Voice For Liberty

Tag: Interventionism

  • Photos of Wichita Planeview grocery stores

    Carneceria Mexican Food Market in Wichita Planeview neighborhoodCarneceria Mexican Food Market in Wichita Planeview neighborhood

    Supporters of a proposed Save-A-Lot grocery store in Wichita’s Planeview neighborhood claim that there are no grocery stores nearby. Therefore, the city is willing to grant over $800,000 in special tax treatment to this store. This special tax treatment — let’s call it what it is: corporate welfare — is not available to the store’s competitors that already exist in the neighborhood or nearby.

    But Wendy Aylworth’s research and John Todd’s photography show that the claims of the store’s supporters are not true: There are grocery stores — nice ones, too — in Planeview. The Wichita City Council is granting special tax-advantaged status to a competitor to these largely mom-and-pop stores in the form of tax increment financing (TIF) and Community Improvement District additional sales tax.

    Click here to view a set of photographs of Planeview grocery stores taken by Todd.

  • Wichita City Council subsidizes pizza and doughnuts for Planeview

    Here’s some citizen-powered commentary and research from a Wichita citizen, Wendy Aylworth.

    At the September 14th Wichita City Council meeting the public was treated to tales of the helpless nature of Wichita’s Planeview residents. It sounded as if residents are being held in an open-air prison, victims of society, greedy QuikTrip stores, and price-gouging cab companies, unable to obtain the necessities of life without trekking an entire ONE mile to get groceries! (See City OKs tax at Planeview store, Wichita Eagle, September 15, 2010)

    There are in fact four grocery stores right across the street from Planeview on Hillside, and one more just around the corner from Hillside on 31st Street South. Two are owned by Americans of Latino descent and three by Americans of southeast Asian descent. Perhaps the race of the owners is the reason the media refuses to report that these are indeed grocery stores and carry milk, eggs, apples, oranges, fish, fresh meats, lettuce, cheese, cereals, spices and all the other basics of a good, healthful diet.

    However, one does have to go to QuikTrip if one wants pizza. Thus the “need” for a Save-a-Lot financed by you and me. Cheaper pizza, that staple of food stamp life.

    Save-A-Lot will also provide a variety of 129 snack foods including potato chips and microwave popcorn with theater butter! Finally junk food will be available within 1.1 miles of Planeview at prices lower than QuikTrip!

    And although residents speaking to the city council on Tuesday complained about having to go to QuikTrip for milk, the truth is QuikTrip carries milk at prices rivaling the cheapest in town. The price was $3.29 gallon on Wednesday, Sep 15th. On other days it’s on sale for $2.99 gallon. But Save-A-Lot should have a lower regular price on bacon. Pop might also be cheaper!

    The claim by the government-subsidized developer that this chain grocery store must be built because there are large numbers of residents of Planeview who don’t have cars (and thus have to walk to QuikTrip to get pizza) is also false. There are a few; only a few. One Planeview resident explained that those not having vehicles could take a cab or get a ride — and the bus drives right through Planeview. The City of Wichita on one hand pushes for residents to make greater use of the public buses, yet the city council members clearly believe residents can’t possibly go shopping using a bus. Still, people who live in cities like San Francisco, New York, and Portland shop via subway and bus every day. The Wichita City Council is hypocritical, forever at odds with itself, and constantly undermining families who start businesses in an attempt to meet the needs of fellow citizens.

    The grocery stores the media ignores, in case you’d like to show them your support, are:

    Thai An Oriental Market at 2425 South Hillside Street, Wichita, KS, telephone 440-7888. Open everyday 9:00 am to 8:00 pm, except they close early at 7:00 pm on Mondays. This is a large store in a brand new building the owner built from the ground up.

    Super Del Centro at 2425 South Hillside Street, Wichita, KS, open 9:00 am to 9:00 pm 7 days a week This store shares the new building with the Thai An market.

    Four Star Asian Market at 2441 South Hillside Street, Wichita, KS, telephone 684-0966. This is a smaller family business, but still carries a great selection.

    Lao Food Market at 3141 South Hillside Street, Wichita, KS. This is a large family-owned store in a building built in 1994, very clean and well-kept. Open 9:00 am to 9:00 pm everyday and often stays open even later on Saturdays and Sundays, if a customer needs.

    Carniceria Mexicana Super Tienda at 3108 E 31st St South. Open 7 days a week 8:00 am to 9:00 pm They have probably the largest avocados in town!

    No, none of these stores on Hillside have doughnuts, but they all have cookies!

    There’s also Checkers grocery store at the southeast corner of Pawnee and K-15, open 6:00 am until Midnight everyday. It’s locally owned and run and is only one mile from Planeview, and 1.3 miles from the new, smaller grocery store the city council is subsidizing.

  • Wichita economic development incentives to be topic of meeting

    This Thursday (September 9) Americans for Prosperity is holding a meeting to discuss a series of economic development incentives that will be considered in an upcoming meeting of the Wichita city council.

    John Todd of AFP says:

    “On Tuesday, September 14, 2010 the Wichita City Council will be considering the approval of several public economic development incentive programs for private development projects. The City Council meeting starts at 9:00 a.m. Copies of the council agenda detailing these projects is usually available online at Wichita.gov on the Friday prior to the Tuesday city council meeting.

    “The purpose of tonight’s meeting is to provide you with the opportunity to discuss and learn more about the incentives used by local government officials in economic development projects so that if you wish, you can get involved in the project vetting process as a more informed citizen.

    The meeting, which is open to the public, is from 7:00 pm to 8:30 pm on Thursday, September 9, 2010, at the Wichita Public Library Central Branch (Patio Meeting Room), at 223 S. Main, Wichita, Kansas 67202

    For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Prices mean something, even life and death

    In the five years since Hurricane Katrina flooded New Orleans, some $15 billion has been spent rebuilding and strengthening that city’s flood defenses. The goal is to protect against the loss of life and property that happened in 2005 when the levies failed.

    Is this wise? Will it work? Mark Thornton wrote “The sad truth is that the government is only making things worse over time. Higher levies only increase the destructive force of future levy breaks.”

    But engineers say that if Katrina arrived today, the city would experience only light flooding. But what will happen in the future? The network of flood protection structures and machinery needs constant maintenance. Reporting in the Wall Street Journal cautions that “Another big question is who will pay the tens of millions of dollars in annual maintenance costs for the new structures once they are complete. Typically, the Corps hands the responsibility of upkeep to state and local authorities after completing a flood-control project. But city officials say the infrastructure is so large and complex that they don’t have the technical expertise to go it alone — or pay for it alone.”

    So there is a definite risk that the strengthening of the city’s flood defenses may make future failures even more disastrous. There’s also the risk that these structures will not be maintained as required. In the latter case, how will we know if the protections are being maintained adequately?

    The answer is we probably won’t know. That’s because the property in New Orleans is insured by the federal government’s flood insurance program. That program, unlike private insurance, doesn’t have to earn a profit, and therefore doesn’t have to price its insurance according to the risks it is covering.

    That’s different from the way fire insurance, for example, is priced. In this case, fire insurance companies have to price their product to cover their expected loses, their other costs, and return some profit. The expected loses are based on a variety of factors, such as characteristics of the home, distance from a fire hydrant, and the qualities of a city’s fire department.

    Many cities have their fire departments rated by a company called Insurance Services Office (ISO). This rating is a major factor in the insurance rates that companies will offer to customers in a city. If a city’s ISO rating declines, meaning that its fire defenses are not as good as before, insurance rates will rise. People will notice. They’ll wonder why and seek answers.

    But government does not face the discipline of profit as do private insurers. As has been noted, government will insure insane risks for very low premiums. And if it pays a loss, it will insure the same property again. Since it isn’t in the insurance business to make money, it doesn’t really have much motive to rate the risk of the property it is insuring.

    That’s the source of the problem. The New Orleans flood protection systems lacked the oversight and inquiring eyes of profit-minded companies. The result was death and destruction on a massive scale.

    So prices and their importance are not of interest only to economists and academics. They contain, as Hayek has taught us, a tremendous amount of information gathered from many sources. Prices can literally mean the difference between life and death.

    Some may object that insurance in some locations, like New Orleans, would be expensive if it was priced to reflect the actual risk faced. That’s probably true, and that’s good. When that extra cost is spread across the entire country through government insurance programs, residents of New Orleans can get cheap insurance. But as we’ve seen, the cost of the missing information that accurate prices provide is very high.

  • More intervention for Wichita proposed

    Tomorrow the Wichita City Council will consider accepting petitions for the formation of another Community Improvement District. In this case the applicant is the Broadview Hotel in downtown Wichita.

    This hotel is already the recipient of potentially $4.75 million in Kansas historic preservation tax credits. Despite the name of the program, the tax credits are in effect a grant of money to the developers.

    Now the hotel seeks permission to charge extra sales tax for its own benefit.

    The action the council may take tomorrow is on the consent agenda, as noticed by the Wichita Eagle’s Brent Wistrom. The consent agenda is usually reserved for non-controversial items. It’s likely that many more CIDs will be proposed, so many that accepting petitions requesting their formation is now considered a routine item of business.

    Each CID, however, must have a public hearing. But already council members have indicated they are ready to approve all CIDs, and council members are not receptive to opposition, if a televised overheard whispered remark by one council member is any indication.

    Separately a proposed downtown Wichita grocery store gets government assistance. Announced by the Kansas Department of Commerce, the Exchange Market & Deli in downtown Wichita can receive $2.5 million in government stimulus financing. The bonds are exempt from federal income taxes, and the federal government pays 45 percent of the interest. It’s part of President Obama’s stimulus program.

    The project this grocery store is attached to — Exchange Place — is the beneficiary of over $10 million in Wichita tax increment financing. That is, if the developers, Real Development, can close on their financing of a nearby project. That financing has been delayed several times.

    Each of these projects is another example of increasing government intervention in the future of downtown Wichita. Each represents a loss of economic freedom to Wichitans, as the city council uses taxes to override the decisions that thousands of Wichitans have made as to where to live and locate their business. Some of the city council members that consistently vote for these interventions describe themselves as conservative.

  • Wichita Community Improvement District approvals signal increased interventionism

    Yesterday’s action by the Wichita City Council in approving two Community Improvement Districts signals a new era in increased intervention in free markets by Wichita politicians and bureaucrats.

    CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    Although at past city council meetings some members seemed as though they might view the districts with skepticism, there was little meaningful discussion, and no council members voted against the formation of the districts.

    The mayor and city council members are unable — or unwilling — to consider the harmful effects of their interventions in creating special tax districts.

    Or, it might be that some strategic campaign contributions helped city council members make up their minds. While I believe that Council Member Lavonta Williams is an honest and honorable council member, we have to be concerned when campaign contributions are made by people who know they will be asking the council for special treatment and favor, as Christian Ablah did yesterday.

    He got what he wanted from the council. Wichita taxpayers lost.

    The city looks silly when it jumps through hoops to conform to laws that shape the way it conducts economic development. As I urged the council:

    Let’s stop distinguishing between “eligible costs” and other costs. When we use a term like “eligible costs” it makes this process seem benign. It makes it seem as though we’re not really supplying corporate welfare and subsidy to the developers.

    As long as the developer has to spend money on what we call “eligible costs,” the fact that the city subsidy is restricted to these costs has no economic meaning.

    Suppose I gave you $10 with the stipulation that you could spend it only on next Monday. Would you deny that I had enriched you by $10? As long as you were planning to spend $10 next Monday, or could shift your spending, this restriction has no economic meaning.

    The issue of high-tax districts being a consumer protection issue didn’t resonate with the council, either. There are several council members who normally would be in favor of exposing greedy merchants who overcharge people, but not in this case. Maybe it’s the campaign contributions again.

    Even pointing out how the city works at cross-purposes with itself doesn’t work. We spend millions every year subsidizing airlines so that airfares to Wichita are low. Then we turn around and add extra tax to visitors’ hotel bills, with Vice Mayor Jeff Longwell and the Wichita Eagle editorial board approving this as a wise strategy.

    People remember high taxes. I don’t think it’s a good strategy to establish high-tax districts designed to capture extra tax revenue from visitors to our city.

    But perhaps the simplest public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

    No one at Wichita city hall wants to talk about this, at least in public.

    Next month the city will hold public hearings for three proposed CIDs in addition to the two approved yesterday. I suspect that the next year will see many more proposed.

    With each intervention like this — not to mention each TIF district, STAR bond, industrial revenue bond with accompanying tax abatement, forgivable loan, EDX property tax exemption, historic preservation income tax credit, and other programs — Wichita and Kansas move farther away from the principles of economic freedom that have created prosperity, and move closer to a centrally planned economy. Those have not worked out well.

  • Community Improvement Districts discussed in Wichita

    At yesterday’s meeting of the Wichita City Council, council members approved the start of the process to create two Community Improvement Districts in Wichita. Yesterday’s action sets August 10 as the date for a public hearing.

    CIDs are a creation of the Kansas Legislature from last year. They allow merchants in a geographic district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID. More background may be read in the article Wichita community improvement districts should have warning signs.

    In my remarks to the council, I asked the city to consider consumer protection and education regarding CIDs. I noted that just by crossing a street and shopping within the boundaries of a CID, consumers will have to pay higher sales tax. How would consumers know this in advance?

    Council member Paul Gray noted that by crossing a street, consumers might enter a different municipality and have to pay more sales tax. While this is true — the neighboring city of Andover is considering a one-cent city sales tax — the Wichita city council can’t control what its neighbors do. But it can control what happens within the boundaries of Wichita.

    Gray said that he didn’t want to create community improvement districts and then handicap them with further government regulation. I agree. But the proper way to avoid this extra regulation is to avoid government intervention in the first place by forging the creation of community improvement districts.

    But perhaps the most important public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

    City council members and city staff did not provide an answer to this question.

    Gray did not vote on this measure as a family member is employed by the business seeking this CID. Council member Lavonta Williams was absent. All other council members voted to approve the petition and set a public hearing on August 10.

    Wichita Eagle reporting on this issue is at Public hearings set on sales tax districts at WaterWalk and Central and Oliver. Wichita Business Journal reporting is at City Council moves forward on two CIDs.

  • Wichita community improvement districts should have warning signs

    At today’s meeting of the Wichita City Council, council members may approve the start of the process to create two Community Improvement Districts in Wichita.

    CIDs are a creation of the Kansas Legislature from last year. They allow merchants in a geographic district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    In Wichita, one CID is limited to a Fairfield Inn hotel being built downtown. That CID proposes to collect an additional two cents per dollar sales tax. The second is a retail and office development of about two blocks at Central and Oliver that asks to collect an additional one cent per dollar.

    There are a few problems associated these CIDs. One is this: How will potential tenants of a CID know that they will have to charge their customers higher sales tax? I asked this question earlier this year at a council meeting, and no answer was given.

    But more importantly, how will consumers considering purchases from a merchant located in a CID know that they’ll have to pay higher sales tax?

    The City of Lawrence is considering how to deal with this problem. Normally I’m cautious of adopting ideas coming out of Lawrence, although that is where I received my university education.

    In Lawrence the mayor and some city council members are concerned for the welfare of consumers, according to reporting in the Lawrence Journal-World. According to the article: “Commissioners said they have heard multiple concerns from residents who fear they may buy products at locations without knowing they are paying the extra tax.”

    That’s a problem. Most people are generally aware of their state’s sales tax rate, and of that in the city where they live. But shoppers are just starting to realize that different stores in a city may charge different sales tax rates. And it’s not in the interest of merchants located in CIDs to publicize that their customers will spend more by shopping in a CID.

    So mandated warning signs might be the answer to this issue of consumer protection and education.

    Some might say this isn’t much of a problem, as the extra sales tax is just one or two cents. But it’s more than that. It’s an additional one or two cents per dollar spent. Since the sales tax in Wichita is now 7.3 cents per dollar, an increase of one cent per dollar is 13.7 percent more paid in sales tax.

    Or, in the case of the Wichita hotel CID, it’s two cents per dollar, or 27.4 percent more sales tax.

    Proponents of economic development tools like CIDs often attempt to justify their use by arguing that the proceeds can be used only for certain eligible costs. Because of this restricted use, it’s not like we’re simply giving money to the CID, they argue.

    This type of doublespeak actually makes sense to some people. But as long as the CID proceeds pay for something that developers must pay for anyway, these restrictions have no meaningful economic effect.

    It’s as if I gave someone $100 with the stipulation that it can be spent only on Mondays. Who could deny that I have not enriched that person by $100, even considering the restriction? As long as the person was going to spend at least $100 on any Monday, the restriction is without meaning.

    Some on the Wichita city council, like council member and Vice Mayor Jeff Longwell contend that since some taxes — like the extra sales tax on hotel rooms in a CID — are paid mostly by visitors to Wichita, they’re a wise economic development strategy.

    We ought to consider, however, that once visitors to Wichita examine their hotel bills and realize how much sales tax they’ve paid, they’re not going to feel happy about Wichita. The high sales tax rate expressed on the hotel bill may give visitors the impression that is the sales tax that applies to the entire city. Is that the impression we want to leave with our visitors?

    Or, if visitors realize they paid extra tax by staying in a hotel located in a certain geographical district, they may regret their decision. They may also wonder why a city allows certain merchants to collect tax at such a high rate.

    I have one question: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices?

    Is the answer as simple as this: that it’s preferable for merchants to blame the state for high prices?

  • Letters on Wichita Bowllagio

    Letters recently appeared in the Wichita Eagle regarding the proposed Bowllagio project, a west side entertainment destination. Bowllagio is planned to have a bowling and entertainment center, a boutique hotel, and a restaurant owned by a celebrity television chef.

    The developers of this project propose to make use of $13 million in STAR bond financing. STAR bonds are issued for the immediate benefit of the developers, with the sales tax collected in the district used to pay off the bonds. The project also proposes to be a Community Improvement District, which allows an additional two cents per dollar to be collected in sales tax, again for the benefit of the district.

    —-
    Property rights

    Imagine paying your mortgage and taxes for many years, only to get a knock on your door one day. A real estate developer tells you he wants your land.

    That’s what happened to a couple on South Maize Road in the boundaries of the proposed Bowllagio sales-tax-and-revenue (STAR) bonds district. They were offered the county-appraised value, plus 10 percent, for their home. But they don’t want to move, as they couldn’t find a comparable property for what the developer offered.

    Now the homeowners are concerned they may be forced out of their home through the process of eminent domain. This forceful taking of property by government is one of the worst possible violations of private property rights.

    Wichita Mayor Carl Brewer said that the city does not intend to use eminent domain for the proposed Bowllagio entertainment complex.

    That’s good news. The city can and should affirm this promise by writing it into the Bowllagio authorizing ordinance. Supporting private property rights is essential; the use of public funds for private projects is bad policy.

    Susan Oliver Estes
    Wichita

    —-
    Let developer fill funding gap

    Bowllagio’s representative told the Wichita City Council last week that the developer needed $13 million in public money to fill the projected funding shortfall for the project to be economically feasible. I believe the developer needs to dig deeper into his own pocket to fill this funding gap, or seek private venture capital.

    As an experienced real estate practitioner, I am aggrieved that the Wichita mayor and City Council members lack the necessary experience to properly evaluate these projects. They have proved to be little match in protecting the public treasury against sophisticated developers accustomed to using the public purse as part of their real estate funding formulas.

    The investment of public money in bowling alleys, restaurants, shops and hotels that compete with existing businesses that offer the same services is not a proper role for government to play and is wrong. It creates an unlevel playing field for those businesses that compete in the same market using their own money.

    If the Bowllagio development venture is an economically feasible project, the private developer will find the private money he needs to fund it.

    John R. Todd
    Wichita