A development near downtown Wichita may receive subsidy through four different avenues.
This week the Wichita City Council will consider approval of a development agreement with EPC Real Estate, LLC, for the Delano catalyst site. This is vacant land north of Douglas, between the Advanced Learning Library and the River Vista project.
Update: The measure passed four votes to three, with Bluebaugh, Frye, and Longwell in the minority.
One form of additional subsidy is forgiveness of sales tax on the construction of buildings. The Letter of Intent for Industrial Revenue Bonds the council will consider states: “The City’s governing body has authorized an application for sales tax exemption with an estimated value of $1,611,822.”
But a really big gift to the developers is the price of the land. City document state the selling price for the 7.2 acre plot is $750,000. That’s about ($750000 / 7.2 acres) = $104,167 per acre. It’s a pretty good deal for the buyers. A look at some current commercial land listings in Wichita finds these:
1.20 acres at 47th South and Seneca for $425,000, or $354,167 per acre.
0.50 acres at 140 N. West St. for $225,000, or $450,000 per acre.
20.00 acres at 1462 S. Maize Road “Great for entertainment, retail, etc.” for $4,251,456, or $212,573 per acre.
0.52 acres at 640 N. Webb Road for $368,570, or $708,788 per acre.
It’s clear that the developers are buying the land from the city for a small fraction of its value.
By the way: Wichita Mayor Jeff Longwell says the city will no longer offer cash incentives for economic development. But selling land a deeply discounted price: Is that different from a cash incentive?
We might also note that this project will receive millions in benefits from Tax Increment Financing. This was a program born out of a perceived need to help redevelop blighted property. This development site, however, is vacant land.
Finally: If downtown Wichita is really progressing as well as its boosters say, why is it necessary to offer so much subsidy to develop a project like this?
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!
Wichita Eagle Opinion Line, November 24, 2017: “The kindest word that can be ascribed to State Senator Susan Wagle, when she criticizes the Kansas Supreme Court? Disingenuous. She never mentions Brownback appointee, Justice Caleb Stegall; he has repeatedly agreed with his colleagues on school finance.”
The likely reason Senator Wagle doesn’t mention Justice Stegall when criticizing the Court on school finance matters is that he, along with another judge, hasn’t participated. The recent opinions are signed “BEIER and STEGALL, JJ., not participating. MICHAEL J. MALONE and DAVID L. STUTZMAN, Senior Judges, assigned.” Why? “Justices Carol Beier and Caleb Stegall have both recused themselves from the Gannon case — Stegall because he served as Brownback’s chief counsel before he was appointed to the Kansas Court of Appeals in 2014; Beier did not provide a reason for her recusal.” See Kansas Supreme Court rejects lawmakers’ school finance changes, threatens in new ruling to close schools.
Quality of life, or a boatload of cash
Ron Sylvester in The Hutchinson News: “It’s all about quality of life. [Wichita Mayor Jeff] Longwell said Wichita drew Cargill and its $60 million investment downtown by investing in its arts community, parks, trails and a new library. Businesses move to town, not because of tax breaks and cash incentives, Longwell said, but because the people who work for those companies want to live there.”
First, Wichita didn’t draw Cargill downtown. It was already located in downtown Wichita. Wichita merely retained Cargill. No new jobs are anticipated.
As to the role of quality of life: Possibly that was a factor. More likely? The millions in subsidy Cargill will receive. Cargill tapped pretty much every economic development incentive program it could, along with a few innovative additions, such as renting its parking garage to the city during the times Cargill doesn’t need it.vSee More Cargill incentives from Wichita detailed.
Let’s ask the mayor this question: If tax breaks and cash incentives were not needed, why did the city (and the state) award so much in incentives?
Who oversaw Wichita schools when this happened?
Teachers ‘fearful’ about escalating violence at Southeast High (Wichita Eagle, December 1, 2017): Some employees at Southeast High School in Wichita say they have ‘grave concerns’ about escalating violence and unruly behavior at the school, and they’re urging leaders to take ‘decisive and strong actions’ to combat it.” This continues a theme from this summer, as further reported in Behavior is getting worse in Wichita classrooms, data shows. (Wichita Eagle, June 16, 2017): “Discipline problems have increased substantially in Wichita schools over the past four years, particularly among the district’s youngest students, according to data obtained by The Eagle. The situation is frustrating teachers, prompting some of them to leave the profession, and has inspired a new program aimed at teaching elementary school students how to pay attention, follow directions and control their emotions.”
I was surprised to learn of these problems that have been developing in the Wichita Public Schools. That’s because John Allison, the immediate past superintendent, was universally praised by the school board and district administration. Allison left at the end of June after serving eight years to become superintendent in Olathe. Hopefully that district will not experience the erosion in discipline that Allison presided over in Wichita.
Amtrak affordable for whom?
Wichita Eagle Opinion Line, December 3, 2017: “How I long for affordable rail service connecting Wichita to major cities. Traveling to family for the holiday reminds me of how sad it is to live in such a remote, isolated, inaccessible place as Wichita.” Inaccessible? We were told that subsidies to discount airlines and a new airport terminal would fix that. Then, the only reason Amtrak is affordable is that taxpayers pay a lot to keep Amtrak running. (That’s if Amtrak prices are really affordable. I just compared a few Amtrak trips with airline trips, and airfares aren’t much more, and offer many more options as to time. And if you value your time, there is no better way to waste it than on a train.) Other forms of travel receive subsidy too, but peanuts compared to Amtrak. From Randal O’Toole, Stopping the Runaway Train: The Case for Privatizing Amtrak:
According to the U.S. Bureau of Transportation Statistics, after adjusting for inflation to 2011 dollars, subsidies to domestic air travel averaged about $14 billion a year between 1995 and 2007. Considering that the airlines carried an average of more than 500 billion passenger miles a year during those years, average subsidies work out to about 2.8 cents per passenger mile (see Figure 2).
Using Bureau of Transportation Statistics’ numbers, highway subsidies over the same time period averaged about $48 billion a year. Highways carried about 4.1 trillion passenger miles per year, for an average subsidy of 1.1 cents per passenger mile. While 95 percent of the airline subsidies came from the federal government, all of the highway subsidies came from state and local governments.
By comparison, federal Amtrak subsidies over the same time period averaged 25 cents per passenger mile. State subsidies averaged another 2.8 cents. Per-passenger-mile subsidies to Amtrak were nearly 9 times subsidies to air travel and nearly 22 times subsidies to highway travel.
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
“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. ↩
U.S. Census Bureau, 2011-2015 American Community Survey 5-Year Estimates ↩
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.)
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. ↩
