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.
In the campaign for Sedgwick County Commission, the incumbent Tim Norton touts his experience, judgment, “intellectual stamina, thirst for data and feedback,” and his efforts in economic development. Following, from January 2013, an example of how uninformed he is regarding basic facts about the Kansas economy.
In Sedgwick County, Norton’s misplaced concern for an industry
Specifically, Norton said “Agribusiness is the third largest economic driver in our community, in our region.”
But is this true? Using 2010 figures from the Kansas Statistical Abstract, these are the largest industries in Kansas in terms of gross domestic product:
Agriculture ranks below many other industries, contributing 3.7 percent of Kansas Gross Domestic Product. In most years agriculture would rank even lower, but because of high farm prices in recent years, it ranks higher than it has.
Norton also expressed concern that humans with large home lots would deplete the land available for agriculture. But he need not worry, as I show in Saving farms from people.
In the campaign for Sedgwick County Commission, the incumbent Tim Norton touts his experience, judgment, “intellectual stamina, thirst for data and feedback,” and his efforts in economic development. Following, from January 2013, an example of how uninformed he is. You also see his preference for government regulation over economic and personal freedom.
Tim Norton: Saving farms from people and their preferences
Now I know people don’t like the idea of sprawl and growth rings and all that, but the truth is there is a balance between where people live and preserving our good agricultural lands and how do you make that work. And that’s being able to sustain part of our economy. Agribusiness is the third largest economic driver in our community, in our region, and to say that we’re okay with every five acre tract being taken up by somebody’s rural residence sounds really good if you’re talking only property rights. But if you’re talking about preserving and sustaining agribusiness you gotta have the land and it’s got to be set aside for that enterprise.
Farms and ranches being driven out of existence by homeowners — that sounds like a problem that might threaten our food supply. But what are the facts?
First, there is an overabundance of farmland in America. There is so much farmland that we pay farmers billions each year to refrain from planting crops. We pay corn farmers billions in subsidies each year and then use their crops for motor fuel, instead of for making fine Kentucky bourbon and taco shells, as God intended.
Considering Sedgwick County, as that is what Norton represents: Despite being the second-most populous county in Kansas and home to its largest city and surrounding suburban communities, Sedgwick County ranks fourth among Kansas counties in the number of farms, thirty-fourth in farmland acres, seventh in total harvested cropland acres, thirty-third in market value of harvested crops, sixty-sixth in market value of livestock, and eighty-seventh in pasture acres. (Data from Kansas Farm Facts 2011, reporting on 2007 farm statistics.)
There’s something else that might ease Commissioner Norton’s concern, if he would only believe in the power of markets over government: That is the price system. If we were truly running short of farmland, crop prices would rise and farmland would become more valuable. Fewer people would be willing to pay the price necessary to have a five-acre home lot.
In fact, if crop prices were high enough, farmers would be buying back the five-acre lots, or perhaps paying homeowners to rent their yards for planting crops or grazing livestock.
In either case, markets — through the price system — provide a solution that doesn’t require politicians and bureaucrats. There are many other areas in which this is true, but government nonetheless insists on regulation and control.
The Wichita Metro Chamber of Commerce urges spending over fiscally sound policies and tax restraint in Sedgwick County.
Today the Wichita Metro Chamber of Commerce issued a “key vote” alert. This procedure, used by political groups of all persuasions, alerts elected officials that the Chamber prefers a certain outcome on an issue. Those who vote in harmony with the Chamber are likely to receive support in their next election, while the noncompliant are implicitly threatened with opponents the Chamber will support.
Here’s what the Chamber sent to commissioners:
From: Barby Jobe
Sent: Tuesday, August 11, 2015 2:47 PM
TO: SEDGWICK COUNTY BOARD OF COUNTY COMMISSIONERS
FROM: WALTER BERRY, Vice Chair, Wichita Metro Chamber Government Relations Committee
RE: KEY VOTE ALERT
While we have not recently had many “key votes” at the local level, the Wichita Metro Chamber would like to alert you that we will be key voting the 2016 Budget.
The Chamber would like to encourage the Commission to consider a compromise by leaving the property tax rate as it is currently and reducing the amount of cash-funded roads thus allowing a reallocation of funds for economic development and education, culture and recreation, city partnerships, and health and human services.
Thank you for your consideration.
It’s unclear precisely what the Wichita Chamber is asking commissioners to do. It seems likely the Chamber is asking for support of “Plan C.” That is the plan drafted by commissioners Tim Norton and Dave Unruh, which proposes deferring road maintenance in order to free funds for current spending. That plan sets the county on the course chosen by the city of Wichita some years ago. That is, defer maintenance on streets and other infrastructure to support current spending. That policy lead to declining quality of streets and a large backlog of other maintenance, with a recent report from the city finding that the “cost to bring existing deficient infrastructure up to standards” is an additional $45 to $55 million per year.
This deferral of maintenance needs is a form of deficit spending. It’s curious that a purportedly conservative organization like the Wichita Chamber of Commerce would support that.
Well, it’s not really surprising. The Wichita Chamber has long advocated for more taxation and spending, taking the lead in promoting the one cent per dollar sales tax proposal in Wichita last year. The Chamber has supported big-spending Republicans over fiscal conservatives for office at several levels.
In Wichita, and across the country, local chambers of commerce support crony capitalism instead of pro-growth policies that allow free enterprise and genuine capitalism to flourish.
That may be surprising to read. Most people probably think that local chambers of commerce — since their membership is mostly business firms — support pro-growth policies that embrace limited government and free markets. But that’s usually not the case. It’s certainly is not the case in Wichita, where the Chamber supports higher taxes, more government spending, more business welfare, more government planning and control, more cronyism — and less economic freedom. The predictable result is less prosperity, which has been the case in Wichita under the leadership of the Wichita Chamber, its policies, and the politicians and bureaucrats it supports.
Here, in an excerpt from his article “Tax Chambers” economist Stephen Moore — formerly of the Wall Street Journal and now with Heritage Foundation — explains the decline of the local chamber of commerce:
The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.
In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, “Rip-Off,” “state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”
In the states, chambers have come to believe their primary function is to secure tax financing for sports stadiums, convention centers, high-tech research institutes and transit boondoggles. Some local chambers have reportedly asked local utilities, school administrators and even politicians to join; others have opened membership to arts councils, museums, civic associations and other “tax eater” entities.
“I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”
From Stephen Moore in the article “Tax Chambers” published in The Wall Street Journal February 10, 2007. The complete article is here.
In this script from a recent episode of WichitaLiberty.TV: A look at the Wichita city council’s action regarding a downtown Wichita development project and how it is harmful to Wichita taxpayers and the economy. This is from episode 77, originally broadcast March 8, 2015. View the episode here.
This week a downtown Wichita project received many economic benefits such as free sales taxes and a bypass of Wichita’s code of conduct for city council members.
The issue had to do with tax increment financing, or TIF. This is a method of economic development whereby property taxes are routed back to a real estate development rather than funding the cost of government. It’s thought that TIF is necessary to make certain types of projects economically feasible. I appeared before the Wichita city council and shared my concerns about the harmful effects of this type of economic development.
I said that regarding the Exchange Place project in downtown Wichita, I’d like to remind the council of the entire subsidy package offered to the project.
There are historic preservation tax credits, which may amount to 25 percent of the project cost. These credits have the same economic impact as a cash payment, and their cost must be born by taxpayers.
There is $12.5 million in tax increment financing, which re-routes future property tax revenues back to the project for the benefit of its owners. Most everyone else pays property taxes in order to pay for government, not for things that benefit themselves exclusively, or nearly so.
There is a federal loan guarantee, which places the federal taxpayer on the hook if this project isn’t successful.
The owner of this project also seeks to avoid paying sales taxes on the purchase of materials. City documents don’t say how much this sales tax forgiveness might be worth, but it easily could be several million dollars.
I said: Mayor and council, if it in fact is truly necessary to layer on these incentives in order to do a project in downtown Wichita, I think we need to ask: Why? Why is it so difficult to do a project in downtown Wichita?
Other speakers will probably tell you that rehabilitating historic buildings is expensive. If so, working on historic buildings is a choice they make. They, and their tenants, ought to pay the cost. It’s a lifestyle choice, and nothing more than that.
I told the council that I’m really troubled about the sales tax exemption. Just a few months ago our civic leaders, including this council, recommended that Wichitans add more to our sales tax burden in order to pay for a variety of things.
Only 14 states apply sales tax to food purchased at grocery stores for home consumption, and Kansas has the second-highest statewide rate. We in Kansas, and Wichita by extension, require low-income families to pay sales tax on their groceries. But today this council is considering granting an exemption from paying these taxes that nearly everyone else has to pay.
I told the council that these tax subsidies are not popular with voters. Last year when Kansas Policy Institute surveyed Wichita voters, it found that only 34 percent agreed with the idea of local governments using taxpayer money to provide subsidies to certain businesses for economic development. Then, of course, there is the result of the November sales tax election where city voters emphatically said no to the council’s plan for a sales tax increase.
This project is slated to receive many million in taxpayer-funded subsidy. Now this council proposes to wave a magic wand and eliminate the cost of sales tax for its owners. People notice this arbitrary application of the burden of taxation. They see certain people treated differently under the law, rather than all being treated equally under the law. People don’t like this. It breeds distrust in government. This council can help restore some of this trust by not issuing the Industrial Revenue Bonds and the accompanying sales tax exemption.
In response to my remarks, city council member and mayoral candidate Jeff Longwell had a few comments, as we see here in video from the meeting.
We see city council member and mayoral candidate Jeff Longwell contesting the idea that TIF funds are being rerouted to the benefit of the owners of the project. We’re getting a public parking garage is the city’s response.
Let’s look at the numbers and see if we can evaluate this claim. According to city documents, the project will hold 230 apartments, and the garage is planned to hold 273 parking stalls. You can imagine that many of the apartment renters or buyers will want a guaranteed parking space available to them at all times. And in fact, an early version of the development plan states: “A minimum of 195 spaces will be allocated for use by the apartments. The remaining 103 spaces will be for public parking.” So the city is giving up $12.5 million of tax revenue to gain 103 parking spaces. That’s 121 thousand dollars per parking spot. You can buy a very nice house in Wichita for that.
The actual situation could be even worse for the city’s taxpayers. The development agreement states: “A minimum of 103 parking spaces shall be set aside in the Parking Garage for public parking and the balance for the exclusive use of the residents and guests of Exchange Place Building and Douglas Building.” It also holds this: “This allocation can be revised by Developer as market experience may demonstrate a need to reallocate parking spaces with consent of the City Representative (which consent shall not be unreasonably withheld or delayed).”
So a large portion of the parking garage is not a public benefit. It’s for the benefit of the apartments developer. If not for the city building the garage, the developer would need to provide these parking spaces in order to rent the apartments. And because of tax increment financing, the developer’s own property taxes are being used to build the garage instead of paying for government, like almost all other property taxes do, like your property taxes do. If this was not true, there would be no benefit to the developer for using tax increment financing. And if TIF did not have a real cost to the rest of the city’s taxpayers, we might ask this question: Why not use TIF more extensively? Why can’t everyone benefit from a tax increment financing district?
In his remarks, the city manager mentioned the Block One garage as a public asset, as it was funded by tax increment financing, so let’s look at the statistics there. According to the revised budget for the project, the plan is for 270 stalls in the garage. But 125 stalls are allocated for the hotel, and 100 are allocated for the Slawson development, and 45 allocated for the Kansas Leadership Center building. That leaves precisely zero stalls for public use. That’s right. If these three businesses make full use of their allocation of parking stalls, there will be zero stalls available for the public.
It’s not quite that simple, as Slawson will use its spaces only during the workday, leaving them available to the public evenings and weekends. Perhaps the same arrangement will be made for the Kansas Leadership Center. Being near the Intrust Bank Arena, the garage is used for parking for its events. Except, there aren’t very many event in the arena. In some months there are no events. But you can see that something that is promoted for the public good really turns out to be narrowly focused on private interests.
The manager also mentioned the garage on Main Street. According to city documents, the cost to rehabilitate this garage is $9,685,000, which creates 550 parking stalls. But the city is renting 180 parking stalls to a politically-connected company at monthly rent of $35. We looked at this a few months ago and saw how bad this deal is for city taxpayers.
In his remarks, Mayor Carl Brewer thanked city staff and the developers for “working collectively as a team.” He criticized those who say, in his words, “let’s not do anything, let’s just see where the chips may fall.” As an alternative, he said “we can come together, we can work together, we can work collectively together, and we can bring about change and form it the way we want.”
These remarks illustrate the mayor’s hostility to free markets, that is, to thousands and millions and billions of people trading freely in order to figure out how to allocate scarce resources. But the mayor likens the marketplace of free people to a random event — where the chips may fall, he said. But that’s not how markets work. Markets are people planning for themselves, using their knowledge and preferences and resources in order to build things they want, and what they think others will want. That’s because in markets, the only way you can earn a profit is by doing things that other people want. You have to please customers in order to profit.
But Wichita Mayor Carl Brewer says we need to work collectively together. He says we can form the future the way “we” want. Well, who is the “we” he’s talking about? As we see, the dynamics of free markets results in people doing what other people want. But the “we” the mayor talks about is politicians, bureaucrats, cronies, and do-gooders deciding how they want things to be done, and using your money to do it. That reduces your economic freedom. Your money is directed towards satisfying the goals of politicians and bureaucrats rather than actual, real people.
Here’s how bad this deal really is for Wichita. In my remarks to the council I also said this: Might I also remind the people of Wichita that some of their taxpayer-funded subsidies are earmarked to fund a bailout for a politically-connected construction company for work done on a different project, one not related to Exchange Place except through having common ownership in the past? I don’t think it is good public policy for this city to act as collection agent for a private debt that has been difficult to collect.
I was referring to the fact that the Exchange Place project started as an endeavor of the Minnesota Guys, two developers who bought a lot of property in downtown Wichita and didn’t do very well. They both have been indicted on 61 counts of securities violations in relation to their work in downtown Wichita. One of their projects was the Wichita Executive Center on north Market Street. The Minnesota Guys still owe money to contractors on that project, and some of the taxpayer funding for the Exchange Place project will be used to pay off these contractors.
Why, you may be asking, is the city acting as collection agent for these contractors? There’s an easy answer to this. Money is owed to Key Construction company. We’ve talked about this politically-connected construction firm in the past. Through generous campaign contributions and friendships, Key Construction company manages to gain things like no-bid contracts and other subsidies from the city.
This is a problem. Dave Wells, the president of Key Construction, is a friend of the mayor, as well as frequent and heavy campaign financier for the mayor and other council members. And the mayor voted for benefits for Wells and his company. That is a violation of Wichita city code, or at least it should be. Here’s an excerpt from Wichita city code section 2.04.050, the Code of ethics for council members as passed in 2008: “[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”
Dave Wells and Carl Brewer are friends. The mayor has said so. But the City of Wichita’s official position is that this law, the law that seem to plainly say that city council members cannot vote for benefits for their friends, this law does not need to be followed. Even children can see that elected officials should not vote economic benefits for their friends — but not the City of Wichita.
There’s much research that shows that tax increment financing is not an overall benefit to a city’s economy. Yes, it is good for the people that receive it, like the developer of Exchange Place and the mayor’s friends and cronies. But for cities as a whole, the benefit has found to be missing. Some studies have found a negative effect of TIF on economic progress and jobs. That’s right — a city is worse off, as a whole, for using tax increment financing. The evolving episode involving Exchange Place — the massive taxpayer subsidies, the cronyism, the inability of the mayor and council members to understand the economic facts and realities of the transactions they approve, the hostility towards free markets and their benefits as opposed to government planning of the economy — all of this contributes to the poor performance of the Wichita-area economy. This is not an academic exercise or discussion. Real people are hurt by this.
Mayor Brewer has just a month left in office, and there will be a new mayor after that. We, the people of Wichita, have to hope that a new mayor and possibly new council members will chart a different course for economic development in Wichita.
The Wichita Eagle editorial page is unhappy with the county commission’s decision to terminate the county’s participation in the federal government’s “sustainability planning grant.” When this controversial grant was first voted upon by the county in 2010, it was rejected by a vote of three to two. This also led the county to withdraw from the Regional Economic Area Partnership (REAP).
In 2011, a new county commission reversed this decision and decided to participate in this joint federal grant from three often controversial national agencies: Housing and Urban Development, Environmental Protection Agency, and Department of Transportation. HUD has played a key role in federal housing mandates and failed federal urban programs going back to the odious urban renewal era. The federal housing failures led to the 2008 financial crisis.
EPA is focused on creating new and complicated federal mandates. These are having a small impact on improving environmental problems but are becoming a new power center for the leftist, statist agenda out of Washington, D.C.
President Eisenhower said, “In preparing for battle, I have always found that plans are useless but planning is indispensable.” Ike also said, “A people that values its privileges above its principles soon loses both.”
The key question for a free people who cherish their liberty is the question, who decides? Why is government planning, which up until the New Deal, was largely left to the private sector and local government becoming a federal problem?
I believe that the state government is better than the federal government in trying to project what public needs might appear in the future. I believe that the local government, county or city, is better than the state government. I believe that a great deal of the current “planning,” should be left to the people and not the government.
Today, there are over-lapping, and duplicative planning efforts underway. The new 20 year Comprehensive Plan that was presented to Sedgwick County earlier this month is one case. The city of Wichita is also involved in this effort. The members of this planning effort were appointed by the city and county managers and included a couple of elected officials as well as over 20 other private citizens.
A 25 year transportation plan is being work on by the Wichita Area Metropolitan Planning Organization (WAMPO) for a region that includes all of Sedgwick County as well as Andover, Rose Hill, and Mulvane that covers western Butler and northern Sumner counties.
A third plan was this “sustainability” planning grant that would be followed with an “implementation” grant. The fact that Sedgwick County has withdrawn from this plan does not guarantee that other cities and counties in this region could not continue to proceed in this process. The sustainability grant has continued despite the opposition to it from both Butler and Sumner county commissions. I believe the sustainability implementation grant, if it proceeds, would probably supersede the other two plans.
REAP has been closely tied to this controversial “sustainability” grant. I want to repeat my reasons for voting against participating in this grant and REAP. I have voted against participating in this grant every time it has appeared on the county agendas in 2010, 2011, and again this year. I also opposed the doubling of the county’s dues for REAP membership. REAP’s legislative agenda has been cited as a reason for supporting this organization. I believe that each local government should have their own agenda. I oppose seeing REAP’s taxpayer funds from being used for statehouse lobbying.
I firmly believe that local government’s role is to provide a firm rule of law where there is a level playing field in it with clear rules for everyone to build their future for themselves and their families. This is the very limited role of government for a free people in a liberty loving society.
In this episode of WichitaLiberty.TV: A look at some elements of Wichita’s legislative agenda for state government, in particular special tax treatment for special artists, problems with the city’s numbers regarding airfares, and why we should abandon the pursuit of passenger rail. Then, why are people not more involved in political affairs? View below, or click here to view at YouTube. Episode 67, broadcast December 7, 2014.
To pay for a new water supply, Wichita gives voters two choices and portrays one as exceptionally unwise. In creating this either-or fallacy, the city is effectively campaigning for the sales tax.
In November Wichita voters will decide whether to create a sales tax of one cent per dollar. The largest intended purpose of the funds is to create a new water supply.
Set aside for a moment the question whether Wichita needs a new water source. Set aside the question of whether ASR is the best way to provide a new water source. What’s left is how to pay for it.
To pay for a new water source, the city gives us two choices: Either (a) raise funds through the sales tax, or (b) borrow funds that Wichitans will pay back on their water bills, along with a pile of interest.
As you can see in the nearby chart prepared by the city, the costs are either $250 million (sales tax) or $471 million (borrow and pay interest). The preference of the city is evident: Sales tax. The “Yes Wichita ” group agrees.
Here’s what is happening. City hall gives us two choices. It’s either (a) do what we want (sales tax), or (b) we’ll do something that’s really bad (borrow and pay interest). Wichita voters shouldn’t settle for this array of choices.
Let me emphasize that. The city’s informational material says if voters don’t pass the sales tax, the city will do something unwise. But the city did that very same bad thing to pay for the current ASR project, that is, borrow money and pay interest. But now the city says pass the sales tax or we will do something bad to you. Pass the sales tax or the city will issue long-term debt and you will pay a lot of interest.
Pass the sales tax, or we will do again what we did to pay for the current ASR project. And that would be bad for you and the city.
Are there other alternatives for raising $250 million for a new water source (assuming it is actually needed)? Of course there are. The best way would be to raise water bills by $250 million over five years. In this way, water users pay for the new water supply, and we avoid the long-term debt that city council members and “Yes Wichita” seem determined to avoid.
Water bills would have to rise by quite a bit in order to raise $250 million over five years. The city could decide to raise rates by different amounts for different classes of water users. The city could adjust its tiered residential rate structure to be more in line with the average of other large cities. (See Wichita water rates seen as not encouraging conservation.) But the total cost of the higher water bills would be exactly the same as the cost of the sales tax: $250 million.
It’s important to have water users pay for a new water supply. The benefit is that water users will become acutely aware of the costs of a new water supply. That awareness is difficult to achieve. Many citizens are surprised to learn that the city has spent $247 million over the past decade on a water project, the ASR program. Almost all of that was paid for with long-term debt, the same debt that the city now says is bad.
Paying for a new water supply through water bills would let commercial and industrial users participate in paying the cost of the project. These water users usually don’t pay a lot of sales tax. A restaurant, for example, does not pay sales tax on the food ingredients it purchases. An aircraft manufacturer does not pay sales tax on the raw materials and component parts it buys. But these companies do have a water bill. Yet, the city recommends that low income households pay more sales tax on their groceries. The city says this is the best way to pay for a new water supply to protect our lawns and golf courses during a drought.
As Wichita voters consider spending $250 million expanding a water project, we should look at the project’s history. So far, the ASR program has not performed near expectations, even after revising goals downward.
In November Wichita voters will consider approval of a one cent per dollar sales tax. Of the $400 expected to be collected over five years, $250 million is earmarked for a new water source. The city has decided that the new water supply will be implemented through expansion of the Aquifer Storage and Recovery program or ASR. This is a program whereby water is taken from the Little Arkansas River, treated, and injected in the Equus Beds aquifer. That water is then available in the future as is other Equus Beds water.
The city believes that ASR is a proven technology that will provide water and drought protection for many years and recommends that voters approve $250 million for its expansion, although there is possibility that the cost may be $200 million.
According to city documents, the original capacity of the ASR phase II project to process water and pump it into the ground (the “recharge” process) was given as “Expected volume: 30 MGD for 120 days.” That translates to 3,600,000,000 (3.6 billion or 3,600 million) gallons per year. ASR phase II was completed in 2011.
At a city council workshop in April 2014, Director of Public Works and Utilities Alan King briefed the council on the history of ASR, mentioning the original belief that ASR would recharge 11,000 acre feet of water per year. But he gave a new estimate for production, telling the council that “What we’re finding is, we’re thinking we’re going to actually get 5,800 acre feet. Somewhere close to half of the original estimates.” The new estimate translates to 1,889,935,800 (1.9 billion or 1,900 million) gallons per year.
Based on experience, the city has produced a revised estimate of ASR production capability. What has been the actual experience of ASR? The U.S. Geological Survey has ASR figures available here. I’ve gathered the data and performed an analysis.
In 2013 ASR recharged 366 million gallons, or 19 percent of the newly revised estimate of production capacity. In 2014 through September, ASR recharged 275 million gallons, or 14 percent of capacity. Extrapolating this nine months of production to a full year results in 367 million gallons produced for 2014, or 19 percent of capacity, the same value as in 2013. This may or may not be valid, but it gives an idea of how 2014 is proceeding.
So for the two most recent years, the ASR system has not operated near its designed capacity, even after revising that capacity downwards by half.
To place these production figures in context, the city uses 56 million gallons per day, on average. So the annual production of the ASR project is about 6.5 days of water usage.
The ASR system is able to draw water from the river only when the flow is above a certain level, which is not every day of the year. So we may want to take a look at how the ASR system performs for shorter periods of time. Monthly data is available.
For a 30-day month, if the plant could be run at full design capacity each day, the production would be 900,000,000 (900 million) gallons. The best month ever for actual production was 192 million gallons, with the second best at 120 million gallons.
If we take the 12 best months for production, including before ASR Phase II started operations, the amount of water recharged is 924 million gallons. That’s 49 percent of the revised expected annual production of 1.9 billion gallons.
The cumulative deficit
I’ve produced a chart of the cumulative production of the Wichita ASR project compared with the original projections and the lower revised projections. The lines for projections rise smoothly, although it is expected that actual production is not smooth. The second phase of ASR was completed sometime in 2011, but no water was produced and recharged that year. So I started this chart with January 2012. Data is from U.S. Geological Survey.
Some have said that since 2013 was a drought year, it isn’t fair to evaluate the production of ASR during a drought. So to present ASR in the best possible light, I’ve prepared a chart starting in July 2013. That was when it started raining so much we had floods, and data from USGS shows that the flow in the Little Arkansas River was much greater. Still, the ASR project is not keeping up with projections, even after goals were lowered.
The city and the “Yes Wichita” campaign say the ASR project is proven and is working. The available data, however, does not support this claim.
Wichita city hall promises policies that are clear, predictable and transparent, except when they’re not.
On July 22, 2104, a presentation to the Wichita City Council sought to assure the council and public that a proposed jobs fund created with money collected by the proposed sales tax would have policies that govern the spending of funds: “GWEDC – Finds businesses to expand, recruit, follows established policies for retention/recruitment.”
But there’s a problem. It’s difficult for governments to establish policies that will satisfy everyone. How do we know today what we’ll need five or ten years down the road? When governments change policies to fit particular circumstances, taxpayers are rightfully concerned that the alterations are to suit the needs of special people — the cronies that feed from the city hall trough of taxpayer money. When you couple in what public choice theory tells us, which is that the cronies who want money from government have a much stronger motive to succeed than the bureaucrats are motivated to protect citizens and taxpayers, we can have trouble.
This has happened before in Wichita. Last year when a project didn’t meet the (supposedly) required benefit-cost ratio, the city simply said that it didn’t apply in that case. See Wichita’s policymaking on display.
Now, Wichita seeks to modify its policies again in response to the wants and desires of one person.
Here’s the background you need to know. When the city passed a downtown development incentives policy in 2011, here’s what the city said was its goal: “The business plan recommends the development of a prudent public investment policy that is clear, predictable and transparent, maximizes public investment and enhances market-driven development.” (emphasis added)
The meeting minutes contained further elucidation: “Scott Kneibel Planning Department stated the purpose of the policy is to put in place something that is clear and predictable in terms of how the public would invest in downtown projects through partnership with the private sector. Stated that sort of statement by this governing body has not been made to date. Stated that is the purpose of this policy so that developers will know what types of investments the City of Wichita is interested in making and how the City of Wichita will make those decisions.” (emphasis added)
But as in the past, we find city proposing the change the standards in the middle of the game. Here’s an excerpt from the agenda packet for Tuesday’s meeting, in which a large incentive package for the redevelopment of Union Station may be considered: “In the opinion of the evaluation team, the established criteria do not adequately address projects such as Union Station where the requested incentives do not involve City debt.”
For this project we see that city policy is being modified on the fly to meet the circumstances of a particular project. This is not necessarily bad. Entrepreneurship demands flexibility. But the city promises policies that are clear, predictable and transparent, and city officials say Wichita has a transparent, open government.
Can you imagine conscientious developers who want to invest in downtown Wichita, but after studying the city’s policies, realize their projects don’t conform to the city’s published standards? How many moved on to other cities, not realizing that our standards can be altered and waived?
As Wichita voters consider the value to give to promises from city hall, they should consider these episodes when the city promises there will be “established policies” for the spending of economic development funds generated by the proposed sales tax.
Documents the Wichita City Council will use to evaluate a development proposal contain material errors. Despite the city being aware of the errors for more than one month, they have not been corrected.
On August 19, 2014 the Wichita City Council considered an agenda item titled “Resolution Considering the Establishment of the Union Station Redevelopment District, Tax Increment Financing.” The purpose of the item was to set October 7, 2014 as the date for the public hearing on the formation of a TIF district. The council passed this resolution.
On August 27 Bob Weeks inquired this of Wichita city officials based on information contained in city documents that were prepared for the August 19 meeting:
“On the Union station TIF proposal, there is mentioned ‘$3,766,156 in monetized historic tax credits.’ Do you know whether these are federal or state tax credits, and the face value of the credits? I presume that ‘monetized’ means the value the developers expect to receive when selling the credits at a discount.”
That same day he received this response from Allen Bell, the city’s Director of Urban Development.
“The Developer has not yet provided the City with details on the tax credits. However, staff analyzed the project to ascertain a ballpark estimate of how much it could generate in both state and federal tax credits and came up with a similar amount. We assume that $3,766,156 is the amount of net proceeds to be injected into the project from the sale of tax credits and that it is discounted from the face value of the credits.”
On follow up, Weeks asked this:
“I was also wondering which incentive program allows for the sales tax exemptions included in the CEDBR analysis.”
The response from Bell was:
“The only incentive program available to Union Station that would provide a sales tax exemption is IRBs. The Developer did not request IRBs or a sales tax exemption. I would guess that CEDBR factored it into the cost-benefit analysis to be extra conservative.”
CEDBR is the Center for Economic Development and Business Research at Wichita State University.
In addition to Bell, other city officials participating in these emails were Van Williams, Public Information Officer; Mark Elder, Development Analyst; and Scott Knebel, Downtown Revitalization Manager.
On October 2, when the city released the agenda packet for the October 7 meeting, the tax credits and sales tax information was not changed.
By the city’s admission, the value of tax credits for this project is a guess, and we don’t know if the project is actually eligible for these tax credits. The sales tax exemption included in the CEDBR is an incentive this project is not eligible for and will not receive. Despite several city officials being aware of these errors, the material the city council will consider on October 7 has not been corrected.
Do you get the feeling that Wichita’s promises and projections regarding water are quite, well, fluid?
Six years ago a Wichita city news release stated “Through the ASR project, Wichita will receive the water it needs through the year 2050 …” (“Wichita’s Future Water-Supply Plan Moves Ahead,” July 3, 2008)
But now, Wichitans are told there is a water crises, and the way to solve it is by voting for a sales tax of one cent per dollar. Either that, or the city will meet the crisis by borrowing money and having water users pay an extra $221 million in interest on a $250 million project.
Perhaps the city’s 2008 news release was based on overly-optimistic engineering. Perhaps the claim of being able to meet our water needs through 2050 is based on all four phases of ASR being completed.
Now, the most recent city documents promise much less: “A new water supply is expected to delay the year (with no conservation) in which drought protection for a 1% drought is provided. This date is projected to be 2030.”
Do you get the feeling that the city’s promises and projections regarding water are quite, well, fluid? Do you remember that eleven years ago then-Mayor Bob Knight was told we had sufficient water for the next 50 years?
An adequate water supply is vitally important. But we are not in a crisis. We had plenty of water this year. Cheney Reservoir has been full most of the year, although currently a little less than full as it’s been dry the last month or so.
Wichita’s water crisis — to the extent it exists — does not need to be solved in a rush. The risks of making big-dollar mistakes are too high to hurry.
Speaking of the ASR project: At a time of heightened interest in ASR, the project’s website has been abandoned. Readers will find language like Phase II “will be complete by the end of 2011.” The last newsletter was for December 2011.
The first years of operation of Phase II of ASR have not been a total success. Maybe that’s why there’s been no news.
In this episode of WichitaLiberty.TV: Let’s ask that Wichita trim its blatant waste of tax dollars before asking for more. We’ll look back at a program called Transforming Wichita. Then: We need to hold campaigns accountable. I’ll give you examples why, and tell how you can help. View below, or click here to view at YouTube. Episode 57, broadcast September 7, 2014.
It’s bad news that Wichita drivers will suffer through more years of delay as they travel through east Wichita. The value of the lost hours sitting in traffic? It’s impossible to say.
But here’s something that will probably be easy to appraise: The waste of taxpayer dollars due to the actions of government planners. From the Eagle story:
It’s unclear how the redesign would affect the ongoing lawsuit between the city of Wichita and 10 property owners whose land was taken by eminent domain for the project. The city also has acquired another 30 parcels in the area.
A court-appointed panel of three appraisers awarded the owners of the 10 parcels a collective $19.6 million for their properties in November.
The Wichita City Council approved the award, as required by the court, but the amount far exceeded an internal estimate in the $4 million to $5 million range.
In December, the city sued the landowners to see if a court would reduce the valuations.
Some of that land probably would not be needed if the interchange is redesigned.
Did you catch that? The city spent nearly five times as much as original estimates to seize property through eminent domain, and also purchased other property. Buildings with remaining useful life have been razed. Now, we learn that this land may not be needed.
As Wichita city hall asks citizens to trust the plans for the proceeds of a new sales tax, remember lessons like this.
Wichita justifies its use of targeted economic development incentives by citing benefit-cost ratios that are computed for the city, county, school district, and state. If the ratio exceeds a threshold, the project is deemed worthy of investment.
The process assumes that these benefit-cost ratios are valid. This is far from certain, as follows:
1. The benefits in the calculation are not really benefits. Instead, they’re in the form of projected higher tax revenues collected by governments. This is very different from the profits that private sector companies earn from their customers in voluntary market transactions.
2. Even if government collects more tax by offering incentives, it should not be the goal of government to grow just for the sake of growing.
3. Government claims that in order to get these “benefits,” incentives are necessary. But often the new economic activity (relocation, expansion, etc.) would have happened without the incentives.
4. Why is it that most companies are able to grow without incentives, but only a few companies require incentives? What is special about these companies? Why do some companies receive incentives year after year?
5. If the relatively small investment the city makes in incentives is responsible for such wonderful outcomes in terms of jobs, why doesn’t the city do this more often? If the city has such power to create economic growth, why is anyone unemployed?
The City of Wichita says it wants policies to be predictable and reliable, but finds it difficult to live up to that goal.
From 2009, an example of how the City of Wichita makes policy on the fly to suit the current situation. The policy change benefited a building developed by “The Minnesota Guys,” who, since the time of this article, fell into disfavor with pretty much everyone in Wichita, including the city council.
Regarding public policy, this episode illustrated the city broadening the application of special assessment financing. Traditionally special assessment financing has been limited to instances such as the city building streets and sewers in new areas of town, allowing commercial and residential property owners to repay the costs over 15 years. But the item approved by the council at this meeting was for repair of existing buildings, not construction of new infrastructure. Additionally, the work financed by the special assessment taxes will be owned by the private property owners. When the city uses special assessment financing to build streets and sewers in new neighborhoods the city owns this infrastructure, even though it is paid for by nearby property owners.
At Tuesday’s meeting (August 18, 2009) of the Wichita City Council, a privately-owned condominium association is seeking special assessment financing to make repairs to its building. In order for the association to succeed in its request, the council will have to waive two guidelines of Wichita’s facade improvement program.
Special assessment financing means that the cost of the repairs, up to $112,620 in this case, will be added to the building’s property taxes. Actually, in this case, to each of the condominium owners’ taxes. They’ll pay it off over the course of 15 years. (A conversation with the president of the homeowners association brought out the possibility that the actual assessment may be in the neighborhood of $75,000.)
So the city is not giving this money to the building’s owners. They’ll have to pay it back. The city is, however, setting new precedent in this action.
Special assessment financing has traditionally been used to fund infrastructure such as streets and sewers, and new infrastructure at that. The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if the building is located in one of the politically-favored areas of town.
By using special assessment financing in this way, the city seeks to direct investment towards parts of town that it feels doesn’t have enough investment. This form of centralized government planning is bad public policy. The city should stop doing this, and let people freely choose where to invest.
Besides this, two guidelines in the city’s facade improvement program must be waived for this project to obtain special assessment financing.
The first is the private investment match. This is designed to ensure that the property owners have “skin in the game” and that the taxes will be paid back.
Here, the city is proposing that since the building’s owners have made a past investment in this property, there’s no need to require a concurrent investment. It hardly needs to be noted that anyone who has purchased property has made a past investment in that property.
Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the city’s report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”
So the city proposes to waive this requirement as well.
There seems to me to be a defect in the manner of ownership of this building. While the homeowners association and the condominium owners might not have anticipated that repairs would be needed so soon after the building’s opening, they must have contemplated that repairs and maintenance — to either exterior or interior common areas — would be needed at some time. How does the association plan to pay for these?
So what will happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”
Isn’t that what private property owners do: fund the cost of repairs to their property?
According to the Sedgwick County Treasurer’s office, the appraised values of these condos range from $103,000 to $310,200, with an average value of $201,943. The maximum amount being added to each condo’s assessment is $4,022, although the actual amount may be closer to $3,000.
That’s along the lines of what it might cost to perform a few repairs and paint a house that’s worth what these condos are worth.
Let’s ask that these owners do just what thousands of homeowners in Wichita do every year: take responsibility for the maintenance of their own property without looking to city hall for help.
When a prominent Wichita business executive and civic leader asked for tax relief, his reasoning allows us to more fully understand the city’s economic development efforts and nature of the people city hall trusts to lead these endeavors.
In November 2013 the Wichita City Council granted an exemption from paying property and sales tax for High Touch Technologies, a company located in downtown Wichita. This application is of more than usual interest as the company’s CEO, Wayne Chambers, is now chair of the Wichita Metro Chamber of Commerce. The Chamber, along with its subsidiary Greater Wichita Economic Development Coalition, are the main agencies in charge of economic development for the Wichita area. Under Chambers’ leadership, these organizations are recommending that the city council authorize a vote on raising the Wichita sales tax for the purposes of economic development.
Let’s take a look at some of the aspects of this company’s application and the city’s agenda packet material (available here).
In its application letter, High Touch argues as follows (emphasis added):
To demonstrate our commitment to Wichita, as well as accommodate our expected growth plans, High Touch Technologies would like to purchase a 106,000 sq. ft. building in Downtown Wichita.
At this time, High Touch Technologies is requesting your support for the issuance of approximately $2,000,000 City of Wichita, Kansas, Taxable Industrial Revenue Bonds. High Touch greatly appreciates any support we can receive on the purchase of this office building through the City’s participation of Industrial Revenue Bonds and the property tax savings associated with this financing method. We intend to continue our growth and expansion over the next several years and these benefits would be helpful in offsetting the substantial capital requirements associated with this project.
High Touch Technologies believes in Wichita and support the community and its economy through corporate stewardship programs. We look forward to working with you and Members of the Council on this project and are always available to answer questions regarding this project or any of our business activities.
Later in the letter:
The applicant agrees to enter into an agreement for Payment in Lieu of Taxes (PILOT) equal to the ad valorem property tax payment amount for the 2013 tax year. The applicant respectfully requests that the payments be capped at that rate for a period of ten (10) years. The tax abatement will permit the applicant to proceed with the anticipated project, allow for its anticipated growth, and result in the public benefits otherwise outlined herein.
The issuance of Industrial Revenue Bonds will be used to lower the cost of office space in the acquired building. The lower costs will give High Touch, Inc. incentive to grow its presence in the corporate office in Wichita. New employees will be added to this Wichita office instead of other offices across the U.S. The savings in office space will allow High Touch, Inc. to use those savings for expansion.
To demonstrate our commitment to Wichita: This is ironic because High Touch is asking to be excused from paying the same property taxes that most other people and business firms have to pay. Instead of commitment, this demonstrates hostility to the taxpayers of Wichita, who will have to pay more so that this company can pay less.
But that irony is surpassed by the spectacle — chutzpa — of the incoming chair of a city’s chamber of commerce threatening to move his company out of the city unless the company receives incentives.
helpful in offsetting the substantial capital requirements: Well. Who wouldn’t appreciate help in offsetting the cost of anything? We should categorize this as unpersuasive.
corporate stewardship programs: Underlying this argument is that because High Touch makes charitable contributions, it should be excused from the same tax burden that most of us face. Here’s a better argument: Be a good corporate citizen by paying your fair share of taxes. Don’t ask for others to pay your share of taxes. That will let citizens make their own charitable contributions, instead of subsidizing what Wayne Chambers want to do.
answer questions regarding this project or any of our business activities: This refers to how the members of the city council will make a judgment that this business is worthy of subsidy, and that others are not. The notion that the City of Wichita can decide which companies are worthy of tax exemptions and investment is an illustration of what economist Frederich Hayek called a “conceit.” It’s so dangerous that his book on the topic is titled “The Fatal Conceit.” The failure of government planning throughout the world has demonstrated that it is through markets and their coordination of dispersed knowledge that we best learn where to direct capital investment. It is simply impossible for this city government to effectively decide in which companies Wichitans should invest their tax dollars. Nonetheless the city council made the decision, and it wants a larger role.
Payment in Lieu of Taxes (PILOT): High Touch is not proposing to totally escape its tax burden. Only partially so, through the PILOT. But the proposed payment is quite generous to the company. A few quick (and probably imprecise) calculations shows how small the PILOT is compared to what taxes would be. City documents indicate the proceeds of the IRBs will be used to pay for $2,000,000 of improvements. This amount of commercial property times 25% assessment ratio times 120.602 mill levy rate equals $60,301 in taxes. High Touch, through the PILOT, is proposing to pay $33,250, just a little more than half of what the taxes might be.
But the true value of the taxes being avoided is probably much higher. As an example, nearby office space is listed for sale at $28 per square foot, and that’s a distress-level price. Applying that price to this building, its value would be almost $3 million. If we look at market capitalization rates, which are generally given as from nine to eleven percent for class A space, we arrive at a much higher value: If we say $10 per square foot rental rate times 106,000 square feet at nine percent cap rate, the value would be almost $12 million. Taxes on that would be about $300,000 per year.
These are back-of-the-envelope calculations using assumed values that may not be accurate, but this gives an idea of what’s actually happening in this transaction: High Touch is seeking to avoid paying a lot of taxes, year after year. But by offering to pay a small fraction as PILOT, the company appears magnanimous.
payments be capped at that rate for a period of ten (10) years: High Touch proposed that what it’s paying in lieu of taxes not be subject to increases. Everyone else’s property taxes, of course, are subject to increases due to either assessed value increases or mill rate increases, or both. High Touch requests an exemption from these forces that almost everyone else faces.
lower the cost of office space: Again, who wouldn’t enjoy lower business or personal expenses? The cost of this incentive spreads the cost of government across a smaller tax base than would otherwise be, raising the cost of government for almost everyone else.
added to this Wichita office instead of other offices across the U.S.: The threat of relocation or expansion elsewhere is routinely used to leverage benefits from frightened local governments. These threats can’t be taken at face value. There is no way to know their validity.
use those savings for expansion: Implicit in this argument is that Wichita taxes prevent companies from expanding. True or not, this is a problem: If taxes are too high, we’re missing out on economic growth. If taxes are not too high, but some companies seek exemption from paying them nonetheless, that’s a problem too.
A prosperous company, establishing the template for seeking business welfare
In a December 2011 interview with the Wichita Eagle, the High Touch CEO bragged of how well the company is doing. The newspaper reported “Ask Wayne Chambers how business is, and he’s going to tell you it’s good. Very good. … Chambers said this week that after two years of robust growth, he’s looking for another one in 2012. ‘We have every reason to believe we’ll continue that growth pattern,’ he said.”
In February 2013 the Wichita Business Journal reported “It should be a great year for High Touch Inc. That’s the initial prediction of CEO Wayne Chambers, who says actions the company took during and leading up to 2012 have positioned High Touch to become a true ‘IT solutions provider.'”
If we take Chambers at his word — that his company is successful — why does High Touch need this business welfare? Economic necessity is usually given as the justification of these incentives. Companies argue that the proposed investment is not feasible and uneconomic without taxpayer participation and subsidy. I don’t see this argument being advanced in this case.
Interestingly, at the time of this application Chambers was co-chair of Visioneering Wichita, which advocates for greater government involvement in just about everything, including the management of the local economy. One of the benchmarks of Visioneering is “Exceed the highest of the annual percentage job growth rate of the U.S., Omaha, Tulsa, Kansas City and Oklahoma City.” As shown in this article and this video, Wichita badly lags the nation and our Visioneering peer cities on this benchmark. Visioneering officials didn’t want to present these results to government officials this year, perhaps on the theory that it’s better to ignore problems that to confront them.
Now Wayne Chambers is the chair of the Wichita Metro Chamber of Commerce. Under his leadership, the Chamber of Commerce recommends that Wichitans pay higher sales tax to support the Chambers’ projects.
Will this blatant cronyism be the template for future management of economic development in Wichita? Let’s hope not, as the working people of Wichita can’t tolerate much more of our sub-par economic growth.
Now that the Wichita City Council has all but recommended that voters raise taxes in order to spend $250 million for water supply enhancements, citizens need to consider recent history and how current decisions are made.
Through the Community Investments Plan process and by other means, citizens have told the City of Wichita they’re concerned about future water supply.
Those who have been paying attention might be surprised that there is a water crisis. That’s because when Bob Knight was mayor, he was told that Wichita had sufficient water for the next 50 years. That was about eleven years ago.
Reading the document, published just last spring, one might be led to believe that everything is fine, water-wise: “In 1993 the Wichita City Council adopted an Integrated Local Water Supply Plan that identified cost effective water resources that would be adequate to meet Wichita’s water supply needs through the year 2050.”
But earlier this year the Wichita Eagle reported “Wichita’s $240 million aquifer storage and recovery program — promoted to taxpayers in the early 1990s as a way to supply the city with water for 50 years — could soon be relegated to serving as a bit player in the city’s long-term water future.”
Later in the same article, the newspaper reported “The ASR project has been plagued by problems, city officials said, including equipment failures and a significant drought that idled the project because of low water levels in the Little Arkansas River.”
Economic vs. political thinking
It appears the plan the city council favors is to expand the ASR project at a cost of $250 million, thereby doubling the amount spent on this project. Some council members have noted the low utilization of the ASR and see its expansion as a way to wring greater efficiency from the plant.
But this mode of thinking is not rational. What has been spent on the ASR is now properly classified as sunk costs. These are costs that have been spent and can’t be recovered. Sunk costs are not relevant to future decisions. Instead, the city needs to focus on the marginal improvements that can be made, and how to get the best value for these future costs.
That’s the economic way of making decisions. But, of course, decisions on Wichita’s future water supply are being made in the political sphere.
How did Wichita get in this position?
It’s vitally important that Wichita develop a plan for an abundant water supply. At the same time, we ought to be asking, as does Johnny Stevens, how this problem developed. The Wichita Business Journal reported this last summer:
Wichita officials — thanks to a couple of weeks of rain — said they were able this week to dodge possible water restrictions and punitive measures as a means of coping with the ongoing drought.
But Wichita developer Johnny Stevens voiced to me today something I have heard from others in the community recently.
“How did it even get to this point?” Stevens said. “It shouldn’t have gotten this far.”
Stevens thinks poor leadership is to blame and can’t understand how elected officials ever let the community seemingly come so close to the edge of such a critical issue.
Long-term thinking: This is not characteristic of political leaders, whose time horizon rarely extends beyond the next election season. Are there other ways to secure water for Wichita? Is Wichita considering private-sector solutions?
On several issues, including street maintenance, water supply, and economic development, Wichita government and civic leaders have let our city fall behind. Now they ask for your support for future plans to correct these mistakes in past plans.
In February the City of Wichita held a workshop where the Community Investments Plan Steering Committee delivered a progress report to the city council. The amounts of money involved are large, and portions represent deferred maintenance. That is, the city has not been taking care of the assets that taxpayers have paid for. When Wichita city leaders ask for more taxes to pay for this lack of stewardship, citizens need to ask for better accountability than what they’ve received.
The time frame of this planning process is the period 2013 to 2035. Under the heading “Trends & Challenges” we find some troubling information. Wichita Mayor Carl Brewer hinted at the problem last year in his State of the City Address when he said the city would need to spend $2.1 billion over 30 years on maintenance and replacement of water and sewer systems. The city’s performance measure report also told us that our pavement condition index has been deteriorating, and is projected to continue to decline.
So if we’ve been paying attention, it should not have been a surprise to read this in the presentation: “Decades of under-investment in infrastructure maintenance … 38% of Wichita’s infrastructure is in ‘deficient/fair’ condition.”
The cost to remedy this lack of maintenance is substantial. The document says that on an annual basis, Wichita needs to spend $180 million on infrastructure depreciation/replacement costs. Currently the city spends $78 million on this, the presentation indicates.
The “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.
This is a lot of money. To place these numbers in context, here are some figures that help illustrate Wichita city finances:
Property tax collected in 2013: $105 million
Budgeted 2014 expenditures for fire department: $44 million
Budgeted 2014 expenditures for police department: $79 million
The amounts by which the city is deficient in maintaining its assets is staggering, compared to other expenses the city has. The size of the deficiency overwhelms possible sources of new revenue. A one cent per dollar increase in sales tax would not cover the deficiencies in maintaining our current assets. Then, remember the things Wichita wants to increase spending on — a new library, economic development, expanded public transit, new convention center, economic development, and perhaps other things.
The report lists three scenarios for future growth: Maintaining current trends, constrained suburban growth, and suburban and infill growth mix. Whenever we see words like “constrained” we need to be cautious. We need to be on guard. The Wichita Eagle reported this: “In the city’s recently completed series of 102 public meetings, citizens were clear, City Manager Robert Layton said: Redevelop the core. We’ve had enough suburban growth for awhile.”
It’s unclear how closely the findings from the public meetings reflects actual citizen preference. Cynics believe that these meetings are run in a way that produces a predetermined outcome aligned with what city officials want to hear. At any rate, when you ask people about their preferences, but there is no corresponding commitment to act on their proclaimed preferences, we have to wonder how genuine and reliable the results are.
There is a very reliable way to find out what people really want, however. Just let them do it. If people want to live downtown on in an inner city neighborhood, fine. If they want suburban-style living, that’s fine too. Well, it should be fine. But reading between the lines of city documents you get the impression that city planners don’t think people should live in suburban-style settings.
The survey that Wichita used has its own problems. Here’s an example of a question respondents were asked to agree or disagree with: “Local government, the school district, community organizations and the business community should work together to create an investment climate that is attractive to business.”
The meaning of an attractive investment climate means different things to different people. Some people want an investment climate where property rights are respected, where government refrains from meddling in the economy and transferring one person’s property to another. An environment free from cronyism, in other words. But the Wichita way is, unfortunately, cronyism, where government takes an active role in managing economic development. We in Wichita never know when our local government will take from us to give to politically-favored cronies, or when city hall will set up and subsidize a competitor to your business.
Sometimes the questions are misleading. A question relating to the subsidy program at the Wichita airport read “I’m willing to pay increased taxes or fees to support investment … that uses public dollars to reduce the cost and increase the number of commercial flights at Mid-Continent Airport.”
On these and other issues, the Wichita Eagle quoted mayor Brewer: “We’ve put them off for too long. We didn’t want the challenges. We didn’t want the tax bills. But now, to maintain our quality of life, we’ve got to catch up.”
It’s almost as if the mayor is speaking as a bystander. But he’s been mayor for nearly seven years, and was on the city council before that time. During that time, he and other city leaders have boasted of not increasing property taxes. While the property tax rate has been (fairly) stable, property tax revenue has increased due to development of new property and rising assessment values. Still, of this, the city has a huge backlog of deferred maintenance. The way to interpret this is that the city has really been engaging in deficit spending under Brewer’s leadership. We didn’t spend what was needed to maintain our assets, and now the mayor tells us we need to increase spending to make up for this.
The economist Milton Friedman told us that it’s more important to look at government spending rather than the level of taxation. That’s because spending must eventually be paid for, either through current taxes or future taxation. The federal government generate deficits and can pay for spending through creating inflation. Fortunately, cities and states can’t do that.
But, as we’ve seen, cities like Wichita can incur costs without paying for them. This is a form of deficit spending. By deferring maintenance of our infrastructure, the city has pushed spending to future years. The report released in February gives an idea of the magnitude of this deferred spending: It’s huge.
This form of deficit spending is “off the books” and doesn’t appear in city financial statements. But it’s real, as the mayor now admits. The threat to our freedom to live where we want is real, too. We must be watchful and diligent.