Voice For Liberty

Tag: Janet Miller

Wichita City Council Member Janet Miller

  • In Wichita, private tax policy on the rise

    In a free society with a limited government, taxation should be restricted to being a way for government to raise funds to pay for services that all people benefit from. An example is police and fire protection. Even people who are opposed to taxation rationalize paying taxes that way. But in the city of Wichita, private tax policy is overtaking our city.

    The Douglas Place project, a downtown hotel to be considered tomorrow by the Wichita City Council, makes use of several of these private tax policy strategies.

    By private tax policy, I mean that the proceeds of a tax are used for the exclusive benefit of one person (or business firm), instead of used for the benefit of all. And in at least one case, private parties are being allowed to determine the city’s tax policy at their discretion.

    The taxes collected by this private tax policy is still collected under the pretense of government authority. But instead of going to pay for government — things like police, fire, and schools — the tax is collected for the exclusive benefit of one party, not the public.

    In Wichita and across Kansas, one example of taxation being used for the benefit of one person or business is the Community Improvement District (CID). Under this program, the business collects an extra tax that looks just like sales tax. Except — the proceeds of the extra CID tax are funneled back for the exclusive benefit of the people who own property in the district. The Douglas Place project is asking to collect an extra tax of two cents per dollar for its own benefit.

    CIDs are a threat to unsuspecting customers who likely won’t be aware of the extra tax they’ll be paying until after they complete their purchases, if at all. Wichita decided against disclosing to citizens the amount of tax they’ll be paying with signage on stores. Instead, the city settled for a sign that says nothing except to check a city website for information about CIDs.

    CIDs also present the City of Wichita as a high-tax place to live and do business. It’s a risk to our city’s reputation. Especially when you consider the Jeff Longwell strategy, which is that since these taxes are often used by hotels and other businesses that cater to visitors, Wichitans don’t pay them as much as do visitors.

    Another example of private tax policy is when a tax such as Wichita’s hotel guest tax is redirected from its original goal. According to a description of the Tourism and Convention Fund in the city’s budget, the goal of the guest tax is to “support tourism and convention, infrastructure, and promotion of the City.” Its priorities are to be “Fund priorities are: 1) debt service for tourism and convention facilities, 2) operational deficit subsidies and 3) care and maintenance of Century II.”

    But in the case of the Douglas Place project, the city is asking for a charter ordinance to be passed that would route 75 percent of this tax directly back to the Douglas Place owners. That’s not the proclaimed purpose of the guest tax, unless we consider private hotels to be part of the city’s tourism infrastructure. (I think some people think that way.)

    At least in the case of Douglas Place the city is being more upfront with its citizens. The charter ordinance requires a two-thirds vote of the city council for passage, a higher bar than in the past. And, the city isn’t borrowing money to give to the hotel. That’s what the city has done in the past, as in the case of the Fairfield Inn & Suites Wichita Downtown that is part of the WaterWalk project. One of the many layers of subsidy going in to that hotel was that the city simply gifted the hotel $2,500,000, to be paid back by the hotel’s guest tax receipts.

    Some will say that’s not really a gift, as the hotel will pay back the loan. But the loan is being repaid with taxes the hotel — more properly, its guests — must pay anyway. This is public taxation for private enrichment.

    If you need further evidence that the city is turning over taxation to private hands, consider this: The charter ordinance is subject to a protest petition, and if sufficient signatures are gathered, the city council would have to either overturn the ordinance or hold an election to let the people decide.

    Now, if such a tax is truly in the public interest, the city would hold such an election and bear its costs itself. But that’s not the case. In the agreement between the city and the Douglas Place developers, we see this: “If Developer requests a special election solely for the purpose of passing the charter ordinance in the event a sufficient protest petition is submitted, Developer shall reimburse the City for the actual out of pocket costs and expenses of conducting such election.”

    In other words, the city is turning over to private interests the decision as to whether to have such an election. At least the citizens of Wichita won’t have to pay for it, if such an election happens.

    Another example of private tax policy that the Douglas Place project is using is Tax increment financing, or a TIF district. This mechanism routes property taxes back to the development. In the case of Douglas Place, $3,325,000 of its own property taxes are being used to pay for its parking garage. That’s a deal most citizens can’t get.

    Normally property taxes are used for the general operation of government. Not so in TIF districts, another example of public taxation for private enrichment. Again, these are taxes that the property must pay anyway.

    Private taxation funds political entrepreneurship

    In Wichita, especially in downtown, we see the rise of private tax policy, that is, the taxation power of government being used for private purposes. This private tax policy is pushed by Wichita’s political entrepreneurs. These are the people who would rather compete in the realm of politics rather than in the market.

    Examples of Wichita’s political entrepreneurs include the developers of Douglas Place: David Burk of Marketplace Properties, and the principals of Key Construction.

    Competing in the political arena is easier than competing in the market. To win in the political arena, you only have to convince a majority of the legislative body that controls your situation. Once you’ve convinced them the power of government takes over, and the people at large are forced to transfer money to the political entrepreneurs. In other words, they must engage in transactions they would not elect to perform, if left to their own free will.

    In the free marketplace, however, entrepreneurs have to compete by offering products or services that people are willing to buy, free of coercion. That’s hard to do. But it’s the only way to gauge whether people really want what the entrepreneurs are selling.

    One of the ways that political entrepreneurs compete is by making campaign contributions, and the developers of Douglas Place have mastered this technique. Key Construction principles contributed $13,500 to Mayor Carl Brewer and four city council members during their most recent campaigns. Council Member Jeff Longwell alone received $4,000 of that sum, and he also accepted another $2,000 from managing member David Burk and his wife.

    All told, Burk and his wife contributed at least $7,500 to city council candidates who will be voting whether to give Burk money. Burk and others routinely make the maximum contribution to all — or nearly all — candidates, even those with widely varying political stances. How can someone explain Burk’s (and his wife’s) contributions to liberals like Miller and Williams, and also to conservatives like Longwell, Meitzner, and former council member Sue Schlapp?

    The answer is: Burk will be asking these people for money.

    Wichitans need to rise against these political entrepreneurs and their usurpation of a public function — taxation — for their own benefit. The politicians and bureaucrats who enable this should realize they should be serving the public interest, not the narrow and private enrichment of the few at the cost of many.

  • For Wichita’s Project Downtown, goal keeps slipping

    In selling a plan for the revitalization of downtown Wichita, promoters started with a promise of much private investment for just a little public investment. But as the plan proceeded, the goal kept slipping, and the first project to be approved under the final plan will probably not come close to meeting even the modest goals set by the Wichita City Council.

    At the time agitation for a downtown plan started in 2008, research indicated that the ratio of private to public investment in downtown was approximately one to one. A March 2009 document hinted that we could do better, noting “Cities with successful downtown turnarounds have shown that for every $1 of public investment there will be $10 to $15 of private money invested.”

    Soon after that Mayor Carl Brewer and others started promoting a 15 to one ratio of private to public investment. At a city council meeting in October 2009, Council Member Janet Miller (district 6, north central Wichita) said “I’ve heard the city manager talk about moving us toward a return more in the neighborhood of 15 to one, private contribution to public.” She described this as an “important benchmark.”

    Before long, some may have realized that a 15 to one ratio was unrealistic. In the briefing city officials gave the city council in December 2010 when it approved the Project Downtown plan, the information presented to the council called for “$500 million in private-sector capital investment over the next 15-20 years.” The plan also called for “An estimated $100 million in parking, streets, and parks/open space improvements,” establishing a five-to-one ratio of private investment to public investment. The document also gave officials a lot of wiggle room, as the $500 million of private investment is qualified: “As much as $500 million.”

    It seems that some didn’t get the message and still pitched the original promise. In his January 2011 State of the City Address, Mayor Brewer said “In efforts to keep people working, the completion of the community-driven Downtown Master Plan will lead us to a point where ultimately the private investment exceeds public investment by a 15 to 1 ratio.”

    Then in May 2011 the council approved a document titled “City of Wichita Downtown Development Incentives Policy.” This policy calls for “Minimum private to public capital investment ratio of 2 to 1.”

    So we’ve gone from 15, to five, to two.

    Now, for the first project to be considered under the new plans and polices: Douglas Place, a downtown Wichita hotel being proposed by a development team led by Wichitan David Burk.

    According to minutes of the August 9 meeting of the Wichita city council, Allen Bell, Wichita’s Director of Urban Development, said that the ratio of private to public investment for this project, as calculated by his office, was 2.2 to one.

    I’m not quite sure how they arrived at that value, as at the same council meeting Bell presented information that the total developer costs were $21,640,000, and the city investment would be $7,710,000. That’s a ratio of 2.8 to one.

    This calculation, however, does not come close to capturing the total public investment in this project. For example, it leaves out the $7,300,000 in tax credits the developers will receive. It doesn’t include the benefit of allowing the hotel to keep 75 percent of the guest tax it generates, or the two percent extra sales tax the city will let it charge and keep. It doesn’t include the revenue the developers will get from renting out retail space the city provides to them at a cost of $1.00 per year. It doesn’t include $600,000 in sales tax exemptions the city will grant the hotel. It doesn’t include the value of 125 parking spaces reserved for the hotel’s exclusive use at below market rent.

    (I’m sure we’ll hear explanations that the tax credits aren’t paid for by Wichita taxpayers. They’re paid for by state and federal taxpayers. This is the type of reasoning we’re accustomed to from the mayor and city council.)

    So in just two years the plans for downtown Wichita have gone from a lofty promise of $15 dollars in private investment for each $1 of public investment, down to $5, then down to $2. And an honest evaluation of the first project under the plan would find that it, almost certainly, doesn’t meet the $2 threshold.

  • At Wichita city council, another junket authorized

    Last week the Wichita City Council approved travel expenses for Mayor Carl Brewer to attend a Wichita Sister Cities meeting in Cancun and Tlalnepantla, Mexico in September. The council approved the expenses without discussing how much would be spent, and who it would be spent on.

    Now we know. The total budget for this trip is $5,862. The people making the trip on Wichita’s behalf besides the mayor are Kevin Vaughn, a City of Wichita police lieutenant whose role is described as security; Jerry Smartt, who is Wichita Area Sister Cities (WASC) President; Ramon Machan, another Wichita police office and WASC Mexico Committee Chair with a possible additional role of security; and Patricia and Ed Koehler, Owner of JR Custom Metals and spouse, in their role as business representatives.

    The expenses for Vaughn, Smartt, and Machan are given as $1,166 each. The expenses for the mayor are listed at $365, smaller than the others as the mayor is paying for his own airfare. The Koehlers are paying their own expenses, and there is no cost to the city for their travel according to the travel budget document.

    Another item in the budget is $2,000 for gifts, described as “silver/gold/bronze coins.”

    Some will undoubtedly consider the wisdom of spending these funds on a trip — a junket — of dubious value, especially the spending on gifts.

    Equally troubling is the council’s vote on this item without knowing the budget for the trip. This didn’t bother Council Member Pete Meitzner (district 2, east Wichita), who argued that the city should also pay the mayor’s airfare.

    This episode is reminiscent of Council Member Janet Miller (district 6, north central Wichita) and her junket to France two years ago. In Wichita Eagle reporting of my questioning of the trip and its city-paid expenses, we learned: “Mayor Carl Brewer aggressively defended City Council member Janet Miller ‘s planned trip to Paris against criticism Tuesday, saying such trips can draw business to the city and generate new ideas.”

    The mayor’s defense included a confusing analogy to marriage, as reported in the same article: “Brewer said the situation is similar to a married couple going through tough times. He said you shouldn’t get a divorce just to save money — just like the city shouldn’t decline an invitation to the conference just because of a tight budget.”

  • Wichita Mayor Carl Brewer to critics: stop grandstanding

    Last week’s meeting of the Wichita City Council provided a window into the attitude of Wichita elected officials, particularly Mayor Carl Brewer. Through their actions, and by their words, we see a government that cares little for the rule of law and good government, and one that is disrespectful to citizens who call attention to this.

    At issue was the circumvention of a statutorily required public hearing. In order to grant subsidies to a development team lead by David Burk of Marketplace Properties, the city is required to hold a public hearing, which it scheduled for September 13th. That schedule wasn’t fast enough for Burk, so at its August 9th meeting the council approved a letter of intent which formalizes the city’s desire to do the things that were to be the subject of the public hearing.

    I, along with others, contend that this action — issuing the letter of intent — reduces the September 13th public hearing to a meaningless exercise. It’s true that several times city bureaucrats and elected officials assured citizens that the letter is non-binding and doesn’t mean the city will go through with the desires expressed in the letter. But I don’t think they believe that themselves, and the language of City Manager Bob Layton reveals so. In the end, the public hearing is reduced to — as the Wichita Eagle’s Rhonda Holman aptly noted — “a pointless afterthought.” See Wichita City Council bows to special interests.

    This action is not good government, and it’s not open and transparent government, despite the claims of Mayor Brewer. It goes against our country’s principle of the rule of law, which holds that our laws and orderly procedures are more important than any single person.

    Almost as troubling is the attitude of Mayor Brewer and others in city hall towards citizens who oppose their plans. Brewer — perhaps in an effort to maintain a sense of decorum or apparent integrity — does not mention the names of those he criticizes. This allows him to appear noble, but without being accountable to actual people, and the public, for the things he says.

    John Todd, an activist and ally of mine who speaks at council meetings frequently — which means, in his case, about once or maybe twice a month — told me of his concerns: “It appears disingenuous to me for the mayor to unilaterally dress down citizens who address the council, with no opportunity for citizen rebuttal. The veiled message that comes through this process is this: ‘If you don’t agree with the mayor and council’s position on any issue, please shut up.’”

    Todd is referring to the common practice of the mayor and some council members, notably Janet Miller (district 6, north central Wichita), to criticize opponents after they’ve completed their testimony and returned to the audience, when there is no opportunity for citizens to respond.

    At the August 9th meeting, the mayor criticized his political opponents for making use of the opportunity to address the council, and by extension, the people who may be watching on television or the internet: “I hope that today, all of this grandstanding that I saw coming from some of the public and I saw from some of the council members, and questioning council members, elected officials’ integrity — unless you have proof, just because you have a camera here, that there is something you shouldn’t be doing. … This whole thing that I saw going on here today remind me so much of a previous administration where individuals were standing up and thank God we have the cameras here. The media’s here every single meeting.”

    What’s particularly deplorable about the mayor’s remarks is that he’s criticizing people for speaking at a public hearing. Yes, city officials say the agenda item was only to consider a letter of intent that does not bind the city council. But that legalistic interpretation ignores the practical political reality that this meeting was, de facto, the public hearing for this project.

    This is not the first time the mayor has complained about his critics. In the past, the mayor has said: “We need every person’s ideas, recommendations, and their opinion. … Being quiet and then complaining about it later isn’t going to be good for you or the community.”

    But when citizens take the mayor’s advice — showing initiative, not being quiet, and stating opinions beforehand — now the mayor calls that grandstanding.

    The mayor has also called his critics “naysayers” and complained that they have received too much media attention.

    The mayor should take notice, however, that most people who care about public affairs and policy are severely disappointed with news media coverage of city hall events. The resources of news gathering agencies, especially newspapers, are severely depleted as compared to the past. In my coverage of a talk given by former Wichita Eagle editor Davis Merritt, I wrote this: “A question that I asked is whether the declining resources of the Wichita Eagle might create the danger that local government officials feel they can act under less scrutiny, or is this already happening? Merritt replied that this has been going on for some time. ‘The watchdog job of journalism is incredibly important and is terribly threatened.’ When all resources go to cover what must be covered — police, accidents, etc. — there isn’t anything left over to cover what should be covered. There are many important stories that aren’t being covered because the ‘boots aren’t on the street anymore,’ he said.” See Former Wichita Eagle editor addresses journalism, democracy, May 11, 2009.

    In his remarks to me, John Todd wrote: “Diversity of opinion and the open discussion of divergent opinions are important parts of good government.” But citizens who observe the actions of the Wichita City Council — the issuance of this letter of intent being only the most recent example — and who sense the attitude of the mayor and some council members towards those who express opinions outside the orthodoxy — are likely to conclude, as many do, that it’s just not worth the effort to get involved.

  • Wichita City Council bows to special interests

    Yesterday’s meeting of the Wichita City Council revealed a council — except for one member — totally captured by special interests, to the point where the council, aided by city staff, used a narrow legal interpretation in order to circumvent a statutorily required public hearing process.

    The issue was a downtown hotel to be developed by a team lead by David Burk of Marketplace Properties. The subsidies Burk wants, specifically tax increment financing (TIF), require a public hearing to be held. The city scheduled the hearing for September 13th.

    That schedule, however, didn’t suit Burk. In order to provide him a certain comfort level, the council agreed to issue a letter of intent stating that the council intends to do the things that the public hearing is supposed to provide an opportunity for deliberation.

    I, along with others, contend that this action reduces the September 13th public hearing to a meaningless exercise. This action is not good government, and it’s not open and transparent government, despite the claims of Mayor Carl Brewer. It goes against our country’s principle of the rule of law, part of which holds that our laws are more important than any single person.

    Several times council members — and once city attorney Gary Rebenstorf — explained that the letter of intent is non-binding on either party. But: No matter what information is presented at the September public hearing, no matter how strong public opinion might be against the incentives involved, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I think there is very little possibility of that.

    Persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?

    During the discussion, no one was able to explain adequately why a letter of intent — if it is non-binding and therefore does not commit the city — was asked for by the developers. Despite the lawyerly explanation of Rebenstorf and council members — including the mayor — the letter does have meaning. Practically, it has such a powerful meaning that it makes the holding of the public hearing on September 13th a mere charade, a meaningless exercise in futility.

    It’s not just me and a handful of others who contend this. The Wichita Eagle’s Rhonda Holman, who is usually in favor of all forms of public spending on downtown, wrote: “Even though the letter of intent will be nonbinding, it risks making the Sept. 13 public hearing on tax-increment financing seem like a pointless afterthought.”

    In his remarks, City Manager Bob Layton explained that the meeting was the first time for council members to “formally vet this project and all of the incentives.”

    He added: “If the council were to say, for instance, there were two or three pieces of that that you had discomfort with, that would then put everyone on notice that the deal may not go forward.” He said this is the purpose of today’s action, and he added that the action is non-binding.

    I would suggest that since the council, with the exception of Council Member Michael O’Donnell (district 4, south and southwest Wichita), found no problems with issuing the letter of intent, it has no problems with the deal, and this is what makes the September public hearing, as Holman said, a “pointless afterthought.”

    Astonishingly, the manger said while this is “not intended to be the normal process,” he said that he “kind of like it” as it gave an initial opportunity to gauge the sentiment of council members.

    I’m glad the manager didn’t mention the sentiment of the public, as with little notice as to the content of the deal and its incentives, citizens had no meaningful opportunity to prepare.

    An example of the contorted logic council members use to justify their action: Council Member Jeff Longwell (district 5, west and northwest Wichita) explained that issuing letters of intent is a common practice in real estate deals. He confused, however, agreements made between private parties and those where government is a party. Private parties can voluntarily enter into whatever agreements they want. But agreements with government are governed by laws. Yesterday, the city council announced its intent to do something for which it is required to hold a public hearing. That didn’t violate the letter of the law, but it certainly goes against its spirit and meaning. Longwell said he has no problem with that.

    Their bureaucratic enablers helped out, too. Wichita Downtown Development Corporation President Jeff Fluhr, in his testimony, said we are working towards becoming a “city of distinction.” That we are, indeed — a city distinguished by lack of respect for the rule of law and its disregard for citizens in favor of special interests.

    A few observations from the meeting follow.

    Public investment

    In response to a question from the mayor, Allen Bell, Wichita’s Director of Urban Development, said that the ratio of private dollars to public dollars for this project is about 2.2 to 1. Whether these numbers are correct is doubtful. It will take an analysis of the deal to determine the true numbers, and the details have been available for only a short time. But if correct, this ratio falls well short of the stated goals. Two years ago, when agitation for a new round of downtown planing started, boosters spoke of a ratio of 15 to 1. Eventually planners promised a ratio of 5 to 1 private to public investment for downtown. This project, while of course is just a single project and not the entirety of downtown development, doesn’t reach half that goal.

    Order of events and media coverage

    During the meeting, Council Member Pete Meitzner (district 2, east Wichita) conceded that “the order of events is confusing.”

    Before that, Council Member Janet Miller (district 6, north central Wichita) claimed that there had been much media coverage of the proposed hotel, and that the public was actually getting two opportunities to talk about this project. She said that the media had published information about today’s meeting and the public hearing on September 13th.

    Miller is gravely mistaken. Until a Wichita Eagle article on Saturday, I saw no mention of the letter of intent, and no detail of the form of subsidies to be considered for this project. The city’s list of legal notices contains no mention of the action that was taken at this meeting.

    Questions not answered

    During my remarks to the council, I related how last year the Wichita Eagle alleged that David Burk, the managing member of this project — and I quote here: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

    This Eagle article and a companion article went on to quote these people as having trouble with and being concerned, to varying degrees, with Burk’s acts: City Attorney Gary Rebenstorf; City Council member Jeff Longwell; City Council Member Lavonta Williams, now serving as vice mayor; then-Vice Mayor Jim Skelton, now on the Sedgwick County Commission; and City Manager Robert Layton.

    In particular, the manager said, according to the Eagle, that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”

    The manager’s quote is most directly damaging. Despite the fact that nearly all the property taxes Burk pays directly enriches himself and only him, he still doesn’t want to pay them. And according to the Wichita Eagle — not me — he engaged in deception in order to reduce them.

    None of the four people in the council chambers — Rebenstorf, Longwell, Williams, and Layton — explained their apparent change of mind with regard to Burk’s acts.

    Burk, who addressed the council immediately after I asked if he cared to explain his actions, decided to avoid the issue. In his shoes, I probably would have done the same, as there is no justification for the acts the Eagle accused him of doing. He, and his political and bureaucratic enablers in Wichita city hall, have to hope this issue fades.

    Campaign contributions

    Council member O’Donnell asked about a parking garage to be built at a cost of $6 million to the city: Will the city be putting this project out to competitive bid? Bell replied no, that is the developer’s request. City attorney Rebenstorf added that there is a charter ordinance that exempts these types of projects from bidding requirements.

    O’Donnell said that awarding the construction contract to a company that has made campaign contributions to all council members (except him) “seems a little questionable.”

    The company in question is Key Construction. Its principals regularly appear on campaign finance reports, making the maximum allowed contribution to a wide variety of candidates. Similarly, Burke and his wife also frequently make the maximum contribution to city hall candidates.

    O’Donnell is correct to publicize these contributions. They emit a foul odor. In our political system, many people make contributions to candidates whose ideology they agree with, be it conservative, liberal, or something else.

    But Burk and others routinely make the maximum contribution to all — or nearly all — candidates, even those with widely varying political stances. How can someone explain Burk’s (and his wife’s) contributions to liberals like Miller and Williams, and also to conservatives like Longwell, Meitzner, and former council member Sue Schlapp?

    The answer is that Schlapp and Longwell, despite their proclamations of fiscal conservatism, have shown themselves to be willing to vote for any form of developer welfare Burk and others have asked for. They create tangled webs of tortured logic to explain their votes. Meitzner, along with his fellow new council member James Clendenin (district 3, south and southeast Wichita), seems to be following the same path.

    Several council members and the mayor took exception to O’Donnell’s raising of this matter. Clendenin, for his part, objected and said that the public has had over 30 days to consider and take exception with this project. This contention, like Miller’s, isn’t supported by any facts that I am aware of. It appears that the first mention of any of the details of the plan and the subsidies is contained in a MAPC agenda that appears to have been created on July 29. Besides not being 30 days in advance, the MAPC agenda is an obscure place to release what Clendenin believes is adequate public notice.

    Regarding the issue of campaign contributions, the mayor — without mentioning his name — strongly criticized O’Donnell for bringing up this matter. Many people watching this meeting felt that the extreme reaction of Brewer and others to O’Donnell’s observation reveals a certain uneasiness regarding these contributions. I don’t believe the mayor and council members are taking illegal bribes, although when any city is enriching people with millions of dollars of developer welfare there is always that threat, and in some cities and states such practices are commonplace.

    The fact remains, however, that there is a small group of campaign contributors who — over and over — ask for and receive largess from city hall.

    The mayor’s criticisms

    In his comments, Mayor Brewer accused opponents of providing only partial facts about matters, because the full facts did not support their case. He was referring to my remarks that a lawsuit brought against the city by a party who felt the city had reneged on a letter of intent was litigated all the way to the Kansas Supreme Court. In my remarks I didn’t mention who won that case — the city did — and the mayor believes this is an example of slanting the facts.

    The mayor went on to make accusations of “grandstanding” from some of the public and “some council members” because there are cameras in the council chambers. He mentioned that news media are present at every meeting and that council meetings are broadcast on television.

    The mayor should take notice, however, that most people who care about public affairs and policy are severely disappointed with news media coverage of city hall events. The resources of news gathering agencies, especially newspapers, are severely depleted as compared to the past. In my coverage of a talk given by former Wichita Eagle editor Davis Merritt, I wrote this: “A question that I asked is whether the declining resources of the Wichita Eagle might create the danger that local government officials feel they can act under less scrutiny, or is this already happening? Merritt replied that this has been going on for some time. ‘The watchdog job of journalism is incredibly important and is terribly threatened.’ When all resources go to cover what must be covered — police, accidents, etc. — there isn’t anything left over to cover what should be covered. There are many important stories that aren’t being covered because the ‘boots aren’t on the street anymore,’ he said.” See Former Wichita Eagle editor addresses journalism, democracy, May 11, 2009.

    In addition, Bill Wilson, the reporter the Wichita Eagle sent to cover the meeting, has a documented bias against the concept of free markets, and against those who believe in them.

    The mayor, when delivering his criticism, does not use the names of those he criticizes. It would be useful if he did, but it would mean he has to take greater accountability for his remarks.

    Following are links to excerpts of testimony from the meeting — perhaps examples of the “grandstanding” the mayor complained about: John Todd, Shirley Koehn, and Bob Weeks.

  • Despite allegations, Wichita’s Dave Burk remains favored

    As Wichita proceeds with the redevelopment of its downtown, one developer seems to be on the cutting edge of harvesting corporate welfare — despite his past behavior. Last year this person, Dave Burk of Marketplace Properties, acted in a way the Wichita Eagle described as deceptive in order to reduce his property taxes. Yet, Burk remains a favored developer at city hall, and he’s soon going to ask taxpayers to pay higher taxes for his benefit. These are the same taxes he himself doesn’t like to pay. The following article from February 2010 explains.

    Today’s Wichita Eagle contains a story about a well-known Wichita real estate developer that, while shocking, shouldn’t really be all that unexpected.

    The opening sentence of the article (Developer won tax appeal on city site) tells us most of what we need to know: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

    Some might say it’s not surprising that Burk represented himself in the way the Eagle article reports. When a person’s been on the receiving end of so much city hall largess, it’s an occupational hazard.

    And when you’ve been the beneficiary of so much Wichita taxpayer money, you might even begin to think that you shouldn’t have to pay so much tax anymore.

    At the state level, you might seek over a million dollars of taxpayer money to help you renovate an apartment building.

    Burk has certainly laid the groundwork, at least locally. A registered Republican voter, Burk regularly stocks the campaign coffers of Wichita city council members with contributions. These contributions — at least for city council candidates — are apparently made without regard to the political leanings of the candidates. How else can we explain recent contributions made to two city council members who are decidedly left of center: Lavonta Williams and Janet Miller? Burk and his wife made contributions to their campaigns in the maximum amount allowed by law.

    This is especially puzzling in light of Burk’s contributions to campaigns at the federal level. There, a search at the Federal Election Commission shows a single contribution of $250 to Todd Tiahrt in 2005.

    It’s quite incongruous that someone would contribute to Tiahrt, Williams, and Miller. Except Williams and Miller can — and have — cast votes that directly enrich Burk. Politicians at the federal level don’t have the same ability to do that as do Wichita city council members. Well, at least not considering Wichita city business.

    So which is it: is Burk a believer in Republican principles, a believer in good government, or someone who knows where his next taxpayer handout will come from?

    Burk’s enablers — these include Wichita’s lobbyist Dale Goter, Wichita Downtown Development Corporation president Jeff Fluhr and chairman Larry Weber, Wichita City Manager Robert Layton, Wichita economic development chief Allen Bell, and most importantly Wichita Mayor Carl Brewer and various city council members — now have to decide if they want to continue in their efforts to enrich Burk. Continuing to do so will harm their reputations. The elected officials, should they run for office again, will have to explain their actions to voters.

    At the state level, the bill that will enrich Burk will likely be voted on in the Kansas Senate this week. Then, similar action may take place in the Kansas House of Representatives. Let’s hope they read the Wichita Eagle in Topeka.

  • Wichita and its political class

    The discussion at yesterday’s Wichita City Council meeting provided an opportunity for citizens to discover the difference in the thinking of the political class and those who value limited government and capitalism.

    At issue was Mid-Continent Instruments, Inc., which asked the city for a forgivable loan of $10,000. It received the same last week from Sedgwick County. According to city documents, the State of Kansas through its Department of Commerce is also contributing $503,055 in forgivable loans, sales tax exemptions, training grants, and tax credits.

    At the city council meeting Clinton Coen, a young man who ran for city council earlier this year, spoke against this measure, which he called corporate welfare.

    In response to Coen, Council Member James Clendenin (district 3, south and southeast Wichita) asked if we should ignore companies that want to do business here, or should we allow them to leave? Implicit in the question is that the threat dangled by Mid-Continent is real: that unless the city gives them $10,000, they will expand somewhere else. How citizens and council members feel about this issue largely depends on their perceived genuineness of this threat.

    When Coen recommended that the city cut spending, Clendenin said “I can guarantee you, from what I have seen, this city government has cut a tremendous amount of spending.” When pressed by Coen for examples of cuts, he demurred. Clendenin also said that the $10,000 is needed to show the city’s commitment to the company.

    Perhaps coming to the rescue of her younger and less experienced colleague, Council Member Janet Miller asked City Manager Bob Layton how much has been cut from the budget, and he replied “we’ve cut over $20 million in the general fund over three years.”

    In saying that, Layton is using the language and mind-set of bureaucrats and politicians. In this world, it’s a cut if spending does not rise as fast as planned or hoped for. As you can see from the accompanying chart, Wichita general fund spending has not been cut in recent years. It has risen in each of the last three years, and plans are for it to keep rising.

    Wichita general fund spending

    This illustrates a divide between the thinking of the political class and regular people. Blurring the distinction between plans and reality lets politicians and bureaucrats present a fiscally responsible image — they cut the budget, after all — and increase spending at the same time. It’s a message that misinforms citizens about the important facts.

    Miller also praised the return on investment the city receives for its spending on economic development, citing Wichita State University Center for Economic Development and Business Research and the cost-benefit calculations it performs. These calculations take the cost of providing the incentives and compare it to the returns the city and other governmental entities receive.

    What is rarely mentioned, and what I think most people would be surprised to learn, is that the “returns” used in these calculations is manifested in the form of increased tax revenue. It’s not like in the private sector, where business firms attempt to increase their sales and profits by providing a product or service that people willingly buy. No, the city increases its revenue (we can’t call it profit) by collecting more taxes.

    It’s another difference between the political class and everyone else: The political class craves tax revenue.

    Aside from this, the cost-benefit calculations for the city don’t include the entire cost. The cost doesn’t include the county’s contribution, the majority of which comes from residents of its largest city, which is Wichita. Then, there’s the half-million in subsidy from the state, with a large portion of that paid for by the people of Wichita.

    But even if you believe these calculations, there’s the problem of right-sizing the investment. If an investment of $10,000 has such glowing returns — last week Sedgwick County Commissioner Jim Skelton called the decision a “no-brainer” — why can’t we invest more? If we really believe this investment is good, we should wonder why the city council and county commission are so timid.

    Since the applicant company is located in his district, Council Member Pete Meitzner (district 2, east Wichita), praised the company and the state’s incentives, and made a motion to approve the forgivable loan. All council members except Michael O’Donnell (district 4, south and southwest Wichita) voted yes.

    Going forward

    While the political class praises these subsidies and the companies that apply for them, not many are willing to confront the reality of the system we’re creating. Some, like O’Donnell and Sedgwick County Commissioner Richard Ranzau, have recognized that when government is seen as eager to grant these subsidies, it prompts other companies to apply. The lure of a subsidy may cause them to arrange their business affairs so as to conform — or appear to conform — to the guidelines government has for its various subsidy programs. Companies may do this without regard to underlying economic wisdom.

    We also need to recognize that besides simple greed for public money, businesses have another reason to apply for these subsidies: If a publicly-traded company doesn’t seek them, its shareholders would wonder why the company didn’t exercise its fiduciary duty to do so. But this just perpetuates the system, and so increasing amounts of economic development fall under the direction of government programs.

    While most people see this rise in corporate welfare as harmful — I call it a moral hazard — the political class is pleased with this arrangement. As Meitzner said in making his motion, he was proud that Wichita “won out” over the other city Mid-Continent Instruments considered moving to.

    Another harmful effect of these actions is to create a reputation for having an uncompetitive business environment. Not only must businesses of all types pay for the cost of these subsidies, some face direct competition by a government-subsidized competitor. This is the situation Wichita-area hotels face as a result of the city granting millions in subsidy to a hotel developer to build a Fairfield Inn downtown.

    Even those not in direct competition face increased costs as they attempt to hire labor, buy supplies, and seek access to capital in competition with government-subsidized firms. Could this uneven competitive landscape be a factor that business firms consider in deciding where to locate and invest?

    We can expect to see more government intervention in economic development and more corporate welfare. Former council member Sue Schlapp in April took a job with the Kansas Department of Commerce. Her job title is “senior constituent liaison,” which I think can be better described as “customer service agent for the corporate welfare state.” Her office is in Wichita city hall.

    Increasingly we see politicians and bureaucrats making decisions based on incorrect and misleading information, such as claiming that the city’s general fund budget has been cut when spending has increased. Sometimes they are fed incorrect information, as in the case of a presentation at Sedgwick County Commission that bordered on fraudulent.

    Sometimes, I think, officeholders just don’t care. It’s easiest to go along with the flow and not raise ripples. They participate in groundbreakings and get their photograph in the newspaper and on television that way. Which brings up an important question: why do none of our city’s mainstream media outlets report on these matters?

  • Kansas governor releases economic development plan

    Yesterday Kansas Governor Sam Brownback released his plan for economic growth and development in Kansas. Drawing on free market principles and relying less on government intervention, the plan calls for a departure from present practices, especially the heavy-handed methods cities like Wichita use.

    Brownback’s plan would transform Kansas’ approach to economic development. Currently the approach of the state and most of its cities and counties is to go after the “big deal.” This typically lures a large employer to Kansas through the use of various incentives. Or, as we have seen recently with the Hawker Beechcraft deal, incentives may be used to keep a company from leaving Kansas, even if that company is downsizing.

    This last deal is especially troubling for the state’s future. Wichita State University professor H. Edward Flentje recently sounded a note of caution on deals like Hawker Beechcraft: “The result diverts millions in limited taxpayer funds, primarily state income-tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.” Flentje wrote that there are more than 500 Kansas businesses now eligible for state assistance just like Hawker.

    It is breaking this cycle of dependency on the “deal” that the governor’s plan calls for. Instead of the state targeting industries or specific companies, Kansas should seek to establish a strategy that is simple, fair, and of high capacity. I believe that for this strategy to work, Kansas cities and counties will need to follow the plan, too.

    Productivity and growth, not just jobs

    Right away the governor’s plan calls for prosperity through productivity: “A sound economic development process enhances prosperity through enhanced business-sector productivity.” This is in contrast to the economic development efforts of most governments, including that of the City of Wichita. There, the focus is on jobs, with capital investment a lesser factor.

    The plan identifies two fundamental roles for government to play. First, the state should create an environment that “motivates as much risk-taking and competition as possible in the context of a ‘level playing field.’” Second, it must do this effectively and efficiently, leaving as many resources in the private sector as possible.

    Key concepts in the plan are risk taking, economic competition, business experimentation, and trial and error. These activities are important, the plan says, because they will lead to increased economic productivity, which is what produces prosperity for Kansans. This is what the economic development policies of Kansas need to promote, says the plan: “The more that Kansas’ economic development environment motivates each entrepreneur and business to engage in the trial and error process, the more the Kansas economy will generate economic opportunity for Kansas families.”

    But the state’s policies don’t promote this environment: “Yet Kansas economic development policy tends to work as if only a small sub-set of entrepreneurs or businesses matter.” Current policies attempt to find the right technologies and companies for the state to invest economic development resources in. The criteria for determining winners are often job count and wage levels. Winners are rewarded at the expense of non-winners.

    Instead of this approach — which is common in most states and cities — the plan recommends a different policy: “Dedicate human and financial resources to promoting maximum experimentation through volume and diversity.” Also: “Establish stable policies that treat all investments and businesses equally, thereby liberating resources from the costly and economically dubious task of targeting.”

    The plan is critical of selective efforts and in favor of broad-based strategy, especially in taxation: “A more uniform business tax policy that treats all businesses equally rather than the current set of rules and laws that give great benefit to a few (through heavily bureaucratic programs) and zero benefit to many.”

    The plan emphasizes promoting as much diversity as possible. The current strategy of attracting large employers is not wise: “In fact, research indicates that economic development strategies based on the recruitment of large employers tends to have negative effects over the long run. One of the best predictors of future economic growth for metropolitan areas is the average employment size of business establishments: larger average sizes are typically associated with slower future growth.”

    Measures of success of economic development efforts include jobs, although the plan cautions that “job creation is a result that derives from profitable business births and expansions.” Other factors are income growth, population density and migration, productivity growth, capital investment, and gross business starts and expansions.

    The plan creates a council of economic advisers and coordinate the actions of seven different agencies that work in the field of economic development. It also calls for funding of certain university research programs.

    The plan is not totally free-market in its approach. It retains PEAK, which lets companies that meet criteria retain their employees’ withholding taxes. But are we certain we can identify which companies are worthy of this subsidy? There will also be a fund that can be used to “close a deal on a prime economic growth opportunity.” Brownback’s “rural opportunity zones” are also included, which offer income tax breaks and student loan paydowns for people moving into counties that have experienced large population decline.

    Cities like Wichita will need to change, adapt

    The governor’s plan calls for economic development strategies very different from what most cities and counties pursue. As an example, at the most recent meeting of the Wichita City Council, the council approved forgivable loan agreements for two companies that are adding jobs. These loans amount to grants of money, providing that the companies meet specified employment goals. The loans were not the only form of subsidy. One company is slated to receive forgiveness from paying property tax for up to ten years, and both received grants and tax credits from the state under existing economic development programs.

    At the meeting, Mayor Carl Brewer offered a defense of the city’s economic development policy (click here for video), saying that if Wichita doesn’t offer targeted incentives, other cities will. “If we don’t stay in the game and do whatever is necessary to be able to protect our jobs, protect our citizens, then we’re going to lose out on this entire thing. Times are changing. 20 years ago individuals weren’t even thinking about providing incentives to various different corporations. And now it appears that every place that we go, we seeing that everyone’s doing it. … That’s a reality of things. The dynamics and the field that we all have to play on is continuing to change.” He urged his critics to look at the larger picture, rather than just the action the council is taking today.

    Council member Janet Miller also defended the city’s policy, saying that companies either qualify for incentives or they don’t, based on established criteria. She cited Wichita State University figures that support the incentives as providing an economic return to the city.

    If cities continue to offer targeted incentives that are at odds with the governor’s plan, what will be the outcome? It doesn’t seem as though the two approaches are compatible. Many of the programs that cities use to offer targeted incentives — industrial revenue bonds (IRB), tax increment financing (TIF), community improvement districts (CID), and others — are creations of the legislature. It and the governor have the power to control their use — if there is political will to do so.

  • North Dakota TIF video reminiscent of Wichita

    The North Dakota Policy Council has a video on YouTube that explains the mechanics of tax increment financing (TIF) districts and the public policy problems associated with TIF.

    The video is presented in three sections. The material in the first section is different from the way TIF districts work in Kansas, but the other two sections are very similar to the way the law works in Kansas.

    At the start of part 3 (“Problems with TIFs”) the narrator states the problem succinctly: “Tax increment financing negatively affects everybody’s property tax bill by taking the tax revenue from increased taxable valuations on the properties in the TIF areas and putting that into TIF accounts.”

    She then presents an illustration showing how the property taxes for non-TIF properties have to rise to make up for the fact that taxes from TIF properties do not go towards paying for city, county, or school district services. While Wichita doesn’t use the term “TIF accounts” as used in this video, the economic effect is the same.

    The video also mentions politically-favored developers being the beneficiaries of TIF districts, specifically mentioning “a friend of the city who might own property that is struggling.” I wonder: is the North Dakota Policy Council aware of the situation in Wichita, where many feel that the city has bailed out Real Development (also known as the “Minnesota Guys”) by not only granting TIF financing to them, but increasing the amount of TIF financing against the recommendation of its independent consultant?

    Compounding the problem is the obvious lack of understanding of the economic effects of TIF districts by members of the Wichita City Council, and possibly by city hall bureaucrats, too. Wichita vice mayor Jeff Longwell has complained to the Wichita Eagle that the public doesn’t understand tax increment financing. We should be questioning Longwell’s own understanding, and that of council member Janet Miller, too.

    Longwell and Miller — the rest of the council too, for that matter — are aided by newspaper reporters like the Wichita Eagle’s Bill Wilson, who is dismissive and hostile towards free markets and those who advocate for them, calling reliance on markets “intellectually shallow” and a “thin ideological argument.”