Tag Archives: Greater Wichita Partnership

Wichita economy shrinks, and a revision

The Wichita economy shrank in 2017, but revised statistics show growth in 2016.

Statistics released today by the Bureau of Economic Analysis, an agency of the United States Department of Commerce, show gross domestic product (GDP) figures for metropolitan areas. Also included are revised statistics for previous years.

For 2017, the Wichita metropolitan area GDP, in real dollars, fell by 1.4 percent. Revised statistics for 2016 indicate growth of 3.8 percent for that year. Last year BEA reported growth of -1.4 percent.

In the revised statistics released today, GDP in 2012 was 28,346 million in chained 2009 dollars. In 2017 it was 29,610 million, a change of 1,264 million or 4.4 percent. For all U.S. metropolitan areas, the same statistic increased from 13,692,212 million to 15,224,212 million, an increase of 1,532,000 million or 11.2 percent.

The nearby table shows the change in GDP for major industry groups. Non-durable goods manufacturing showed the largest increase at 0.17 percent, while durable goods manufacturing fell by 0.21 percent.

Wichita, not that different

We have a lot of neat stuff in Wichita. Other cities do, too.

In New York Magazine, Oriana Schwindt writes in “The Unbearable Sameness of Cities: What my journey across the United States taught me about indie cafés and Ikea lights.”

I couldn’t stop noticing. I’d go on to see the same in Colorado Springs, in Fresno, in Indianapolis, in Oklahoma City, in Nashville.

And it wasn’t just the coffee shops — bars, restaurants, even the architecture of all the new housing going up in these cities looked and felt eerily familiar. Every time I walked into one of these places, my body would give an involuntary shudder. I would read over my notes for a city I’d visited months prior and find that several of my observations could apply easily to the one I was currently in.

In his commentary on this article, Aaron M. Renn wrote: “While every company tries its hardest to convince you of how much different and better it is than every other company in its industry, every city tries its hardest to convince you that it is exactly the same as every other city that’s conventionally considered cool.”

Later in the same piece, he wrote:

A challenge these places face is that the level of improvement locally has been so high, locals aren’t aware of how much the rest of the country has also improved. So they end up with an inflated sense of how much better they are doing versus the market. … People in these Midwest cities did not even know what was going on in the next city just 100 miles down the road. They were celebrating all these downtown condos being built. But the same condos were being built everywhere. … But even today people in most cities don’t really seem to get it that every city now has this stuff. Their city has dramatically improved relative to its own recent past, but it’s unclear how much it’s improved versus peers if at all.

Does this — the sameness of everywhere — apply to Wichita? Sure. Everyone thinks Wichita is different from everywhere else. We have a flag! A warehouse district! A Frank Lloyd Wright house! The NCAA basketball tournament! We’re (probably) getting a new baseball team and stadium!

We even have, as Schwindt does in cataloging what you’ll find in every single city mid-size and above, “Public murals that dare you to pass them without posing for a pic for the ‘gram.”

So many other places have this stuff, too.

It isn’t bad that Wichita has these things. But the danger, as Renn notes, is that these things don’t distinguish Wichita. As much as we wish otherwise, these things are probably not going to reverse the course of the declining Wichita economy. If you don’t believe the Wichita economy is declining, consider that our GDP in 2016 was smaller than in the year before. Wichita metro employment growth was nonexistent during 2017, meaning it’s unlikely that GDP grew by much. (In January 2017 total non-farm employment in the Wichita MSA was 295,000. In January 2018 it was the same. See chart here.)

Even things that might really have a positive effect on the economy, like the Wichita State University Innovation Campus, are far from unique to Wichita. But developments like this are pitched to Wichitans as things that will really put Wichita on the map. A prosperous future is assured, we are told.

It’s great to love your city. But we can’t afford to be lulled into complacency — a false recognition of achievement — when all the data says otherwise.

We need a higher measure of honesty from our leaders. It might start with the mayor and the chair of the county commission, but the mayor seems terribly misinformed, as is the commission chair. Institutions that we ought to respect, like the local Chamber of Commerce, have presided over failing economic development but refuse to accept responsibility or even to acknowledge the facts. Worse, the Chamber spends huge amounts of money on blatantly dishonest campaigns against those candidates that don’t support its programs. Those programs, by the way, haven’t worked, if the goal of the Chamber is to grow the Wichita economy.

Wichita employment, July 2018

For the Wichita metropolitan area in July 2018, jobs are up, the unemployment rate is down, and the labor force is slightly larger, compared to the same month one year ago.

Data released this week by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area.

Click for larger.

The best numbers for Wichita are the total nonfarm employment series, which rose from 290,600 last July to 295,200 this July. That’s an increase of 4,600 jobs, or 1.6 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.)

Of note, the same series of data for the nation rose from 146,486,000 to 148,901,000 over the same time, an increase of 1.6 percent.

The unemployment rate fell to 4.3 percent, down from 4.8 percent from a year ago.

Considering seasonally adjusted data from the household survey, the labor force rose by 0.13 percent from June 2018, and employment rose by 0.11 percent.

Click charts for larger versions.

Wichita employment, June 2018

For the Wichita metropolitan area in June 2018, jobs are up, the unemployment rate is down, and the labor force is smaller, compared to the same month one year ago.

Data released this week by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area.

Click for larger.

The best numbers for Wichita are the total nonfarm employment series, which rose from 294,900 last June to 297,900 this June. That’s an increase of 3,000 jobs, or 1.0 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.)

Of note, the same series of data for the nation rose from 147,578,000 to 150,057,000 over the same time, an increase of 1.7 percent.

The unemployment rate fell to 4.0 percent from a year ago. Part of the improvement in the unemployment rate is due to a slightly smaller labor force.

Considering seasonally adjusted data from the household survey, the labor force rose slightly from May 2018, and employment was unchanged. This is a slowdown of a positive trend in the previous three months.

Click charts for larger versions.

An endorsement from the Wichita Chamber of Commerce

When the Wichita Regional Chamber of Commerce Political Action Committee endorses a candidate, consider what that means.

If you’ve been following analyst James Chung — and it seems like everyone has — he’s delivered a sobering message: The Wichita economy has not been growing. “[Wichita has been] stuck in neutral for about three decades, with basically no growth, amidst the landscape of a growing U.S. economy,” he said. (In fact, in 2016 the Wichita economy shrank from the previous year, and numbers for 2017 don’t look much better.)

Chung says we need to change our ways. In his June visit he said, and the Chung Report wrote, “Every market signal points to the same conclusion: The manner in which Wichita is operating during this critical point in our history is just not working.”

So what needs to change? Chung won’t say, but here are two things:

First, there are some elected officials and bureaucrats who have presided over the stagnation of Wichita. These people need to go.

Second, there are also institutions that are problems, with one glaring example. In one way or another, the Wichita Regional Chamber of Commerce has taken the lead in economic development for many years. In recent years the Chamber ran Greater Wichita Economic Development Coalition. Now the effort has been split off to a non-profit corporation, the Greater Wichita Partnership.

That sounds good, but under the hood it’s the same leadership and the same methods, although with a few new hired hands.

So when James Chung (and others) says our manner of operation is not working, it’s the Wichita Chamber of Commerce and its ecosystem that must assume a large portion of blame.

Not only has the Wichita Chamber manner of operation not been working, its leadership hasn’t been working, either. In 2014 the Chamber showed charts of Wichita job growth as compared to the nation and other cities, and Wichita was near the bottom. The Chamber’s response was to advocate for a Wichita city sales tax, some to be used for economic development, but also for water supply enhancement, street repair, and bus transit improvement.

The Chamber managed the political campaign for the sales tax, and in November 2014, 62 percent of Wichita voters said no.

After this, what did the Chamber do? It had told Wichitans that an economic development fund fed by sales tax revenue was essential. Then, the sales tax vote failed. But that isn’t the only way to fund what the Chamber said we needed. The Chamber could have asked the Wichita city council to raise property taxes, and the council could have done that with a simple majority vote of its members. (Since then it has become more difficult, but still possible, to raise local property taxes.)

Or, the city could have raised franchise fees. These are like a sales tax added to utility bills. This could also have been accomplished with a simple majority vote of the council. The council could do it today, if its members wanted to.

None of these possibilities were pursued, at least to my knowledge. The Wichita Chamber of Commerce, after advocating for a sales tax it said was essential, gave up after defeat. It recommended that Wichitans vote to impose a sales tax themselves, but when it came to something it could have accomplished — new taxes through city council votes — the Chamber backed away.

The Chamber then formed the Greater Wichita Partnership. But many of the people who supported the Chamber’s sales tax are directing the operations of GWP, serving its strategic advisory team and the more-exclusive executive board.

This includes the president and CEO of the Wichita Chamber, who was also president during the sales tax campaign.

The Chamber endorsements

So when the Wichita Regional Chamber of Commerce PAC supports candidates, spends money on their behalf, and issues endorsements, what should voters think?

Voters should remember that the Wichita Chamber has presided over the wreckage of the Wichita economy, its leaders still call the shots, and still wants to raise taxes, I believe.

Plus, these people will not accept responsibility for the harm they have caused.

This is a shame, because we want to be proud of our civic leadership. We want to have faith in our elected officials and bureaucrats.

But that isn’t the case in Wichita. Keep this in mind when considering candidates endorsed by the Wichita Regional Chamber of Commerce PAC.

Project Wichita survey

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

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

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

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

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

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

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

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

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

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

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

Then there are some demographic questions.

Problems

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

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

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

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

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

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

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

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

Following up, the same person wrote:

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

Another Facebook user wrote:

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

Yet another from Facebook:

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

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

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

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

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

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

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

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

Individual questions

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

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

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

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

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

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

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

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

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


Notes

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

Wichita jobs up

Wichita employment trends are positive for three consecutive months.

Seasonally adjusted data from the Bureau of Labor Statistics, part of the United States Department of Labor, shows a rise in the Wichita metropolitan area labor force and job count. This data is through May 2018 and shows three consecutive months of rising employment.

This is a reversal of the long term trend for Wichita, in which the labor force and employment have been falling or trending steady while the nation’s economy has been growing. An interactive visualization of employment data for all metropolitan areas is available here.

While the upward trend is welcome, it is not known whether Wichita can sustain positive growth.

In May, the forecast for Wichita from Center for Economic Development and Business Research (CEDBR) at Wichita State University was pessimistic: “The production sectors are projected to remain approximately flat in 2018. Natural resources and construction employment is forecast to increase by less than 100 jobs while manufacturing employment is projected to decline by less than 100 jobs.”

This decline in manufacturing employment is forecast even after the new Spirit Aerosystems jobs are accounted for. In its reporting on this forecast, the Wichita Eagle wrote:

Late last year, Spirit, the city’s largest employer, announced plans to hire an additional 1,000 mostly production workers over two years, with the bulk of the hiring expected in 2018. Bombardier announced plans to add 100 jobs when it moves its Global 5000 business jet interior completions work from Canada to Wichita later this year.

“I’m not so sure all of the positive news means we’re growing,” [CEDBR director Jeremy] Hill said.

He said the gains at Bombardier and Spirit are offset by contraction and consolidation by smaller manufacturers that supply parts to Spirit and other aircraft manufacturers. In some cases, work the smaller firms have done has been taken back by larger manufacturers, who are now doing it themselves. Retirements in aircraft manufacturing may also be affecting the numbers, Hill said, but he doesn’t have the data to confirm that.

“It is hard to get your hands on,” he said. “It’s definitely not showing up in the (employment) numbers, not showing up in output in durables manufacturing.”

Wichita and U.S. employment. Click for larger.

Sedgwick County jobs

Sedgwick County had fewer jobs in 2017 than in 2016.

The Bureau of Labor Statistics has released new data for the Quarterly Census of Employment and Wages. This represents data for the complete year of 2017, on a preliminary basis.

From December 2016 to December 2017 Sedgwick County employment was level, changing by 0.0 percent. According to the BLS news release, that ranked 317 of the 347 largest counties.

Showing monthly value with strong seasonality, and 12-month trailing moving average. Click for larger.
Using the monthly average job count, Sedgwick County had 248,772 (monthly average) jobs in 2016. For 2017 that fell to 247,022, a decline of 1,750 jobs or 0.7 percent.

As can be seen in the chart of change in job levels, 2017 continues a trend of slower job growth in Sedgwick County, with the growth trend turning negative.

Nonetheless, Sedgwick County leaders, as well as other local leaders, proclaim momentum in the local economy. Earlier this year Sedgwick County Commissioner David Dennis penned a column for the Wichita Eagle praising the county’s efforts in economic development. 1 Dennis is also chair of the commission this year. 2

In his column, the commissioner wrote: “Economic development is a key topic for the Board of County Commissioners and for me in particular. Right now we have a lot of momentum to make our community a more attractive place for people and businesses.”

In the same column he also wrote “There is a lot of momentum and forward movement in our community right now and I’m encouraged to see what we can achieve as a team.”

Looking at these statistics, it’s difficult to see how anyone could come to these conclusions.

According to BLS, “The Quarterly Census of Employment and Wages (QCEW) program publishes a quarterly count of employment and wages reported by employers covering more than 95 percent of U.S. jobs, available at the county, MSA, state and national levels by industry.” Also “The primary economic product is the tabulation of employment and wages of establishments which report to the Unemployment Insurance (UI) programs of the United States. Employment covered by these UI programs represents about 97% of all wage and salary civilian employment in the country.”

Source of data is Bureau of Labor Statistics, Quarterly Census of Employment and Wages, specifically series ENU2017310010: “All Employees in Total Covered Total, all industries for All establishment sizes in Sedgwick County, Kansas, NSA.” Data through December 2017.


Notes

  1. David Dennis. Sedgwick County part of drive to strengthen area workforce. Wichita Eagle, March 5, 2018. Available at http://www.kansas.com/opinion/opn-columns-blogs/article203559734.html.
  2. Weeks, Bob. Sedgwick County’s David Dennis on economic development. Available at https://wichitaliberty.org/sedgwick-county-government/sedgwick-county-david-dennis-on-economic-development/.

Wichita unemployment rate falls

For April 2018, the unemployment rate in the Wichita metropolitan area fell, and the number of jobs grew.

Today the Bureau of Labor Statistics released employment statistics for metropolitan areas through April 2018. These are numbers that are not seasonally adjusted, so it’s not very useful to compare any month with the month before. But it is appropriate to compare a month with the same month of the prior year.

The good news, sort of: The unemployment rate for the Wichita metro area declined to 3.6 percent in April 2018, down from 3.9 percent in April 2017. The number of unemployed persons also declined by 8.9 percent for the same period.

These numbers should be good news. But these two statistics don’t exist in a vacuum. Specifically, the unemployment rate is the ratio of the number of unemployed persons to the labor force. While the number of unemployed persons fell, so too did the labor force. It declined by 2,676 persons over the year, while the number of unemployed persons fell by 1,071. This produces a lower unemployment rate, but a shrinking labor force is not the sign of a healthy economy.

Click for larger.

A further indication of the health of the Wichita MSA economy is the number of nonfarm jobs. This rose by 100 from April 2017 to April 2018, an increase of 0.03 percent. This follows a decline of 0.5 percent from March 2017 to March 2018.

For April 2018, BLS reports:

Unemployment rates were lower in April than a year earlier in 305 of the 388 metropolitan areas, higher in 63 areas, and unchanged in 20 areas, the U.S. Bureau of Labor Statistics reported today. Eighty-eight areas had jobless rates of less than 3.0 percent and three areas had rates of at least 10.0 percent. Nonfarm payroll employment increased over the year in 312 metropolitan areas, decreased in 70 areas, and was unchanged in 6 areas. The national unemployment rate in April was 3.7 percent, not seasonally adjusted, down from 4.1 percent a year earlier. 1

Sources:
Bureau of Labor Statistics. Table 1. Civilian labor force and unemployment by state and metropolitan area, not seasonally adjusted. Available at https://www.bls.gov/news.release/metro.t01.htm.
Bureau of Labor Statistics. Table 3. Employees on nonfarm payrolls by state and metropolitan area, not seasonally adjusted. Available at https://www.bls.gov/news.release/metro.t03.htm.


Notes

  1. Bureau of Labor Statistics. Metropolitan Area Employment and Unemployment Summary. Wednesday, May 30, 2018. Available at https://www.bls.gov/news.release/metro.nr0.htm.

Wichita in ‘Best Cities for Jobs 2018’

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

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

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

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

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

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

Wichita has momentum, they say

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What to do?

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

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


Notes

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

Personal income in Kansas and Wichita

Personal income in Wichita and Kansas has declined.

Today the Bureau of Economic Analysis, an agency of the United States Department of Commerce, released real personal income for the states and metropolitan areas. 1 The data released today is through the complete year 2016.

Real Personal Income for States, 2016. Bureau of Economic Analysis. Click for larger.
For the state of Kansas, real personal income declined from $137,975 million in 2015 to $137,307 in 2016, a decline of 0.5 percent. For the entire country, the growth was 1.1 percent. Among the states and DC, Kansas ranked forty-fifth in magnitude of change.

For the Wichita metropolitan statistical area, real personal income declined from $30,913 million in 2015 to $30,747 in 2016, also a decline of 0.5 percent. Of 382 metro areas, Wichita ranked 337th in magnitude of change.

Looking at per capita figures, real personal income per capita in Kansas fell from $47,483 in 2015 to $47,221 in 2016, a decline of 0.6 percent. For the entire country, the growth was 0.4 percent. Among the states and DC, Kansas ranked forty-third in magnitude of change.

Real personal income per capita in the Wichita metropolitan statistical area fell from $48,076 in 2015 to $47,694 in 2016, a decline of 0.8 percent. Of 382 metro areas, Wichita ranked 325th in magnitude of change.

“Real” means that the values are expressed in a way that recognizes the effects of inflation. In this case the values are in “millions of chained (2009) dollars.” Additionally, BEA uses regional price data to measure and account for the effects of regional inflation.

BEA offers this definition: “Real state personal income is a state’s current-dollar personal income adjusted by the state’s regional price parity and the national personal consumption expenditures price index.” 2 Metro personal income is defined similarly.

Personal income, also from BEA, is “The income received by, or on behalf of, all persons from all sources: from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers. It includes income from domestic sources as well as the rest of world. It does not include realized or unrealized capital gains or losses.” 3


Notes

  1. Bureau of Economic Analysis. Real Personal Income for States and Metropolitan Areas, 2016. Available at https://www.bea.gov/newsreleases/regional/rpp/2018/pdf/rpp0518.pdf.
  2. Ibid.
  3. Ibid.

Wichita metropolitan area population in context

The growth of population in Wichita compared to other areas.

Several Wichita city officials have noted that the population of the City of Wichita now exceeds that of Cleveland. This, to them, is a point of pride and sign of momentum in Wichita.

It’s true, at least the population facts. For 2016, the U.S. Census Bureau estimates the population of Wichita as 389,902 and Cleveland as 385,809. From the 2010 census, Wichita’s population was 382,368; Cleveland’s 396,815. 1

That Wichita moved up in population rank is more due to Cleveland losing 11,006 people (2.8 percent loss) while Wichita gained 7,534 people (2.0 percent gain).

Looking only at city population, however, misses the fact that the Cleveland metropolitan statistical area population is 2,058,844 compared to the Wichita MSA at 645,628, a difference of 3.2 times.

For most types of economic and demographic analysis, metropolitan statistical areas (MSA) are preferred to cities proper. The Census Bureau notes: “The general concept of a metropolitan or micropolitan statistical area is that of a core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with that core.” 2

Wichita officials usually recognize this and have started to emphasize the importance of the region (the MSA), not just the city. Many of our civic agencies have named or renamed themselves like these examples: Greater Wichita Partnership, Wichita Regional Chamber of Commerce, Blueprint for Regional Economic Growth, Metropolitan Area Planning Commission, Wichita Area Planning Organization, Regional Economic Area Partnership of South Central Kansas, South Central Kansas Economic Development District.

Further, there is more economic data available at the MSA level (compared to the city level) from agencies like Bureau of Labor Statistics and Bureau of Economic Analysis. This data includes important measures like employment, labor force, unemployment rate, gross domestic product, and personal income.

City boundaries are still important, as Wichita, for example, can’t impose property or sales taxes outside the city limits. Nor can it write laws affecting neighboring towns or the county.

But not even schools respect city boundaries, with several large suburban school districts (Andover, Maize, Goddard) reaching far into the city limits of Wichita.

While Wichita may be the 50th largest city, its rank is not as high when considering metropolitan areas. Worse, its rank is slipping as other areas grow at a faster clip. In the 1990 and 2000 census, Wichita was the 80th largest metro area. By 2010 Wichita’s rank had fallen to 82, and for 2017 the rank is 89.

Growth of Wichita MSA population and economy

Wichita officials incessantly talk about momentum. Using a misguided measure of regional size and growth (Wichita is larger than Cleveland!) is one example.

Unfortunately, there are many other examples. Recently Wichita’s mayor spoke of a “thriving city” and that “we’re going to continue our growth pattern.” 3

Recently Greater Wichita Partnership president Jeff Fluhr told a group of young people this:

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

That development, which has in recent years expanded to incorporate the entire region, is a critical component to attracting and retaining talent — the exact kind of talent in the ICT Millennial Summit crowd. 4

In January Wichita Mayor Jeff Longwell said, “It’s hard to find a time when we’ve had more momentum.” 5

In announcing his candidacy for Sedgwick County Commission, Wichita city council member Wichita City Council Member Pete Meitzner (district 2, east Wichita) said, “We have enjoyed great progress and growth during my two terms as a City Council member and I plan to do my part to assure Sedgwick County is part of this continued success.” 6

But these pictures — thriving, growth, progress, momentum — just aren’t true, according to the best statistical evidence. Wichita is shedding jobs. 7 In 2016 the Wichita economy shrank. 8 Our labor force is declining. 9 Sedgwick County shows a decline in employees and payroll in 2016. 10

Finally, as can be seen in the nearby chart of population growth in the Wichita metro area and a few other examples. Wichita’s growth rate is low, and is slowing. (The other metro areas in the chart are our Visioneering peers plus a few others.)

It is terribly unfortunate that the Wichita economy is not growing. What’s worse is the attitude of our city leaders. If we don’t confront our problems, we probably won’t be able to solve them.

In an interactive visualization I’ve prepared from census data, you can compare growth in metropolitan statistical areas. Click here to access the visualization.

Wichita and other population growth. Click for larger.


Notes

  1. Annual Estimates of the Resident Population for Incorporated Places of 50,000 or More, Ranked by July 1, 2016 Population: April 1, 2010 to July 1, 2016. Source: U.S. Census Bureau, Population Division. Release Date: May 2017
  2. Available at https://www.census.gov/programs-surveys/metro-micro/about.html.
  3. Weeks, Bob Mayor Longwell’s pep talk. Available at https://wichitaliberty.org/politics/mayor-longwells-pep-talk/.
  4. Daniel McCoy. ICT Millennial Summit: Wichita is having a moment. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2017/11/30/ict-millennial-summit-wichita-is-having-a-moment.html.
  5. Heck, Josh. Emerging Leaders panel offers insight into eco-devo strategies. Available at https://www.bizjournals.com/wichita/news/2018/01/11/emerging-leaders-panel-offers-insight-into-eco.html.
  6. Bill Wilson. Wichita council member unveils bid for county commission. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2018/02/13/wichita-council-member-unveils-bid-for-county.html.
  7. Weeks, Bob. Wichita unemployment rate falls. Available at https://wichitaliberty.org/economics/wichita-unemployment-rate-falls-2018-03/.
  8. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/.
  9. Weeks, Bob. Why Wichita may not have the workforce. Available at https://wichitaliberty.org/wichita-government/why-wichita-may-not-have-the-workforce/.
  10. Weeks, Bob. Business patterns in Kansas counties. Available at https://wichitaliberty.org/economics/business-patterns-in-kansas-counties/.

Wichita unemployment rate falls

The unemployment rate in the Wichita metropolitan area fell. So too did the number of jobs.

Today the Bureau of Labor Statistics released employment statistics for metropolitan areas through March 2018. These are numbers that are not seasonally adjusted, so it’s not very useful to compare any month with the month before. But it is appropriate to compare a month with the same month of the prior year.

The good news, sort of: The unemployment rate for the Wichita metro area declined to 3.9 percent in March 2018, down from 4.2 percent in March 2017. The number of unemployed persons also declined by 8.3 percent for the same period.

These numbers should be good news. But these two statistics don’t exist in a vacuum. Specifically, the unemployment rate is the ratio of the number of unemployed persons to the labor force. While the number of unemployed persons fell, so too did the labor force. It declined by 3,367 persons over the year, while the number of unemployed persons fell by 1,056. This produces a lower unemployment rate, but a shrinking labor force is not the sign of a healthy economy.

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

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

Sources:
Bureau of Labor Statistics. Table 1. Civilian labor force and unemployment by state and metropolitan area, not seasonally adjusted. Available at https://www.bls.gov/news.release/metro.t01.htm.
Bureau of Labor Statistics. Table 3. Employees on nonfarm payrolls by state and metropolitan area, not seasonally adjusted. Available at https://www.bls.gov/news.release/metro.t03.htm.

How much will this cost Wichita taxpayers?

How much, if anything, do tax abatements cost?

Someone asked a question regarding an item on the Wichita City Council agenda today: How much will this cost taxpayers?

The item in question is agenda item IV-1: Public Hearing and Request for a Letter of Intent to Issue Industrial Revenue Bonds (WAM Investments #6, LLC). 1

Attached was an article from the Wichita Business Journal previewing the matter. 2

How much do these bonds cost taxpayers? It’s important to remember that with Industrial Revenue Bonds in Kansas, cities and counties are not the lender. 3 If this company was not able to pay the bond interest or principle, the city would be under no obligation to pay. The city makes no guarantee as to repayment. Bond buyers know this.

(As an aside, the Business Journal article states: “However, using IRB financing can help the company secure a lower interest rate.” This is simply not true unless the bonds are tax-exempt municipal bonds. Those bonds have a lower interest rate because the interest income is not subject to income tax. But the IRBs considered today are not tax-exempt.)

So if the city is not lending money, and if the city is not guaranteeing repayment, do these bonds have a cost to taxpayers? The answer depends on which side of the fence you sit.

The benefit to WAM, today’s applicant, is that IRBs carry with them tax abatements. Specifically, a whole or partial exemption from paying some property taxes. Additionally, IRBs also enable escape from paying sales tax on purchases made with bond proceeds.

So one way to look at the IRBs is that they do indeed have a cost. The city, county, school district, and state will not receive tax revenue they otherwise would receive.

Supporters of this incentive make two rebuttals. One is that without the tax abatements, the project would not be built. Therefore, no tax revenue. So by abating taxes for a period of time, the project can be built, and after the abatements expire, it will be paying taxes. (For this project, the property tax abatement is for five or likely ten years, with a reduced rate of abatement in the final five.)

The second argument is that by building something, new jobs and commerce are created. These new employees and commercial activity pay taxes. The city and other jurisdictions receive more from these new taxes than they gave up in tax abatements. This is called the benefit-cost ratio. It’s computed by Center for Economic Development and Business Research (CEDBR) at Wichita State University. City documents often refer to something like a “1.57:1 benefit-cost ratio,” meaning that for every one dollar foregone in tax revenue, the city expects to gain $1.57 in other tax revenue.

There are problems with these arguments. For the first: The developer of this project says the incentives are “critical.” If true, this claim exposes a large problem, which is if taxes are so high as to block investment, how are we going to grow as a city and region? Will every project require tax incentives? If not, why do some say they need incentives, and some don’t?

Second: Remember that government says that with the new project, tax revenue will increase. But this almost always happens regardless of whether the company has received incentives. Therefore, the benefit-cost ratio calculations are valid only if incentives were absolutely necessary.

Are incentives necessary? The benefiting companies usually make their case with a lot of numbers and projections, most of which are simply guesses. Plus, there is strong incentive to not tell — to not know — the truth. Here’s why. Suppose fictional company XYZ dangles the idea of expanding its presence in Wichita, or maybe in some other city. XYZ cites incentive packages offered by other cities. Wichita comes up with millions in incentives, and XYZ decides to expand in Wichita. Question: Were the incentives necessary? Was the threat to expand elsewhere genuine? If XYZ admits the threat was not real, then it has falsely held Wichita hostage for incentives. If the city or state admits the threat was not real, then citizens wonder why government gave away so much. No one has an incentive to be truthful. 4

Back to the item on today’s agenda. How much tax revenue is foregone through the abatements? City documents in the agenda packet did not have these numbers, but a presentation made to council members did, as follows:

Value of one year 95% tax abatement ($6,000,000 at 80%)
City of Wichita: $37,240
Sedgwick County: $33,508
USD 375 (Circle public schools): $61,255
State of Kansas: $1,710
Total: $133,713

These values would apply annually for five years. If occupancy goals are met, the incentives would apply for another five years, at a lower rate. (The values above are 95 percent of the usual taxes. The rate for the second five years would be 50 percent of the usual taxes.)

(As an aside, the Business Journal should not use headlines like it did in this case: “Wichita City Council to consider $6 million in IRBs for industrial spec building.” A better headline would be something like “Wichita City Council to consider $133,713 in annual tax abatements.” That is the real economic transaction that happened today.)

But this is not all. The applicant company will almost certainly receive an exemption from paying sales tax on the building. City documents did not provide an estimate for how much sales tax might be abated, but it could be several hundred thousand dollars.


Notes

  1. Wichita City Council agenda packet for May 1, 2108.
  2. Daniel McCoy. Wichita City Council to consider $6 million in IRBs for industrial spec building. Wichita Business Journal, April 30, 2018. Available at https://www.bizjournals.com/wichita/news/2018/04/30/wichita-city-council-to-consider-6-million-in-irbs.html.
  3. Weeks, Bob. Industrial revenue bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  4. For more on this, see LeRoy, Greg. The Great American Jobs Scam. Especially chapter two, titled Site Location 101: How Companies Decide Where to Expand or Relocate. The entire book may be read online at http://www.greatamericanjobsscam.com/pages/preview-book.html. A relevant excerpt: “These prisoners’ dilemma games also enable companies to create fictions about cause and effect. These fictions can be used to create public versions of how deals happened that no one can credibly contradict, because the company’s real decision-making process will never be revealed. The most important fiction to maintain, of course, is that subsidies matter in deciding where a company expands or relocates. For example, being able to send secret signals to competing cities means companies can tell contradictory stories to different cities and have no fear of being exposed. If a company really has its heart set on City A, it can tell that city that it is in the hunt, but needs to do better. Meanwhile, it can send less urgent signals to Cities B and C, even if they offered bigger packages at first. Eventually, City A offers the biggest package, and the company announces its decision to go there.”

Liquor tax and the NCAA basketball tournament in Wichita

Liquor enforcement tax collections provide insight into the economic impact of hosting NCAA basketball tournament games in Wichita.

In Kansas, a tax is collected at liquor stores, grocery stores, and convenience stores on the sale of alcoholic beverages. The same tax is also collected on sales to clubs, drinking establishments, and caterers by distributors. 1 This tax is called the liquor enforcement tax. The rate has been 8 percent since 1983, when it was raised from 4 percent. 2

This tax provides some insight into the level of sales of alcoholic beverages at bars, clubs, and restaurants. It is not a perfect measurement of that, and perhaps not even a very good measurement, as it also includes sales at retail outlets for consumption offsite.

Nonetheless, it’s data we have. The Kansas Department of Revenue provides this data on a monthly basis for each county. With the touted influx of visitors for the NCAA men’s basketball tournament games in Wichita in May — along with the generalized party atmosphere — we might to expect to see these tax collections rise during March. Here’s what happened.

The liquor tax collections exhibit pronounced seasonality, so it’s useful to compare the same month of the previous year, as follows for Sedgwick County:

March 2017: $1,315,653
March 2018: $1,085,214
Change: -$230,439, a decline of 17.5 percent.

Not only was March 2018 lower than March 2017, it was lower than five of the previous six months of March.

The monthly average for the 12 months prior to March 2018 was $1,243,793. March 2018 didn’t meet that standard.

Kansas liquor enforcement tax collections are available in an interactive visualization here.

Liquor enforcement tax collections in Sedgwick County. Click for larger.


Notes

  1. “Liquor Enforcement or Sales Tax. The second level of taxation is the enforcement or sales tax, which is imposed on the gross receipts from the sale of liquor or CMB to consumers by retail liquor dealers and grocery and convenience stores; and to clubs, drinking establishments, and caterers by distributors.”
    Also: “Enforcement. Enforcement tax is an in-lieu-of sales tax imposed at the rate of 8 percent on the gross receipts of the sale of liquor to consumers and on the gross receipts from the sale of liquor and CMB to clubs, drinking establishments, and caterers by distributors.
    A consumer purchasing a $10 bottle of wine at a liquor store is going to pay 80 cents in enforcement tax.
    The club owner buying the case of light wine (who already had paid the 30 cents per gallon gallonage tax as part of his acquisition cost) also now would pay the 8 percent enforcement tax.”
    Kansas Legislative Research Department. Kansas Legislator Briefing Book 2017. Available at http://www.kslegresearch.org/KLRD-web/Publications/BriefingBook/2017Briefs/J-4-LiquorTaxes.pdf.
  2. Kansas Wine & Spirits Wholesalers Association. A Brief Review of Alcoholic Beverages in Kansas. Available at http://www.kwswa.org/KSBeverageAlcoholHistory.pdf.

Effect of NCAA basketball tournament on Wichita hotel tax revenues

Hotel tax collections provide an indication of the economic impact of hosting a major basketball tournament.

The Kansas Department of Revenue has released transient guest tax collections for March 2018. This is a tax added to hotel bills in addition to sales tax. The rate in Kansas is 6.00 percent, although some localities add additional tax to that.

For the city of Wichita, here are the collections:

March 2017: $538,539
March 2018: $543,844
Increase: $5,305 or 0.99 percent

With the hotel tax at 6.00 percent, that increase implies additional sales of $88,417 for the same month of the prior year. (The 2.75% tourism fee that is also added to Wichita hotel bills is paid directly to the city, so it does not appear in the statistics from the Kansas Department of Revenue.)

While an increase from the same month of the previous year is good, the average monthly hotel tax collections for the year before (March 2017 through February 2018) was $590,770.

So March 2018 didn’t exceed the average month of the previous year. It also didn’t exceed March 2016. Whatever was happening in Wichita during that month, the city generated $665,854 in hotel taxes.

Kansas transient guest tax collections are available in an interactive visualization here.

Wichita hotel tax collections. Click for larger.

Why Wichita may not have the workforce

If Wichita-area companies can’t fill jobs, the declining labor force may be the reason. Who is responsible?

The Chung Report has a recent article noting the low unemployment rate in Wichita. That may make it difficult to fill jobs: “Wichita also has a low unemployment rate, which has seen steep decline in the past five years and now sets at 3.9 percent, below the national average of 4.1 percent. So even if companies are dead set on hiring, do we have the available workforce?” 1

It’s a useful article. But where it could be better, especially when discussing how Wichita companies will find workers to fill anticipated new jobs, is to note the shrinking Wichita labor force.

Here is a table of data for the Wichita MSA from the Bureau of Labor Statistics Local Area Unemployment Statistics (LAUS) program. 2 It is part of the Bureau’s Current Population Survey (CPS), which is a “monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics.” 3

I chose the year ending January 2011 as a comparison point, as it is near the low point of the great recession. Since then, the unemployment rate has fallen greatly, and is just half the rate of 2010.

But that isn’t the total story. It isn’t even the most important part of the story. Since the unemployment rate is a ratio, it has two moving parts, specifically the number of unemployed people and the number of people in the labor force. (The labor force, broadly, is the number of persons working plus those actively looking for work.)

It is possible that the unemployment rate falls while the number of people employed falls or rises slowly. This is the general trend in Wichita for the past seven years or so. The nearby table illustrates this. The labor force has fallen, and by a lot, while employment growth has been modest.

In fact, of the changes, we can say that 35.2 percent of the change in the unemployment rate is due to new jobs, while 67.8 percent of the change is due to a smaller labor force.

So when Wichita leaders ask “Do we have the workforce?” the answer might be no. The next question ought to be “Why not?”

Our leaders are quick and eager to take credit for economic development gains. But what about the shrinking labor force caused by the many of the same leaders and their policies?

As the proverb says, “Success has many fathers, while failure is an orphan.”


Notes

  1. The Chung Report. Predicting Future Jobs. Available at https://thechungreport.com/where-are-all-the-new-jobs/.
  2. Bureau of Labor Statistics. Local Area Unemployment Statistics (LAUS) program. Available at https://www.bls.gov/lau/.
  3. Bureau of Labor Statistics. Current Population Survey. Available at https://www.bls.gov/cps/.

Wichita employment down, year-over-year

At a time Wichita leaders promote forward momentum in the Wichita economy, year-over-year employment has fallen.

Today the Bureau of Labor Statistics released employment statistics through February 2018. 1

One of the tables released is “Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted,” which shows changes in jobs from February 2017 to February 2018. 2 For this time period for the Wichita metropolitan area, the number of nonfarm jobs fell from 294.7 thousand to 292.3 thousand, a decline of 2,400 jobs or 0.8 percent.

In February, 313 metropolitan areas had over-the-year increases in nonfarm payroll employment, 69 had decreases, and 6 had no change.

Over the same period, the unemployment rate in the Wichita MSA fell from 4.6 percent to 4.1 percent. The labor force fell from 309,336 to 304,886.


Notes

  1. Bureau of Labor Statistics. Metropolitan Area Employment and Unemployment Summary. Available at https://www.bls.gov/news.release/metro.nr0.htm.
  2. Bureau of Labor Statistics. Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted. Available at https://www.bls.gov/web/metro/metro_oty_change.htm.

Employment in metropolitan areas

An interactive visualization of labor force, employment, and unemployment rate for all metropolitan areas in the United States.

The example from the visualization shown below shows the Wichita Metropolitan Statistical Area and All Metro Areas. Data is through January 2018. Of note regarding Wichita:

  • Since the Great Recession ended, the unemployment rate in Wichita has fallen, as it has nationwide.
  • At the same time, employment (the number of people working) in Wichita, has been steady or rising slightly. Nationwide, employment has been growing.
  • At the same time, the civilian labor force in Wichita has been mostly falling, while rising nationwide.

When using the visualization you can adjust the date range to focus on recent years, or any other time period.

To learn about the data included and to use the visualization, click on Civilian labor force and unemployment by metropolitan area.

Example from the visualization., showing Wichita and All metro areas Click for larger.

Wichita employment down, year-over-year

At a time Wichita leaders promote forward momentum in the Wichita economy, year-over-year employment has fallen.

Today the Bureau of Labor Statistics released employment statistics through January 2018. 1

One of the tables released is “Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted,” which shows changes in jobs from January 2017 to January 2018. 2 For this time period for the Wichita metropolitan area, the number of nonfarm jobs fell from 292.1 thousand to 291.1 thousand, a decline of 1,000 jobs or 0.3 percent.

Of 382 metropolitan areas, 57 performed worse than did Wichita. For these metro areas, the average growth in jobs was 1.15 percent.

Over the same period the unemployment rate in the Wichita MSA fell from 4.6 percent to 3.7 percent.


Notes

  1. Bureau of Labor Statistics. Metropolitan Area Employment and Unemployment Summary. Available at https://www.bls.gov/news.release/metro.nr0.htm.
  2. Bureau of Labor Statistics. Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted. Available at https://www.bls.gov/web/metro/metro_oty_change.htm.