developer pulls out. Wichita Eagle, November 17, 2017. Available at http://www.kansas.com/news/politics-government/article185304103.html. ↩
  • Naftzger Park project details

    Naftzger Park project details

    The city has finalized a proposal for a development near Naftzger Park. It includes a few new and creative provisions.

    This week the City of Wichita will consider a development agreement for land and buildings near Naftzger Park in downtown Wichita. 1

    Community Improvement District

    The plan includes the formation of a Community Improvement District. In CIDs, merchants charge additional sales tax for the benefit of the property owners, instead of the general public.2 In this CID, the proposed additional sales tax is two cents per dollar, the maximum available under state law, and could generate up to $3.1 million over a period as long as 22 years.3

    This proposed CID contains a “sweetener,” likely designed to reduce public opposition. Ten percent of the CID revenue would be used to maintain Naftzger Park. We’ve seen this before, as in the Cabela’s CID where some of the funds paid for road improvements near the store.4

    The action the city council will consider this week is whether to accept the petitions to form the CID and set January 9, 2018 as the date for the public hearing.

    Industrial Revenue Bonds and tax forgiveness

    This project is also requesting Industrial Revenue Bonds. under this program, the city will not be lending money, nor will it be responsible for repaying any loans. Instead, the program allows the developers to avoid paying sales tax on construction.5 City documents don’t give an amount of tax savings, but it could be over one million dollars. 6

    City documents state that a property tax abatement is not being requested. That isn’t available for this project, as its property taxes are already allocated by TIF.

    Tax Increment Financing (TIF)

    The project has already been approved for of Tax Increment Financing. In this case, future property tax revenues from this project will be rerouted from their normal flow to reconstruct Naftzger Park, something that is seen as a large benefit to the developers.

    Construction administration fee

    The city will pay the developers up to $250,000 for construction administration of the park.

    Parking

    This agreement also contains something I’m sure is considered as creative. We also saw this as an incentive offered to Cargill earlier this year. In this case, the city will pay the developers a fee for using their parking spaces. In this case, the city proposes paying a one-time easement fee of $10,000 per spot for from 80 to 90 parking spots. The total payment would be from $800,000 to $900,000. These parking spots would be available to the public outside of business hours, which are defined as 6:00 a.m. to 6:00 p.m. Monday through Friday.

    Private events

    Buried with the development agreement is a provision that the developers may use the park for private events: “The City and the Board will cooperate with Developers, upon Developers’ request, to create an Annual Master Calendar of private and public events for the Park, with the expectation that the Developers will have the use of the Park for certain private events.”

    Little else is mentioned regarding these private events, such as the maximum number of private events. This seems subject to abuse.

    Other Naftzger Park material

    1. City of Wichita Agenda Packet for December 19, 2017, Item IV-6. Available at http://wichitaks.granicus.com/AgendaViewer.php?view_id=2&clip_id=3699. ↩
    2. Weeks, Bob. Community improvement districts in Kansas. Available at https://wichitaliberty.org/kansas-government/community-improvement-districts-kansas/. ↩
    3. Council Agenda: “The Developer and Park Board control the land within the proposed CID. The requested CID would provide pay-as-you-go financing for qualified project costs through the imposition of a 2% special retail sales tax on all taxable retail sales within the district for a maximum of 22 years. The eligible project costs identified in the CID petition include costs of renovating the building at 691 E. William and construction of the Class A commercial building. The City will receive 10% of the CID revenue to fund Naftzger Park maintenance and or ROW repairs and improvements, in addition to the 5% administrative fee. The revenue is estimated to be $310,000. The maximum amount of project costs that can be reimbursed is $3,118,504 based on the projected revenue of the project, exclusive of the City’s administrative fee and Naftzger Park maintenance.” ↩
    4. Weeks, Bob. Cabela’s CID should not be approved in Wichita. Available at https://wichitaliberty.org/wichita-government/cabelas-cid-should-not-be-approved-in-wichita/. ↩
    5. Weeks, Bob. Industrial revenue bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/. ↩
    6. “The Developer is also requesting the issuance of a letter of intent to issue Industrial Revenue Bonds (IRBs), valid through December 31, 2022, in an amount not-to-exceed $26,000,000 to achieve a sales tax exemption on items purchased for the redevelopment project. No property tax abatement is being requested.” ↩