Tag Archives: Jeff Longwell

Wichita City Council Member Jeff Longwell

Too much on the consent agenda in Wichita city hall

The Wichita city council will consider an item that, I believe, is of sufficient interest and controversial enough that it should appear on a regular agenda, not a consent agenda.

Update: at Tuesday’s meeting, the council passed the consent agenda without discussion of this agenda item.

Meetings of governmental bodies like the Wichita City Council may contain a consent agenda. That’s a collection of agenda items that are voted on in bulk, with one single vote, unless a council member requests an item be “pulled” for discussion and possibly a separate vote. Generally, items on consent agendas are not controversial, and it may hold two dozen or more items. If no council member asks to pull an item, there is no discussion.

Tomorrow the Wichita city council will consider an item that, I believe, is of sufficient interest and possibly controversial enough that it should appear on a regular agenda, not a consent agenda. It involves the hiring of a consultant to help the city find a baseball team. 1

Tomorrow’s meeting, being on the fourth Tuesday of a month, is traditionally for consent agenda items only, plus workshops. But the council has, a few times, declared this meeting to be a “regular” meeting in order to conduct business other than consent agenda items.

The Wichita city council has a history of placing controversial items on the consent agenda. It has, at least once, removed an item from the consent agenda to place it on a regular agenda. 2 There are some things the council doesn’t want to talk about.

In addition, Current Mayor Jeff Longwell has wondered if the city holds too many public hearings. 3 Some things, the mayor feels, don’t need public input.


Notes

  1. Weeks, Bob. A consultant to help Wichita’s confidence factor. Available at https://wichitaliberty.org/wichita-government/consultant-help-wichita-confidence-factor/.
  2. See, for example, For Wichita City Council, discussion is not wanted at https://wichitaliberty.org/wichita-government/for-wichita-city-council-discussion-is-not-wanted/, Wichita, again, fails at government transparency at https://wichitaliberty.org/wichita-government/wichita-fails-government-transparency/, and Wichita open records issue buried at https://wichitaliberty.org/open-records/wichita-open-records-issue-buried/.
  3. Weeks, Bob. For Wichita’s mayor, too many public hearings. Available at https://wichitaliberty.org/wichita-government/wichita-mayor-too-many-public-hearings/.

A consultant to help Wichita’s confidence factor

Wichita considers hiring a consultant to help find a baseball team.

In August the Wichita Eagle reported:

Wichitans can hope for an announcement on a new affiliated baseball team coming to Wichita by the end of 2017, Mayor Jeff Longwell says.

“By the end of this calendar year, we feel confident that we will be able to announce a team, who the team is, all of the above,” Longwell told The Eagle Tuesday afternoon. “We hope that we can complete all of those conversations by the end of this year and be able to announce a contract in place.” 1

Evidently the mayor and the city are feeling less confident. Next week’s city council agenda includes a proposal to hire a consulting firm to help the city. The contract the council will consider states: “Wichita desires to retain Beacon Sports as its advisor and exclusive representative for the Assignment, and perform such other advisory services as are mutually agreed upon between the two parties.” 2

The city’s analysis advises: “Based on the encouraging findings, City staff have reached the conclusion that, due to Minor League Baseball (MiLB) rules and protocols, it is necessary to formally contract with a specialized baseball consultant.”

The contract has a cap of $50,000. For this, the contract states, “Beacon Sports will use its best efforts and endeavor to assist Wichita in obtaining and having present to it qualified offers on terms that are acceptable to Wichita, but makes no representation regarding the successful outcome of this Assignment.”

Of note, this item appears on the consent agenda. That’s a collection of agenda items that are voted on in bulk, with one single vote, unless a council member requests an item be “pulled” for discussion and possibly a separate vote. Generally, items on consent agendas are not controversial, and it may hold two dozen or more items.


Notes

  1. Salazar, Daniel. Expect affiliated baseball team announcement by end of 2017, Wichita mayor says. Wichita Eagle, August 29, 2017. Available at http://www.kansas.com/news/local/article170095417.html.
  2. “MiLB Baseball Consultant Contract,” Wichita City Council Agenda packet for October 24, 2017. Available at http://www.wichita.gov/Council/Agendas/10-24-2017%20City%20Council%20Agenda%20Packet.pdf.

Wichita in the Wall Street Journal

A Wall Street Journal article reports on Wichita, but there are a few issues with quotes from the mayor.

In an article in one of the nation’s leading newspapers, Wichita Mayor Jeff Longwell is quoted:

“We’re no longer going to play in this traditional incentive game and offering cash to companies,” said Mayor Jeff Longwell. “We think quality of life will do more.”

The article as shared on Facebook. Click to visit the post.
The article in the Wall Street Journal is The ‘Air Capital of the World’ Has a Problem: Too Few Aviation Workers. A subscription may be required to view the article.

What is wrong with what the mayor said? It’s mostly true that the city is no longer paying cash as jobs incentives, although that was never a large part of the city’s spending on incentives. What’s troubling about the mayor’s remarks is that the city has many incentives programs that are just as valuable as paying cash. The State of Kansas adds others. Here are the major programs the city and state offer that are as good as cash:

The city offers programs (IRB and EDX) in which companies escape paying property taxes, which is just as good as receiving the same amount in cash. 1

The IRB program, once bonds are authorized by the city, often allows a company to escape paying sales taxes, in some cases several million dollars. Not paying a dollar in sales tax is just as good as receiving a dollar in cash. 2

The city uses tax increment financing (TIF), in which property taxes paid by a property owner are redirected for the property owner’s benefit. So instead of paying cash for improvements, developers let their property taxes pay for these. 3

The city uses STAR bonds, in which future sales tax revenue is redirected for the benefit of a specific property owner. This lets the property owners avoid spending cash on things. 4

The city approves the formation of community improvement districts in which the taxing authority of the city is used to allow merchants to collect extra sales tax. 5

For one company, the city cut permitting fees in half. It’s estimated the company will save $85,000. That’s as good as receiving cash. 6

And if this is not enough, the city might pay your company $6,500,000 in cash to use your parking garage during the hours you don’t need it. (Never mind this parking isn’t really needed.) 2

Besides these programs, the state has programs such as PEAK, which pay cash benefits to companies. Also, the city supports applications for state and federal historic preservation tax credits. Receiving tax credits is as good as receiving cash.

Set aside the question of whether these incentive programs are necessary and effective. Then we’re left with a few questions:

Is the mayor not aware that these incentive programs are as valuable to companies as receiving cash payments?

Or does the mayor believe that the methods by which these programs are implemented obscure the economic realities?

Or is there some other reason?

Wichita MSA employment since 2010. Click for larger.
It’s encouraging that the mayor wants to change something. Since the last recession, Wichita is falling further behind the rest of the country in job growth. 8 For the two recessions before that, Wichita was able to catch up to the rest of the country in job growth. But that isn’t happening now.

But if the mayor thinks we’re doing something other than using the equivalent of cash to lure companies to Wichita — or just to retain existing companies — he is wrong.

Trends of business activity in downtown Wichita. Click for larger.
By the way, the Journal article reports this: “Wichita, known as the ‘air capital of the world,’ is working with the industry to train thousands of new workers while sprucing up downtown in an attempt to make it a place where people want to stay — and to dissuade companies from shipping the jobs overseas.”

It’s true that a lot of money, but public and private, has been spent on downtown. The economic results, unfortunately, are not good: Since the time of increased investment, there are fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. 9


Notes

  1. Weeks, Bob. Industrial revenue bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  2. Ibid.
  3. Weeks, Bob. Wichita TIF projects: some background. Available at https://wichitaliberty.org/wichita-government/wichita-tif-projects-background/.
  4. Weeks, Bob. STAR bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/star-bonds-kansas/.
  5. Weeks, Bob. Community improvement districts in Kansas. Available at https://wichitaliberty.org/kansas-government/community-improvement-districts-kansas/.
  6. Weeks, Bob. More Cargill incentives from Wichita detailed. Available at https://wichitaliberty.org/wichita-government/cargill-incentives-from-wichita-detailed/.
  7. Ibid.
  8. Weeks, Bob. Wichita MSA employment series. Available at https://wichitaliberty.org/economics/wichita-msa-employment-series/.
  9. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.

A Wichita social media town hall

A City of Wichita town hall meeting ends in less than nine minutes, with a question pending and unanswered.

As part of its engagement with citizens, the City of Wichita holds social media town hall meetings. On June 20, 2107, there was a Facebook town hall on the topic of economic development featuring Assistant City Manager Scot Rigby. His charge is “developing and implementing a coordinated and comprehensive development services program and for developing, implementing and overseeing economic development, redevelopment and real estate programs and projects.” He’s worked for the city for two years. 1

Promoting the town hall. Click for larger.
There is not a customary duration for events like this, although other social media town halls have been promoted by the city as lasting 90 minutes. Surely citizens might expect any meeting like this to last at least 30 minutes, if not 60 or more.

But Wichita Assistant City Manager Scot Rigby’s town hall meeting on June 20 lasted eight minutes and 22 seconds.

(A screen capture of the event is available here, and the entire event as recorded on Facebook is here.)

It wasn’t for lack of questions that the meeting ended so quickly. One question I asked had to do with the city’s reporting on its economic development efforts. The City of Lawrence annually produces a comprehensive report, but Wichita does not. 2 Rigby answered this question online, which is the way these things are supposed to work.

An excerpt from the town hall. Click for larger.
Then I asked this question: “There has been a lot of investment, public and private, in downtown Wichita. What has been the trend in the number of business firms, employees, and payroll during that time?” That was six minutes and 50 seconds after the start of the meeting, according to Facebook. The meeting ended 92 seconds later with no answer to this question.

But I wanted the city to answer my question. After five weeks of multiple requests through both Facebook and email, I received a response from the city:

from: Bob Weeks
to: Scot Rigby

Hi, I’m still wondering why the social media town hall from June 20 was ended after less than nine minutes. There is still a pending question.

For your convenience, here is the link to the Facebook video:
“https://www.facebook.com/cityofwichita/videos/1450322791680383/”

Thank you,
Bob Weeks

Dear Mr. Weeks-

Scot Rigby asked that I follow up with your question since I was involved with coordination of the Social Media Town Hall events.

During the Social Media Town Hall events on June 15 and June 20 we presented content in a variety of formats on Facebook and Twitter. We used the Facebook Live format for one topic, but 30 second videos for 14 other topics (seven on each day). We publicized the Facebook Live topic the day before, and our intent was to respond to questions from that topic as well as during the event. We ended the Facebook Live event after responding to comments and feedback from June 15 and focused efforts on responding to other posts as well as Nextdoor, which we used for the first time during the Social Media Town Hall this year. Because of changes in technology, each year the Social Media Town Hall is a little different.

Sincerely-

Elizabeth

Elizabeth Goltry Wadle
Principal Budget Analyst
City of Wichita

I think I’ll characterize this as nonresponsive.

Besides this answer, the city also responded on Facebook on July 18, nearly a month after I posed the question. That response referred me to the 2016 State of Downtown Report from the Wichita Downtown Development Corporation. That is also (mostly) nonresponsive to my question.

Trends of business activity in downtown Wichita. Click for larger.
In a way, I can sympathize with Rigby not wanting to answer my question. Perhaps he doesn’t know the answer. But he might know — he should know — the answer, which is that since 2007 there are fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower. 3

Regarding the 2016 State of Downtown Report from the Wichita Downtown Development Corporation: That document claims there are 26,000 workers in downtown Wichita. That is a large mistake and greatly overstates the number of workers. 4

It’s curious that the city did not refer me to a 2017 edition of the State of Downtown Report. But that document does not exist. It’s common for these reports to be released in May, but this year’s report is not yet available.

The city takes pride in being responsive to citizens. Former Mayor Carl Brewer often spoke in favor of government transparency. For example, in his State of the City address for 2011, he listed as an important goal for the city this: “And we must provide transparency in all that we do.”

When the city received an award for transparency in 2013, a city news release quoted Wichita City Manager Robert Layton:

“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”

Shortly after his election, current Mayor Jeff Longwell penned a column in which he said, “First off, we want City Hall to be open and transparent to everyone in the community.”

Is a lack of staff at city hall the reason why I can’t get an answer to a question? I don’t think so. Two years ago the city expanded its staff by hiring a Strategic Communications Director. When the city announced the new position, it said: “The Strategic Communications Director is the City’s top communications position, charged with developing, managing, and evaluating innovative, strategic and proactive public communications plans that support the City’s mission, vision and goals.”

My experience with this social media town hall runs contrary to the city’s proclaimed goals, and this is not the only time I’ve had problems with the city regarding requests for information. 5


Notes

  1. City of Wichita. Assistant City Manager, Development Director Hired. Available at http://www.wichita.gov/News/Pages/2015-07-15a.aspx.
  2. Weeks, Bob. Wichita doesn’t have this. Available at https://wichitaliberty.org/wichita-government/wichita-does-not-have-this/.
  3. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  4. Weeks, Bob. Downtown Wichita jobs, sort of. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.
  5. Weeks, Bob. During Sunshine Week, here are a few things Wichita could do. Available at https://wichitaliberty.org/open-records/sunshine-week-wichita/.

Wichita WaterWalk contract not followed, again

Wichita city hall failed to uphold the terms of a development agreement from five years ago, not monitoring contracts that protect the public interest.

Two weeks ago a Wichita Eagle article reported on a 2002 public-private partnership that called for the private-sector company to submit an annual report to the city. But the company did not submit the reports, and the city didn’t ask for them. The city did after the Eagle inquired. 1

Much of the Eagle article described why current city officials were not aware of the 2002 agreement: “Due largely to turnover on the city staff and term limits on the City Council, top officials at City Hall were unaware of the contract provisions until The Eagle inquired about them. … No city official who played a major role in the 2002 contract is still actively involved in government.”

The article quoted Mayor Jeff Longwell as “interested in WaterWalk fulfilling any contractual agreement they have in place (with the city), even if that contract was made 20 years prior to my time.”

Now we know that the city did not enforce a similar agreement with the same WaterWalk developer made while Longwell was a council member. The city manager who oversaw the agreement is still manager.

WaterWalk additional rent calculation, excerpt. Click for larger.
We don’t have to look as far back in history as 2002 to find an agreement the city did not enforce, one where the city was not protecting the interest of taxpayers. In 2012 the city entered into a same or similar agreement in the same WaterWalk development with the same developer, Jack P. Deboer. It also called for the city to potentially earn payments, called “additional annual rent.” It also called for reports to be made, although the exact language used is “provide that calculation.” 2

I asked for the annual reports on July 10. Three days later I received a message indicating the documents would be ready on July 19. On that day they arrived. Like those provided to the Eagle, they were heavily redacted and showed that no additional rent was due the city.

Upon further inquiry, it is clear that these reports were not filed with the city on an annual basis, but were created only after I asked for them. 3

Calculations use incorrect formula

The 2012 agreement specified that the WaterWalk developer would be able to annually deduct 20 percent of the construction costs as “development cost return.” But, in the calculations provided to me by the city, 17 percent is used instead. 4

WaterWalk additional rent calculation, excerpt. Click for larger.

The city excused this error as being in favor of the city, and no additional rent was due in any case.

Redacted, not really

As shown in the examples above, the documents provided to me were heavily redacted, with nearly all numbers obscured. The illustrations show the appearance of the pdf document when opened in Acrobat reader or another pdf reader.

But a simple copy and paste into another application like Microsoft Word revealed the blacked-out numbers. The procedure used by the city didn’t really redact the numbers. It appears that someone used the Acrobat drawing tools to draw thick black lines over the numbers, which isn’t effective. Acrobat offers a set of redaction tools specifically designed for removing sensitive content from pdfs, and the city should have used this method. 5

When I reported this finding to the city, Elder replied: “We would ask that you respect the privacy of this information as well as the City’s obligations under the Kansas Open Records Act at K.S.A. 45-221(b), included below, which strictly prohibits the release of the financial information of a taxpayer, and not disclose the financial information.” 6

I don’t believe that the Kansas Open Records Act prohibits the disclosure of this information, and it is in the public interest that these numbers are available. At the moment, I am inclined to respect the city’s request.

Again

Here is another example of the city and its private-sector partners failing to observe a contract. The city did not monitor its agreements to protect the public interest, and this agreement is recent enough that remoteness in time is not an excuse.

Were the 2002 and 2012 development agreements wise for the city? At the time of the 2012 deal, I wrote this: 7

[There] is a provision that requires the apartment developer to pay “Additional Annual Rent.” Under this concept, each year the apartment developer will calculate “Adjusted Net Cash Flow” and remit 25 percent of that to the city.

To the casual observer, this seems like a magnanimous gesture by the apartment developer. It makes it look like the city has been a tough negotiator, hammering out a good deal for the city, letting citizens profit along with the apartment developer.

But the definition of cash flow includes a comprehensive list of expenses the may be deducted, including the cost of repaying any loans. There’s also an allowable expense called “Tenant Development Cost Return,” which is the apartment developer’s profit. The agreement defines this profit as 20 percent, and it’s deducted as part of the computation of “Adjusted Net Cash Flow.”

If there is ever any money left over after the dedication of all these expenses and profit margin, I will be surprised. Shocked, even. Here’s one reason why. One of the allowable deductions that goes into the computation of “Adjusted Net Cash Flow” is, according to city documents: “Amounts paid into any capital, furniture, fixture, equipment or other reserve.” There’s no restriction as to how much can be funneled into these reserve accounts. We can be sure that if this project was ever in the position where it looked like it might have to remit “Additional Annual Rent” to the city, contributions to these reserve funds would rise. Then, no funds paid to the city.

This is an example of the city appearing to be concerned for the welfare of taxpayers. In reality, this concept of “Additional Annual Rent” is worse than meaningless. It borders on deception.

Beyond this, we now know that neither the city nor the WaterWalk developer followed the terms of the deal. The annual reports were not supplied by the company, and they were not requested by the city. As it turns out the annual reports purport to show that the city was owed no money under the profit sharing agreement.

But that’s not the point. The issue is that the city did not enforce a simple aspect of the agreement, and the private-sector company felt it did not need to comply. Taxpayers were not protected, and we’re left wondering whether these agreements were really meant to be followed.


Notes

  1. Lefler, Dion. WaterWalk profit-sharing: 15 years, zero dollars for Wichita. Wichita Eagle, July 8, 2017. Available at http://www.kansas.com/news/politics-government/article160147944.html.
  2. “As Additional Annual Rent Tenant shall pay a sum equal to twenty-five percent (25%) of the Adjusted Net Cash Flow commencing with the first day the Tenant Improvements open for business. The Tenant shall calculate Adjusted Net Cash Flow for each Current Year within forty-five (45) days after the end of the Current Year (or portion thereof) and provide that calculation, and pay to the Landlord the Additional Annual Rent, within sixty (60) days after the end of the Current Year. Additional Annual Rent shall continue until this Lease expires. Adjusted Net Cash Flow is Gross Revenues less Total Expenses, less the total amount of capital expenses for furniture, fixtures, and equipment for the Tenant Improvements in excess of the aggregate amount expended from any reserve during such year.” Amendments to WaterWalk Developer Agreements. August 21, 2012. Available at https://drive.google.com/file/d/0B97azj3TSm9Mdm1tWjlQbVAzemM/view?usp=sharing.
  3. Email from city development analyst Mark Elder, July 21, 2017. “The annual report for this project was requested in the same time frame as the reports provided for Gander Mountain however, the documents were provided to the City within the last week.”
  4. Wichita City Council agenda packet for August 21, 2012. Waterwalk Ground Lease, Section 16.08. “Tenant Development Cost Return, defined as, on an annual basis, twenty percent (20%) of the total Construction Costs for all Tenant Improvements paid by Tenant, Developer, or permitted assignees and sublessees. As further clarification, the amount determined to be twenty percent (20%) of the total Construction Costs for all Tenant Improvements may be included in the calculation of the Total Expenses each year during the Term of this Lease.”
  5. Adobe.com. Removing sensitive content from PDFs. Available at https://helpx.adobe.com/acrobat/using/removing-sensitive-content-pdfs.html.
  6. “Except to the extent disclosure is otherwise required by law or as appropriate during the course of an administrative proceeding or on appeal from agency action, a public agency or officer shall not disclose financial information of a taxpayer which may be required or requested by a county appraiser or the director of property valuation to assist in the determination of the value of the taxpayer’s property for ad valorem taxation purposes; or any financial information of a personal nature required or requested by a public agency or officer, including a name, job description or title revealing the salary or other compensation of officers, employees or applicants for employment with a firm, corporation or agency, except a public agency. Nothing contained herein shall be construed to prohibit the publication of statistics, so classified as to prevent identification of particular reports or returns and the items thereof.”
  7. Weeks, Bob. Wichita WaterWalk apartment deal not good for citizens. https://wichitaliberty.org/wichita-government/wichita-waterwalk-apartment-deal-not-good-for-citizens/.

More Cargill incentives from Wichita detailed

More, but likely not all, of the Cargill incentives will be before the Wichita City Council this week.

A division of Cargill, Cargill Meat Solutions Corporation, is moving from an office on North Main Street in downtown Wichita to the site of the former Wichita Eagle building, also in downtown Wichita. Last year it was widely reported that Cargill was considering moving this division to another city. Reports of incentives offers to Cargill from other cities spurred the City of Wichita to offer its own incentives if Cargill would remain in Wichita. This week the city council will consider additional subsidies and incentives besides those already offered. 1

As summarized in the agenda packet:

“In exchange for Cargill’s commitment, the City has negotiated the following:

  • Issue Industrial Revenue Bonds (Letter of Intent approved April 18, 2017) 100% property tax abatement; 5+5 year basis
  • Sales tax exemption
  • Acquisition of a 15 year parking easement for public access to the garage in the evenings and on weekends (estimated cost of $6,500,000)
  • Expedited plan review (50% reduction in time)
  • Reduced permitting fees (50%) (estimated savings of $85,000)
  • Assign a project manager/ombudsman for a single point of contact for the company”

Industrial Revenue Bonds

In April the city council approved a letter of intent regarding Cargill’s participation in the Industrial Revenue Bond program. 2 The city won’t be lending Cargill money. Instead, IRBs are a (convoluted) method whereby local governments are able to forgive the payment of property taxes. For the case of Cargill, city documents from April state the tax forgiveness could be worth $1,359,531 per year. 3 This would be shared by these taxing jurisdictions in these annual amounts, again according to city documents:

  • City of Wichita: $378,450
  • Sedgwick County: $340,958
  • USD 259, the Wichita Public School District: $622,723
  • State of Kansas: $17,400

Cargill has agreed to make an annual Payment-In-Lieu-Of-Taxes (PILOT) of $413,900, according to city documents.

In addition to the property tax exemption, the IRBs also carry a sales tax exemption for purchases related to construction. City documents give an estimated value of $2,026,291 for the sales tax Cargill will not have to pay. 4

Parking easement

At one time, it was thought that the city would build a parking garage and let Cargill use it an no cost, or at a greatly reduced cost. Instead, the city now proposes that Cargill build the garage and the city will acquire an easement. This has sounded almost benign, but now we realize that the city will pay Cargill an estimated $6.5 million. In return, the city will be able to use up to approximately 700 parking spaces outside of Cargill business hours for a period of 15 years.

Is this a good deal for the city? The city has agreed to pay $9,286 for the use of each parking space for 15 years during non-business hours. 5 For comparison, recently the city rehabilitated the parking garage at 215 S. Market at a cost of $17,609 per parking space. The city rents 180 of these to a nearby company at the rate of $35 per month, which is $420 per year. 6 In the case of Cargill, the city is paying — effectively — $619 dollars per parking spot per year, and for off-hours use only.

It is not known whether the city will charge fees to the public to use the garage. It is also unknown whether there is much demand for public parking at the Cargill location, but present market conditions would suggest there is not much additional demand.

Expedited plan review, reduced fees, and ombudsman

The city has agreed to cut permit fees and speed response time for approvals. 7

This incentive — the need for it and its value to Cargill — is an explicit admission that City of Wichita regulations are burdensome. If not, why would the city devote time and expense to helping Cargill obtain relief from these regulations?

Consider this aspect of public policy: Cargill is a large company with — presumably — fleets of bureaucrats and lawyers trained to deal with burdensome government regulation. These costs can be spread across a large company, meaning that Cargill can afford to overcome burdensome regulations.

But what about the small companies that don’t have fleets of bureaucrats and lawyers? What about the young or small companies that can’t spread the costs of regulation across a large volume of business? What will the city do for these companies? This is especially important because the spirit of entrepreneurship the city wants to cultivate is most commonly found in small, young, companies — the type of company without fleets of bureaucrats and lawyers.

The city says it would do for any company what it is doing for Cargill. Except: How are companies supposed to know to ask for regulatory relief, streamlining, and a discount on fees?

If the city really wants to help all companies, it would — at its own initiative — cut fees and reduce response time across the board, for everyone. Until then Wichita offers special regulatory treatment for special circumstances, which widens the gulf between the haves and have-nots. 8

Other subsidy programs

The agenda packet for the city council meeting doesn’t mention this, but from the State of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill. 9 (Not all; only 95 percent.) Some very rough calculations show that PEAK benefits might be worth some $2 million annually to Cargill. 10

Ironically, with the recent increases in Kansas income taxes, PEAK is even more valuable to Cargill.

Is this needed?

In the past, economic development subsidies of this type were justified by local governments as necessary to recruit new companies to the area. These subsidies, however, are used simply to retain a company that is already located in downtown Wichita.

The city has asked Wichita State University’s Center for Economic Development and Business Research to produce benefit/cost ratios. They show that the costs the city, county, and state incur will generate benefits that exceed these costs. For the school district, costs exactly equal benefits — a remarkable coincidence.

The reasoning and calculation behind these benefit/cost ratios is opaque. The general idea is that spending by a company spawns other spending that results in economic benefit and growth. That’s true. It’s important to know, however, that this benefit also occurs when companies move to Wichita or expand in Wichita, without the benefit of economic development subsidies.

The question, then, becomes are these incentives necessary? Would Cargill have moved to another city if not for these incentives? It’s only if Cargill would have left Wichita that the benefit/cost ratios have any meaning.

The City of Wichita says Cargill received lucrative offers from other cities. But these offers have not been seen, to my knowledge. We’re left to take the word of Cargill that it received offers from other cities, and that it would have moved from Wichita if not for Wichita’s incentives.

Cargill, as we’ve seen, has a multi-million dollar motive. City of Wichita officials also have a large motive, as do officials and politicians at the state level. The politicians and bureaucrats want to — need to — be seen as doing something to improve the economy. It costs none of them one dime to pay these incentives. But the Cargill building will fulfill their ediface complex when they preside at groundbreaking and ribbon-cutting ceremonies.

If Wichita leaders wanted to gain the trust of Wichitans, to have us believe and understand that these incentives are necessary to keep Cargill in Wichita, the city could reveal the other offers Cargill received. Cargill itself could reveal offers it received from other cities. These actions would help Wichitans understand whether these incentives are truly needed. But the world of economic development incentives is a murky swamp.

Finally, Mayor Jeff Longwell, other council members, and city hall bureaucrats tell us that the city has moved beyond cash incentives. Cash will not be paid for jobs, they say.

But forgiving a tax bill is just like paying cash. Discounting the cost of permits is just like paying cash. Paying $6.5 million to use a company’s parking garage during hours the company has no use for it: How is that different from simply paying the company a cash incentive?

Perhaps the mayor and others have a different understanding of the economics of transactions than I.


Notes

  1. City of Wichita. Agenda Packet for July 18, 2017. Approval of Development Agreement with Cargill Meat Solutions Corporation.
  2. Weeks, Bob. Industrial revenue bonds in Kansas. https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  3. City of Wichita. Council agenda packet for April 18, 2017.
  4. Weeks, Bob. Cargill subsides start forming. Available at https://wichitaliberty.org/wichita-government/cargill-subsides-start-forming/.
  5. $6,500,000 / 700.
  6. Weeks, Bob. Why is this man smiling? Available at https://wichitaliberty.org/wichita-government/man-smiling/.
  7. “Section 4.03. Approvals. The City agrees to provide a 50% reduction in the fees charged by the City for permits and approvals, including plan review, utility and building permitting fees, for all matters related to the Project. The City also agrees to reduce the response time for approval of building plans from the standard 30 days to 15 days for all matters related to the Project.” Also: “The reduction in the permitting fees will be paid from the Economic Development fund.”
  8. Weeks, Bob. Regulation in Wichita, a ‘labyrinth of city processes.’ Available at https://wichitaliberty.org/regulation/regulation-wichita-labyrinth-city-processes/.
  9. Weeks, Bob. In Kansas, PEAK has a leak. https://wichitaliberty.org/kansas-government/kansas-peak-leak/.
  10. For the first year of the agreement, Cargill is expected to have 750 or more employees at an average salary of $66,814. That annual salary / 26 pay periods = $2,570 biweekly. For a family with two children (this is just a guess and could be way off), there are two withholding allowances, so $2,570 – ($86.54 x 2) = $2,397. Using the new withholding tables for married workers (another assumption), bi-weekly withholding is $48.17 + 5.7% x ($2,397 – $1,298) = $48.17 + $62.64 = $110.81. That means $2,881 annual withholding, so Cargill’s 95% share is $2,737. For 750 employees, this is an annual subsidy to Cargill of $2,052,750.

Won’t anyone develop in downtown Wichita without incentives?

Action the Wichita City Council will consider next week makes one wonder: If downtown Wichita is so great, why does the city have to give away so much?

Next week the Wichita City Council will consider a package of incentives for the developer of a large downtown building, the Finney State Office Center.

The building has an appraised value of $7,902,570, per the Sedgwick County Treasurer. The city will sell it for $100,000. That’s a mere 1.3 cents per dollar, if the county’s valuation is reasonable.

(But, the $100,000 is non-refundable, should the purchaser decide not to close on the building.)

Finney State Office Building environs. Click for larger.
The project is also asking for the city to issue Industrial Revenue Bonds. Despite the use of the term “bond,” the city is not lending money to anyone. Someone else will purchase the bonds. Instead, the IRBs are a vehicle for conveying property tax abatements and sales tax exemptions.

In this case, the developer requests a sales tax exemption for purchases during the renovation. City documents don’t give a value for the sales tax that might be exempted. But the developer has requested IRBs for an amount up to $35,000,000. So a sales tax exemption might be worth up to $2,625,000, depending on how much taxable products and services are purchased.

IRBs also carry the possibility of a property tax abatement. Granting of the abatement is routine in most areas of the city. But, this property is located within a tax increment financing (TIF) district. That means, according to Kansas law, that a property tax abatement may not be awarded. That is, unless the property is removed from the TIF district, which is what the city proposes.

What is the value of the tax abatement? City documents don’t say. But if the developer spends $35 million on the project, it ought to carry something near that appraised value when complete. So its annual property tax bill would be ($35,000,000 * 25 percent assessment rate for commercial property = $8,750,000 assessed value * 124.341 mill rate) $1,087,984.

There’s another exception the city will probably make for this project. According to the city’s economic development incentives policy, the city must receive a payoff of at least 1.3 times its investment. That benchmark isn’t met in this case, with Wichita State University’s Center for Economic Development and Business Research reporting a benefit-cost ratio of 1.04 to the city. Nonetheless, city staff recommends the city approve the incentives, citing several loopholes to the policy.

There’s also a parking agreement to consider. Given the city’s past practice, the city will lease parking stalls at rates below market rate or the city’s cost to provide.

No cash incentives

The city, in particular Wichita Mayor Jeff Longwell, have prominently and proudly touted the end of cash incentives. But, this project is receiving benefits better than cash: An $8 million building for a song, no sales tax, and no property tax for ten years. Let’s ask the city to be honest and give us dollar values for these incentives.

Why?

A second question is this: Why is it necessary to provide all these incentives in order to induce someone to develop in downtown Wichita? The cost of these incentives increases the cost of government for everyone else — that is, everyone else except all the other incentive-receivers.

In Wichita, we’ll not know how this tax money is spent

Despite claims to the contrary, the attitude of the City of Wichita towards citizens’ right to know is poor, and its attitude will likely be reaffirmed this week.

This week the Wichita City Council will consider approval of a contract with Visit Wichita, the city’s convention and visitor bureau. Once again, citizens will be left out of knowing how the city’s tax money is spent.

In the past, I’ve asked that Visit Wichita (formerly Go Wichita Convention and Visitors Bureau) make its spending records available. It’s the same type of information that the city will send you about its own spending. But for Go Wichita, spending must — apparently — be kept secret.

It’s not a small amount of money that will be spent in secret. This year the city will send Go Wichita almost $2.5 million.1

But that’s not all. Since the implementation of the “City Tourism Fee” Visit Wichita collects 2.75 percent of hotel bills. (Welcome to Wichita! Here’s the bill for your tourism fee!) That’s estimated to generate $3 million in 2017.2

That is a lot of tax money, and also a high proportion of the agency’s total funding. We don’t have IRS filings from Visit Wichita since the city tourism fee started, so it’s difficult to say what portion of its funding is tax money. But it’s a lot, at least 90 percent.

Despite being nearly totally funded by taxes, Visit Wichita refuses to supply spending records. Many believe that the Kansas Open Records Act requires that it comply with such requests. If the same money was being spent directly by the city, the records undoubtedly would be supplied.

I’ve appeared before the council several times to ask that Visit Wichita and similar organizations comply with the Kansas Open Records Act. See Go Wichita gets budget approved amid controversy over public accountability, City of Wichita Spends $2 million, Rebuffs Citizen’s Transparency Request, and articles at Open Records in Kansas.

The lack of transparency at Visit Wichita is more problematic than this. Visit Wichita refused to provide to me its contract with a California firm retained to help with the re-branding of Wichita. When the Wichita Eagle later asked for the contract, it too was refused. If the city had entered into such a contract, it would be a public record. Contracts like this are published each week in the agenda packet for city council meetings. But Visit Wichita feels it does not have to comply with simple transparency principles.

The City of Wichita could easily place conditions on the money it gives to these groups, requiring them to show taxpayers how their tax dollars are being spent. But the City does not do this. This is not transparency.

In the past I’ve argued that Visit Wichita is a public agency as defined in the Kansas Open Records Act. But the city disagreed. And astonishingly, the Sedgwick County District Attorney agreed with the city’s interpretation of the law.

So let’s talk about good public policy. Let’s recognize that even it is the case that the Kansas Open Records Act does not require Visit Wichita, WDDC, and GWEDC to disclose records, the law does not prohibit or prevent them from fulfilling requests for the types of records I’ve asked for. Even if the Sedgwick County District Attorney says that Visit Wichita is not required to release documents, the law does not prevent the release of these records.

Once we understand this, we’re left with these questions:

Why does Visit Wichita want to keep secret how it spends taxpayer money, as much as $5.5 million next year?

Why is this city council satisfied with this lack of disclosure of how taxpayer funds are spent? Many council members have spoken of how transparency is important. One said: “We must continue to be responsive to you. Building on our belief that government at all levels belongs to the people. We must continue our efforts that expand citizen engagement. … And we must provide transparency in all that we do.” That was Mayor Brewer speaking in his 2011 State of the City address.

The city’s official page for the current mayor holds this: “Mayor Longwell has championed many issues related to improving the community including government accountability, accessibility and transparency …”

During the recent mayoral campaign, Longwell told the Wichita Eagle that he wants taxpayers to know where their money goes: “The city needs to continue to improve providing information online and use other sources that will enable the taxpayers to understand where their money is going.”

In a column in the Wichita Business Journal, Wichita Mayor Jeff Longwell wrote: “First off, we want City Hall to be open and transparent to everyone in the community.”

Now is the chance to fulfill these promises. All the city needs to do is add to its contract with Visit Wichita that the agency agree that it is a public agency spending public dollars, and that it will comply with the Kansas Open Records Act.

It would be a simple matter for the council to declare that the city and its taxpayer-funded partner agencies believe in open government. All the city has to have is the will to do this. It takes nothing more. It costs the city and its agencies nothing, because the open records law lets government charge for filling records requests. I would ask, however, that in the spirit of open transparent government, in respect for citizens’ right to know how tax funds are spent, and as a way to atone for past misdeeds, that Visit Wichita fulfill records requests at no charge.


Notes

  1. “The 2017 Adopted Budget includes funding for Visit Wichita’s annual allocation in the amount of $2,476,166, which is to be paid from the Convention & Tourism Fund.” City of Wichita. Agenda for December 20, 2016.
  2. “For 2017 the tax is budgeted to generate $3 million.” City of Wichita. Agenda for April 19, 2016.

Bizarre and troubling Wichita city council meetings

Inside jokes or a public shaming: Either way, it isn’t good.

Those who watch meetings of the Wichita City Council may have become accustomed to Wichita Mayor Jeff Longwell and his unusual sense of humor. But an episode from the September 6, 2016 meeting of the council goes beyond bad and unfunny humor, presenting an unfavorable image of our city to anyone watching the meeting. The target of the mayor’s humor — or derision — is Wichita city manager Robert Layton. A video excerpt of the meeting is available here, or at the end of this article.

The mayor’s treatment of the city manager seems cruel. But maybe not. Perhaps there are inside jokes in play here, humor that an outside observer like myself does not understand and can’t appreciate. But that’s the problem. If, in fact, the mayor is joking with the manager, these are inside jokes. Therefore, outsiders won’t understand the humor. This includes most citizens of Wichita and outsiders observing the meetings of the Wichita City Council. I think I can speak for everyone when I say this: We aren’t impressed. It isn’t funny.

If the mayor isn’t joking, then what’s left is public cruelty, and that of a boss (the mayor) to those who work for him (the manager). Former Wichita Mayor Carl Brewer did this too, and to more than one city manager.

If you need help interpreting the mayor’s intent, consider this: The agenda for this meeting, for this item, held the notation “RECOMMENDED ACTION: Defer this item until October 4, 2016” for this item. There was no need for the mayor’s needling of the manager.

Either way — inside jokes or a public scolding — episodes like this are not good for the city’s image.

CID and other incentives approved in downtown Wichita

The Wichita City Council approves economic development incentives, but citizens should not be proud of the discussion and deliberation.

Today’s meeting of the Wichita City Council saw the council discuss and approve economic development incentives for a project in downtown Wichita.

The item contemplated economic development incentives for redevelopment of an empty building in downtown Wichita to become a Hilton Garden Inn Hotel. The incentives being considered were a Community Improvement District (CID), Industrial Revenue Bonds (IRB), a parking agreement, and a skywalk easement. The discussion by the council was useful for revealing two members who are opposed to some targeted economic development incentives, but it also showed a troubling lack of knowledge and consideration by others.

Property tax

The hotel is requesting industrial revenue bonds. These bonds do not mean the city is lending any money. Instead, IRBs in Kansas are a mechanism to convey property tax abatements and sales tax exemptions.

The agenda packet for this item states: “[Hotel developer] WDH is not requesting abatement of property taxes in conjunction with the IRBs.”1 This is presented as a magnanimous gesture, as something the hotel developers (WDH) could have requested, but did not, presumably out of some sort of civic duty.

But: Property tax abatements may not be granted within the boundaries of a TIF district, which this hotel is located within.2 3 So the developers did not request something that they are not entitled to request. This is not news. Nonetheless, several council members were grateful.

As to property taxes, Wichita City Council Member James Clendenin (district 3, southeast and south Wichita) asked what would be the increase in value in the building, once finished. Later Wichita City Council Member Jeff Blubaugh (district 4, south and southwest Wichita) praised the property taxes that will be paid. He also mentioned the “nearly-empty parking garage.” When the city built this garage and accompanying retail space it was to be a showpiece, but has been suffering from blight and lack of tenants paying market rates for rent.4

Asking about tax abatements, Wichita City Council Member Pete Meitzner (district 2, east Wichita) asked “They didn’t apply for other …” His voice trailed off before finishing the question, but the “other” tax abatement that could be applied for is the property tax abatement. Except, the law does not allow for a property tax abatement for this project.

All these questions alluded to the increased property taxes the renovated building will pay. Except, being within a TIF district, property taxes may not be abated. So where will the hotel’s property taxes go?

First, the property tax generated by the present value of the property (the “base”) will be distributed as before. But the increment — which will be substantial — will go to the TIF district, not the city, county, and school district. Except: This is an unusual TIF district, in that an agreement between the city and county provides that only 70 percent of the incremental property taxes will go to the TIF district, with the remainder being distributed as usual. This was not mentioned during today’s discussion.

There was talk about a “gap.” Some economic development incentives require documenting of a “financing gap” that makes the project not economically feasible. But that is not required for the incentives considered for this hotel.

Sales tax

Regarding the sales tax exemption: City document do not state how much sales tax will be forgiven, so we’re left to speculate. Previous city documents5 indicate spending $3,000,000 on furniture and fixtures, which is taxable. Sales tax on this is $225,000.

The same city document mentioned spending of $6,250,000 on construction of the hotel, and of $1,000,000 for construction of retail space. Sales tax on this combined total is $543,750. Based on material from the Kansas Department of Revenue, these amounts would be due if not for the action of the city council.6

In total, the development of this hotel will escape paying $768,750 in sales tax. It should be noted that Kansas is one of the few states that charges sales tax on groceries at the same rate as other purchases, making Kansas food sales tax among the highest in the nation.7

Curiously, council members Clendenin and Williams, who represent low-income districts where families may be struggling to buy groceries — and the sales tax on them — did not object to this special sales tax treatment for a commercial developer.

No more cash?

In his remarks, the mayor talked about how we can continue with economic development “without handing cash to corporations.” But when a project is going to buy materials and services on which $768,750 in sales tax is normally due, and the city council takes action to extinguish that liability, well, that’s better than cash to the receiver.

Good news

Kudos to Wichita City Council Member Bryan Frye (district 5, west and northwest Wichita), who actually cited the United States Constitution in his statement from the bench. He said that the issues surrounding this project are a far cry from what our Founding Fathers envisioned as the role of government, saying “I struggle with using city resources to collect and distribute sales tax for the sole benefit of one commercial entity.” He offered a substitute motion which would have approved all the parts of the agreement except for the CID tax. His motion failed, with only he and Wichita Mayor Jeff Longwell voting in favor.

On the original motion, which was to approve all parts of the incentive agreement, Longwell and Frye voted in opposition, with everyone else voting in favor.


Notes

  1. City of Wichita. Agenda packet for September 6, 2016. Available here.
  2. “Certain property, even though funded by industrial revenue bonds, does not qualify for exemption: … property located in a redevelopment project area established under K.S.A. 12-1770 et seq. cannot be exempt from taxation.” Kansas Department of Revenue. Property Tax Abatements. Available at www.ksrevenue.org/taxincent-proptaxabate.html. Also, Kansas Department of Commerce. Industrial Revenue Bond Exemptions. Available at www.kansascommerce.com/DocumentCenter/Home/View/1082.
  3. Gilmore & Bell PC. Economic Development tools. Available here.
  4. Weeks, Bob. As landlord, Wichita has a few issues. Available at https://wichitaliberty.org/wichita-government/landlord-wichita-issues/.
  5. Wichita City Council Agenda packet for August 16, 2016. Available at wichita.gov/Government/Council/Agendas/08-16-2016%20City%20Council%20Agenda%20Packet.pdf.
  6. “General rule: Materials are taxable.” (p. 4) Also: “Taxable labor services in Kansas are the services of installing, applying, servicing, repairing, altering, or maintaining tangible personal property performed on real property projects in the general category of commercial remodel work.” (p. 8) Kansas Department of Revenue. Sales & Use Tax for Contractors, Subcontractors, and Repairmen. Available at www.ksrevenue.org/pdf/pub1525.pdf.
  7. Food sales tax a point of shame for Kansas. Wichita Eagle. January 25, 2016. Available at http://www.kansas.com/opinion/editorials/article56532903.html.

A look at a David Dennis campaign finance report

It’s interesting to look at campaign finance reports. Following, a few highlights on a report from the David Dennis campaign. He’s a candidate for Sedgwick County Commission in the August Republican Party primary election. The report was filed July 25, 2016, covering the period from January 1, 2016 through July 21, 2016. These reports are available online at the Sedgwick County Election Office website.

Keith Stevens, $200
A longtime Democrat community activist, always on the side of higher taxes and more government spending.

Suzanne F. Ahlstrand, $250
Gary & Cathy Schmitt, $100
Jon E. Rosell, $100
Charlie Chandler, Maria Chandler, $1,000 total
Al and Judy Higdon, $500
James & Vera Bothner, $250
Lyndon O. & Marty Wells, $500
All are, or have been, affiliated with the Wichita Metro Chamber of Commerce in various roles, including paid staff and leadership. At one time local chambers of commerce were dedicated to pro-growth economic policies and free markets. But no longer. The Wichita Chamber regularly advocates for more taxes (the 2014 Wichita sales tax campaign was run by the Wichita Chamber), more spending, more cronyism, and less economic freedom. It campaigns against fiscally conservative candidates when the alternative is a candidate in favor of more taxes. The Chamber says it does all this in the name of providing jobs in Wichita. If you’re wondering who ground down the Wichita economy over the past few decades, look no further than the Wichita Chamber of Commerce and its affiliates who have run Wichita’s economic development bureaucracy.

Harvey Sorensen, $500
Sorensen was one of the drivers behind the 2014 one cent per dollar Wichita city sales tax proposal, serving as co-chair of Yes Wichita, the primary group campaigning for the tax. In a public forum Sorensen said, “Koch Industries is going to spend a million dollars to try to kill the future of our community.”1 Wichita voters rejected that sales tax, with 62 percent of voters voting “No.”2 Since the election, we’ve learned that we can satisfy our water future needs by spending much less than Sorensen recommended, at least $100 million less.3 Part of the Wichita Metro Chamber of Commerce cabal, Sorensen has played both sides of the street, having donated $500 to Jeff Longwell and the same amount to his opponent Sam Williams in the 2015 Wichita mayoral election. We might be led to wonder if Sorenson makes contributions based on sincerely held beliefs regarding public policy, or simply for access to officeholders.

Jon, Lauren, David, and Barbara Rolph, $2,000 total
Jon Rolph was another co-chair of Yes Wichita, the primary group campaigning for the 2014 Wichita city sales tax. Since then he’s floated the idea of trying again for a city sales tax.

Plumbers & Pipefitters Local Union No. 441 Political Action Committee, $500
Labor unions rarely — very rarely — make campaign contributions to Republicans. Except for David Dennis.

Bryan K & Sheila R Frye, $50
Bryan Frye is a newly-elected Wichita City Council member who has quickly found a home among the other big-taxing, big-spending council members. He’d very much like a county commissioner who is compliant with more taxes and more spending — like David Dennis.

Lynn W. & Kristine L. Rogers, $50
Lynn Rogers is a Republican-turned-Democrat. As a member of the Wichita public schools board, he is an advocate for more school spending, less school accountability, and no school choice.

Alan J. & Sharon K. Fearey, $100
A Democrat, Sharon Fearey served two terms on the Wichita City Council. She was always an advocate for more taxes and spending, even scolding the Wichita Eagle when it thwarted her spending plans.

Foley Equipment, $500
Ann Konecny, $500
Foley was an advocate for the 2014 Wichita city sales tax, contributing $5,000 to the campaign. The next year, Foley asked for an exemption from property taxes and the sales tax that it campaigned for.4 Foley wanted poor people in Wichita to pay more sales tax on groceries, but didn’t want to pay that same sales tax itself.

BF Wichita, L.L.C., $500
A company affiliated with George Laham. He’s a partner in the taxpayer-subsidized River Vista Apartment project on the west bank of the Arkansas River north of Douglas Avenue. Rumor is that the apartment project will be abandoned in favor of selling the land as the site for an office building.

Automation Plus, $500
Sheryl Wohlford, Vice President, is a longtime progressive activist, a member of Wichita Downtown Vision Team. In short, someone who knows how to spend your money better than you.

Steven E. Cox, Janis E. Cox, $1,000 total
Owners of Cox Machine, this company regularly applies for and receives taxpayer-funded incentives, including the forgiveness of paying sales tax. Yet, this company contributed $2,000 to the campaign for the 2014 Wichita city sales tax.

Leon or Karen Lungwitz, $500
Owner of company where Wichita mayor Jeff Longwell once worked.

Slawson Commercial Properties, LLC, $500
Socora Homes, Inc., $500
New Market 1, LLC, $500
Buildings 22-23-24, LLC, $500
All are Slawson companies, advocates of and beneficiaries of taxpayer-funded subsidies.

Carl & Cathy Brewer, $200
The Democrat former mayor of Wichita. Enough said about that.

Tom Winters, $250
Winters is emblematic of the big-taxing, big-spending Republican officeholder who believes he knows how to spend your money better than you. Karl Peterjohn defeated Winters in the August 2008 primary election.

Timothy R. Austin, $150
We might label Austin as “engineer for the cronies” based on his frequent appearances before governmental bodies advocating for taxpayer-funded subsidy for his clients.


Notes

  1. Ryan, Kelsey. Comment on Koch involvement in sales tax heats up debate. Wichita Eagle, October 29, 2014. Available at www.kansas.com/news/local/article3456024.html.
  2. Sedgwick County Election Office. November 4th, 2014 General Election Official Results — Sedgwick County. Available at www.sedgwickcounty.org/elections/election_results/Gen14/index.html.
  3. Weeks, Bob. In Wichita, the phased approach to water supply can save a bundle. wichitaliberty.org/wichita-government/wichita-phased-approach-water-supply-can-save-bundle/.
  4. Weeks, Bob. In Wichita, campaigning for a tax, then asking for exemption from paying. Available at wichitaliberty.org/wichita-government/campaigning-for-tax-then-asking-for-exemption-from-paying/.

Wichita city council campaign finance reform

Some citizen activists and Wichita city council members believe that a single $500 campaign contribution from a corporation has a corrupting influence. But stacking dozens of the same $500 contributions from executives and spouses of the same corporation? Not a problem.

On December 1, 2015 the Wichita City Council considered an ordinance regarding campaign finance for city elections. A Wichita Eagle article on the topic started with: “A proposed change in city ordinance would allow corporations, labor unions and political action committees to have a greater influence on Wichita politics. For years, city elections have remained insulated from the power of those groups, unlike national and state elections, because Wichita ordinance specifically forbids them from contributing to local campaigns.” 1

The city believed the proposed action was necessary to comply with recent court rulings. Under the proposed ordinance — which was passed by the council — corporations, labor unions, and political action committees would be able to make a single campaign contribution per election cycle of up to $500, the same limit as for individuals.

During the council meeting, citizens testified as to the terrible consequences should the council pass this ordinance. Here are a few excerpts taken from the minutes of the meeting:

  • “Citizens United has unleashed Frankenstein monsters purchasing our government with their pocket money.”

  • “Stated corruption and conflicts of interest have become institutionalized and what City legal counsel suggests will sell the Council and the City of Wichita to the highest bidder.”

  • “Stated according to a lengthy report last week, by the Pew Research Center, across party lines people are distrustful and concerned about big money in politics.”

  • “Stated big money does not donate, it invests and buys democracy. Stated she is asking the City Council to keep big money out of the City Council elections.”

  • “Allowing big money into City elections is a concern.”

  • “Stated the City has been independent and has a freedom from influence that the state and the nation do not enjoy. Stated you will then be under the thumb of people who want to control you. which is scary to those of them who are highly opposed to this situation and hopes that the Council will think of them and how this vote will benefit them.”

  • “Stated the League [of Women Voters] has studied campaign finance over the years at all three levels. Stated they are currently involved in the study of money and politics and their position currently reads that they want to improve the methods of financing political campaigns in order to ensure the public’s right to know and combat corruption and undue influence, which is their biggest concern.”

In its reporting after the meeting, the Eagle reported more concern: 2

But those who oppose the measure said they were concerned about opening up local elections to party-affiliated groups like PACs and about transparency since PACs do not have to report their individual donors.

“Individuals should decide elections, not corporations,” Frye said.

Several members of the public spoke against the changes.

“People in the shadows are going to be pulling your strings,” said Russ Pataki.

“It’s very worrisome what big money has done to state and national politics. The city has been independent (of that),” said Lynn Stephan to the council before the vote. “You have a freedom from influence the state and nation don’t enjoy.”

So, people are concerned about the corrupting influence of political campaign donations from corporations and political action committees. Citizens — and the Wichita Eagle — believe that currently the city council is free from this influence.

But the reality of city council campaign financing is different.

Stacked campaign contributions received by James Clendenin from parties associated with Key Construction. Click for larger version.
Stacked campaign contributions received by James Clendenin from parties associated with Key Construction. Click for larger version.
In my testimony at the December 1 meeting, I explained that there are a few corporations that stack campaign contributions in a way that circumvents prohibitions. Although I did not mention it at the meeting, sometimes campaign finance reporting laws allowed this to happen without disclosure until after relevant action had happened. To illustrate, here is a timeline of events involving just one company and its campaign contributions.

2008 and 2009
Executives of Key Construction and their spouses make six contributions to the Lavonta Williams campaign, totaling $3,000.

2010 and 2011
Executives of Key Construction and their spouses make eight contributions to the Carl Brewer campaign, totaling $4,000. Brewer was Wichita mayor running for re-election in 2011.

Executives of Key Construction and their spouses make eight contributions to the Jeff Longwell campaign, totaling $4,000.

2012
The City of Wichita is preparing to build a new airport terminal with a cost of around $100 million. Key Construction and Dondlinger and Sons Construction are two bidders. The contract is controversial. Dondlinger submitted a lower bid than Key, but it was alleged that Dondlinger’s bid did not meet certain requirements.

January 24, 2012
Executives of Key Construction and their spouses make six contributions to the James Clendenin campaign, totaling $3,000.

Stacked campaign contributions to Lavonta Williams from Key Construction associates. Click for larger version.
Stacked campaign contributions to Lavonta Williams from Key Construction associates. Click for larger version.
April 2, 2012
On this day and the next, executives of Key Construction and their spouses make eight contributions to the Jeff Longwell campaign for Sedgwick County Commission, totaling $4,000. At the time, Longwell was a Wichita city council member.

April 17, 2012
On this day and the next, executives of Key Construction and their spouses make eight contributions to the Lavonta Williams campaign, totaling $4,000.

July 16, 2012
An executive of a Michigan construction company and his wife contribute $1,000 to Longwell’s campaign for county commission. The company, Walbridge, is partnering with Wichita-based Key Construction to bid on the Wichita airport terminal contract.3

July 17, 2012
The Wichita city council votes in favor of Key Construction and Walbridge on a dispute over the airport terminal contract, adding over $2 million to its cost. Brewer, Longwell, Williams, and Clendenin participated in the meeting and voted. City documents state the job of the council this day was to determine whether the staff who made the decision in favor of Key Construction “abused their discretion or improperly applied the law.”4

July 20, 2012
An additional $2,250 in contributions from Walbridge executives to the Jeff Longwell campaign for Sedgwick County Commission campaign is reported.

January 2013
Williams and Clendenin file campaign finance reports for the calendar year 2012. This is the first opportunity to learn of the campaign contributions from Key Construction executives and their spouses during 2012. For Williams, the Key Construction-related contributions were the only contributions received for the year. Clendenin received contributions from Key Construction-related individuals and parties associated with one other company during the year.

Is there a pattern? Yes. Key Construction uses its executives and their spouses to stack individual contributions, thereby bypassing the prohibition on campaign contributions from corporations. This has been going on for some time. It is exactly the type of corrupting influence that citizens are worried about. It has been taking place right under their eyes, if they knew how or cared to look. And Key Construction is not the only company to engage in this practice.

Just to summarize: The Wichita city council was charged to decide whether city officials had “abused their discretion or improperly applied the law.” That sounds almost like a judicial responsibility. How much confidence should we have in the justice of a decision if a majority of the judges have taken multiple campaign contributions from executives (and their spouses) of one of the parties?

In some ways, it is understandable that citizens might not be aware of this campaign contribution stacking. The campaign finance reports that council members file don’t contain the name of contributors’ employers. It takes a bit of investigation to uncover the linkage between contributors and the corporations that employ them. For citizens, that might be considered beyond the call of duty. But we should expect better from organizations like the League of Women Voters.

Certainly there is no excuse for the Wichita Eagle to miss or avoid things like this. Even worse, it is disgraceful that the Eagle would deny the problem, as it did in its November 23 article quoted above.

In summary, some citizen activists — most council members, too — believe that a single $500 campaign contribution from a corporation has a corrupting influence. But stacking dozens of the same $500 contributions from executives and spouses of the same corporation? Not a problem.

Political campaign contributions are a form of speech and should not be regulated. What we need are so-called pay-to-play laws, which regulate the linkage between campaign contributions and council member participation in matters that benefit donors.5

Either that, or we need council members with sufficient character to recognize when they should refrain from voting on a matter.


Notes

  1. Ryan. Kelsey. Wichita City Council considers changes to campaign finance, salaries. Wichita Eagle, November 23, 2015. Available at www.kansas.com/news/politics-government/article45993895.html.
  2. Ryan, Kelsey. Wichita council votes to change local campaign finance law, raise council salaries. Wichita Eagle, December 1, 2015. Available at www.kansas.com/news/politics-government/article47329045.html.
  3. Weeks, Bob. Michigan company involved in disputed Wichita airport contract contributes to Jeff Longwell. Voice for Liberty. Available at wichitaliberty.org/wichita-government/michigan-company-involved-in-disputed-wichita-airport-contract-contributes-to-jeff-longwell/.
  4. Wichita City Council agenda packet for July 17, 2012.
  5. Weeks, Bob. *Kansas needs pay-to-play laws.” Voice for Liberty. Available at wichitaliberty.org/wichita-government/kansas-needs-pay-to-play-laws/.

Wichita mayor’s counterfactual op-ed

Wichita’s mayor pens an op-ed that is counter to facts that he knows, or should know.

In the pages of the Wichita Eagle Wichita Mayor Jeff Longwell wrote: “The city of Wichita has held its mill levy steady for the past 22 years.”1

That’s the mayor’s opinion. The facts, as can be easily found in government documents, are that the Wichita mill levy rises nearly every year.2 Since 2005 it has risen every year.

Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
The mayor, city council, and bureaucrats say they have not taken action to raise the mill levy. They also say the mill levy is set by the county. All this is true.

But the county sets the mill levy based on two factors, one the city controls: The amount it decides to spend. The other factor, the assessed valuation of property, is not controlled by the city. So it is understandable that the mill levy may vary by small amounts from year to year when the two numbers are melded to form the actual mill levy. Some years the levy might rise, and in some years, it may fall. If it is a truly random matter, we should expect that over time the number of rising years and falling years should be equal, and that the overall change should be near zero.

But in Wichita, the mill levy rises nearly every year. And over time, since 1995, it has risen by 4.46 percent.

Wichita mill levy, percent dedicated to debt service. Click for larger version.
Wichita mill levy, percent dedicated to debt service. Click for larger version.
(Besides that, there has been a shift in the application of property tax revenue, with revenue was diverted from debt service to current spending. As recently as 2007 the city devoted 31 percent of property tax revenue to debt service. In 2015 it was 26 percent.)

What should concern Wichitans about their mayor’s op-ed is that he knows these facts. Or, at least he should. Despite the data that is readily available in the city’s comprehensive annual financial reports, Mayor Longwell has chosen to remain misinformed and/or uninformed, and to spread that to citizens.

Following are excerpts from the minutes of the August 7, 2012 council meeting, which Jeff Longwell attended as council member, and following that, video.

Wichita City Council, August 7, 2012

Bob Weeks 2451 Regency Lakes Court stated we say the City has not raised its mill levy in a long time and thinks it is true that this Council has not taken action to raise the mill levy, but it has increased. Stated in 2002 the City’s mill levy was 31.845 and last year 32.359, which is an increase of about half a mill or 1.6 percent. Stated we should also recognize that property tax revenue increased from about $83 million to $118 million dollars or 42 percent. Stated we did not experience anything near that in the rate of growth of population or inflation? even the two put together. Stated in the City sales tax collection for the same years, $41 million to about $55 million or 34 percent increase. Stated City revenues have increased quite a bit even though the Council has not taken explicit action to increase either the sales tax rate or the property tax rate. Stated another thing he is concerned about is shifting one mill of property tax revenue from the debt service fund to the general fund. Stated over the past years since 2007 there has been a shift of about 2.5 mills, which is more than the explicit policy of one mill, which will be ending over the next two years. Stated we have not delayed paying off debt in the sense that we have not made our scheduled bond payments but that 2.5 mills could have been used to retire debt instead of supporting current spending. Stated we could have repurchased some of our outstanding bonds or we could have used that money to pay for things that we borrowed for. Stated we need to realize that we have been not taking advantage of opportunities to retire longterm debt and had been redirecting that spending to current fund spending, which is where Cowtown and the Nature Center come from. Stated we need to be aware of these types of things as we make the policies going forward.

Mayor Brewer asked staff to explain the figures that Mr. Weeks was talking about.

Kelly Carpenter Finance Director stated regarding the mill levy, they started out at 10 mills in the capital improvement plan. Stated they reduced that down to 7.5 mills and now we are gradually increasing that mill levy back up in the debt service fund to 8.5 mills over the next two years.

Council Member O’Donnell stated he was referring that the mill levy has actually increased.

Kelly Carpenter Finance Director stated the overall mill levy has not increased within the last 19 years. Stated there has been a shift between the general fund and the debt service fund but the overall mill levy of the 32 mills has not increased.

Council Member O’Donnell asked Mr. Weeks to return to the podium and asked where his figures are from.

Bob Weeks stated from the 2011 Comprehensive Annual Financial Report, page H17. Stated they are the numbers that he extracted from that report. Stated it may not be that this Council took an action to raise the mill levy but somehow it did increase.

Council Member O’Donnell asked staff to answer that.

Mark Manning Finance Department the mill levy is set by the county and what they tell the Council each year is that the mill levy in the proposed budget is not changed from the mill levy certified by the county, the prior year. Stated they do not know what the mill levy will be for 2013 right now and will not know until November when the county finalizes its evaluation. Stated it may be slightly higher or lower and that is why you see those annual fluctuations. Stated Mr. Weeks is correct? some years it goes up and some years it goes down a little bit. Stated it does fluctuate and there is nothing we can do to control that but the general policy has been to keep it level for the last 19 years.

  1. Mayor Jeff Longwell: Property tax lid needs exemption for public safety. Wichita Eagle. Available at www.kansas.com/opinion/opn-columns-blogs/article74286642.html.
  2. Weeks, Bob. Wichita property tax rate: Up again. Voice For Liberty in Wichita. Available at.wichitaliberty.org/wichita-government/wichita-property-tax-rate-up-again/.

What else can Wichita do for downtown companies?

With all Wichita has done, it may not be enough.

Within a month, these two headlines appeared in the opinion pages of the Wichita Eagle:

Investment in downtown Wichita is impressive 1

State and local leaders need to help meet Cargill’s needs 2

The second headline was in response to the news story “Cargill plans to move its Wichita headquarters — but where?” 3 In this story, Carrie Rengers reports “Cargill is looking to move its Wichita headquarters, but whether that’s within downtown, where it already is, or outside of it or even outside of Kansas is unclear. … City and state officials are working in full gear to make sure Wichita — downtown specifically — is the option Cargill selects.”

Rengers reports that Wichita city officials say no specific incentives have been offered to Cargill, but “any incentives likely would involve infrastructure help, such as with parking, or assistance with easing the process for a new building, such as with permitting.” Wichita Mayor Jeff Longwell says “cash incentive won’t be an option,” according to Rengers.

A Cargill official says that the company needs to attract millennials and younger people, who are not attracted to “traditional office space and office-type buildings.”

Now, consider the first opinion headline: “Investment in downtown Wichita is impressive.” In this op-ed, Phillip Brownlee writes “It’s encouraging that investment in downtown Wichita is continuing — and that it is mostly privately funded. A vibrant downtown is important to the city’s image and to attracting and retaining young adults. More than $1 billion in private and public investment has occurred downtown in the past decade. About $675 million of that investment has been privately funded, and $411 million has been public projects, according to Wichita Downtown Development Corp.”

Brownlee goes on to note other investments, such as 800 new apartment units “in the works.”

On the importance of downtown, Brownlee writes “City leaders have long recognized the value of a healthy downtown. Besides the symbolic importance of not having a lot of empty buildings, many young adults prefer an urban environment. That makes downtown important even for businesses not located there, because it can help or hurt their ability to recruit and retain young professionals.”

I see a discontinuity. Our city’s leaders — opinion, elected, and bureaucratic — brag about all the investment in downtown Wichita, public and private, yet it doesn’t seem to be enough to retain a major Wichita employer in downtown.

At least editorialist Rhonda Holman recognizes the problem in her column: “It’s concerning that Cargill’s stated intentions to relocate and consolidate have not included a commitment to remain downtown or even in Wichita or Kansas.” What is her solution? “Elected and business leaders need to be creative and assertive in helping Cargill meet its needs.”

I share Holman’s concern. It’s very troubling that with $411 million in private investment over the past decade, downtown Wichita still isn’t attractive enough to retain Cargill, if the company’s intent to move is real and genuine. And advising the same group of people who have been in power during the decline of the Wichita economy to be “creative and assertive” is a solution?

What’s even more disconcerting is that the person who has overseen much of this downtown spending has been promoted. Now Jeff Fluhr of Wichita Downtown Development Corporation is president of Greater Wichita Partnership, with responsibility “to grow the regional economy.”

Forgive me if I’m underwhelmed.

Regulation
One of the things that may be offered to Cargill, according to Rengers, is “assistance with easing the process for a new building, such as with permitting.” This is a big red flag on a very tall flagpole. If the city has regulations so onerous that they are a consideration as to whether to locate in Wichita, this is something that must be fixed immediately. But the instinct of the Wichita City Council and city bureaucrats is to create more regulations covering everything from the striping of parking lots to the personal hygiene of taxi drivers.

Cash incentives
Mayor Longwell says there will be no cash incentives offered to Cargill. Instead, something like help with parking may be offered. This might take the form of building a parking garage for Cargill. We should ask: What is the difference between giving cash to Cargill and building a parking garage for Cargill’s use? There really isn’t a meaningful difference, except for Cargill. That’s because cash incentives are taxable income. Free use of a parking garage isn’t taxable. 4 5

Further, Cargill may qualify for PEAK, or Promoting Employment Across Kansas.6 This program allows companies to retain 95 percent of the payroll withholding tax of employees. The original intent of this program was to lure companies to locate in Kansas, but in recent years the program has been expanded to include incentivizing companies to remain in Kansas. While this is a state program and not a city program under the mayor’s control, PEAK benefits are more valuable than cash.


Notes

  1. Brownlee, Phillip. Investment in downtown Wichita is impressive. Wichita Eagle. March 5, 2016. Available at www.kansas.com/opinion/editorials/article64129977.html.
  2. Holman, Rhonda. State and local leaders need to help meet Cargill’s needs. Wichita Eagle. April 1, 2016. Available at www.kansas.com/opinion/opn-columns-blogs/now-consider-this/article69534982.html.
  3. Rengers, Carrie. Cargill plans to move its Wichita headquarters — but where? Wichita Eagle. March 29, 2016. Available at www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article68700517.html.
  4. Journal of Accountancy, (2009). Location Tax Incentive Not Federal Taxable Income. Available at: www.journalofaccountancy.com/issues/2009/apr/locationtaxincentive.html.
  5. American Institute of CPAs, (2015). Federal Treatment of State and Local Tax Incentives. Available at: www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpTax/Federaltreat.jsp.
  6. Weeks, Bob. In Kansas, PEAK has a leak. Voice For Liberty in Wichita. Available at wichitaliberty.org/kansas-government/kansas-peak-leak/.

In Wichita, revealing discussion of property rights

Reaction to the veto of a bill in Kansas reveals the instincts of many government officials, which is to grab more power whenever possible.

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it.
— Frederic Bastiat

Kansas Governor Sam Brownback’s veto of a bill that gives cities additional means to take blighted property has produced reaction from local officials in Wichita. The bill is Senate Bill 338.

As has been noted in numerous sources, cities in Kansas have many tools available to address blight. 1 What is the purported need for additional power?

In remarks from the bench, Wichita City Council Member Pete Meitzner (district 2, east Wichita) said there is no intent to be “aggressive in taking people’s property.” 2 But expanding the power of government — aggression, in other words — is what the bill does. Otherwise, why the need for the bill with its new methods and powers of taking property?

And once government is granted new powers, government nearly always finds ways to expand the power and put it to new uses. Even if we believe Meitzner — and we should not — he will not always be in office. Others will follow him who may not claim to be so wise and restrained in the use of government power.

In particular, government finds new ways to expand its powers through enabling concepts like blight. Did you know the entire suburban town of Andover is blighted? 3 Across the country, when governments find they can take property with novel and creative interpretations of blight, they do so. 4

It’s easy to sense the frustration of government officials like Wichita Mayor Jeff Longwell. In his remarks, he asked opponents of SB 338 “what they would do” when confronted with blight. That is a weak argument, but is often advanced nonetheless. Everyone has the right — the duty — to oppose bad legislation even if they do not have an alternate solution. Just because someone doesn’t have a solution, that doesn’t mean their criticism is not valid. This is especially true in this matter, as cities already have many tools to deal with blight.

Proponents of SB 338 also make unfounded accusations about the motivation of opponents of the law. Because someone opposes this law, it doesn’t mean they are in favor of more blight. Those who fight for freedom and liberty are used to this. Advocating for the right to do something doesn’t necessarily mean that one is in favor of actually doing it.

The nature of rights

Much of the discussion this issue concerns the rights of people who live near blighted property. People do have certain rights, but rights have limits. Regarding property, Roger Pilon writes: “Thus, uses that injure a neighbor through various forms of pollution (e.g., by particulate matter, noises, odors, vibrations, etc.) or through exposure to excessive risk count as classic common-law nuisances because they violate the neighbor’s rights. They can be prohibited, with no compensation owing to those who are thus restricted.” 5

Note that Pilon mentions “excessive risk” as something that injures a neighbor. Some of the activities the city wants to control are things like drug dealing, drug usage, and prostitution that may take place on blighted property. And, I suppose it is a risk to have gangs dealing drugs out of the house across the street, blighted or not. But these activities are illegal everywhere, and there are many laws the city can use to control these problems. There is no need for new laws.

It is important to draw a bright line as to where property rights end. Pilon: “By contrast, uses that ‘injure’ one’s neighbor through economic competition, say, or by blocking ‘his’ view (which runs over your property) or offending his aesthetic sensibilities are not nuisances because they violate no rights the neighbor can claim. Nor will it do to simply declare, through positive law, that such goods are ‘rights.'” 6

In today’s world, however, where new rights are seemingly created from thin air, people want to exercise their purported right to control how their neighbor’s property looks. But we have no such right, writes Pilon: “The principle, in fact, is just this: People may use their property in any way they wish, provided only that in the process they do not take what belongs free and clear to others. My neighbor’s view that runs over my property does not belong free and clear to him.” 7

Opposition in the Legislature

When the Kansas House of Representatives and Senate voted on this bill, several House members submitted explanations of their vote. In the Senate, David Haley filed a protest and message explaining his opposition to the bill. These statements follow.

Explanation of vote in the House of Representatives

MR. SPEAKER: I VOTE NO ON SB 338. KANSAS ALREADY HAS SUFFICIENT TOOLS IN PLACE TO ADDRESS BLIGHT. SB 338 circumvents our current eminent domain statutes by redefining “abandoned property” and by allowing our local governments to expeditiously confiscate, seize or destroy law abiding citizens’ private property without compensation, adequate notice, and a legal property title. This is an egregious overreach that deprives some citizens of their private property rights without sufficient due process and it will cause irreparable harm to our most vulnerable citizens that do not have the resources to protect their property.
— GAIL FINNEY, BRODERICK HENDERSON, RODERICK HOUSTON, BEN SCOTT, VALDENIA WINN, JOHN CARMICHAEL, KASHA KELLEY, BILL SUTTON, JERRY LUNN, CHARLES MACHEERS

Protest of Senator David Haley against Senate Bill 338

February 23, 2016

In Accordance with Article 2, Section 10 of the Constitution of Kansas, I, David Haley, a duly elected Senator representing the Fourth District of Kansas, herein PROTEST the action of this Legislature in the promulgation and passage of Senate Bill 338: An Act pertaining to Cities.

In my 23 years as a Kansas Legislator and as but one of only three attorneys in the Senate, this is the first PROTEST I have ever lodged on any measure of the thousands I have considered.

This Chamber now further denigrates real property rights to which every Kansan should be heir.

SB 338 which purports to grant authority to cities and nonprofit organizations to petition courts to possess vacant property for rehabilitation purposes will, simply, but legalize grand theft.

The Senate Commerce committee as is its charge (and not the Senate Local Government committee where, justifiably, similar language as SB 338 had over many years failed time and time again) recognizes and advances business and financial opportunities for our State.

First, the question of a city, redefining definitions of “abandonment” and “blight” as these terms apply to real property, land and or improvements, is the expertise of deliberations of a committee membership dedicated to the auspices of municipalities not the principles of profit.

The principles of real property ownership should always inure to the rights of the citizen not to a developer’s bottom line or even a desire to enhance appraised valuations for tax purposes.

Diabolical in its spawning, methodical and tenacious in its steady lurch forward, SB 338 adheres to two tiered definitions of “abandoned property;” both ingenuous and neither accurate. One definition of “abandoned property”: vacant for 365 days and having a “blighting influence” on surrounding properties; the other definition vacant for 90 days and 2 years tax delinquent.

There are numerous every day scenarios whereby a real property owner has in no way “abandoned” their property though that same property may be vacant for 90 to 365 days, be tax delinquent for 2 years or may have need of rehabilitation to conform to a local standard, real or perceived. But SB 338 alleges “abandonment” and triggers governmental intrusion, harassment and potentially leads to a taking of real property by the government for the benefit of an organization which profits from the taking and kick back higher taxes to the city.

“Commerce,” yes, but a shameful way to run a citizen responsive “Local Government.”

The specious argument in favor of this legislation portends neighborhood beautification, tax viability and repopulation of or demolition and rebuilding of older houses. By eradicating “blight,” the entire community, even the city, is greatly enhanced.

With that premise, I, David Haley, could not agree more.

Today, with no need for warping and putting into statute time-honored definitions of “blight” and “abandonment” or presupposes new postulates for passages of time periods to correlate to real property owners’ interests or genuine concern with their legally owned land(s), there are tools already available to every municipality to address blight. “Code enforcement” departments can post notice and bring to environmental and district court negligent property owners. Subsequent to insufficient response, steep fines and even jail time can be issued now. Today in current statute, a property with two or more years of delinquent property taxes may be sold by the Sheriff of each Kansas County in a “Delinquent Property Tax Sale” also known as a “Sheriff’s” sale or as property “sold on the Courthouse steps.” Again, these are current tools available to curb or cure blight and to put real property into fiscally responsive ownership.

The property rights of legal property owners should not be infringed upon by this Legislature.

Marginal or fragile property owners (traditionally average income or poor property owners attempting to hold on to inherited property or an entrepreneurial hope structure as often found in inner cities) will be set upon by keen-eyed, out of county based developers sheltered by an industrious “not-for-profit” which uses the city and district court as the leverage to harass and ultimately take the land, all in the name of “civic pride” or “community betterment.” Theft.

The late Kansas City, Missouri civil rights leader Bernard Powell (1947-1979) envisioned and warned of the transfer of inner city property back into the same hands of those who fled the same a half century or more ago to the sanctity of the suburbs. Bernard Powell predicted the day would come when government, and the tools they elect and hire, will work hand-in-hand with “robber barons” to turn those out; those who have despaired in neglected, under represented, often high crime, poorly educated neighborhoods, those who have weathered poverty, hard times, civic and civil harassment but yet held a real property interest, a “piece of the pie” … to force them out. Bernard Powell spoke of prosperity returning to the inner city and nothing being tendered to the people who had paid the price for the most sought after of land.

He called it government assisting the turning of the “ghetto into a goldmine.” How prophetic.

Here I sit, practically alone in my opposition to this expansion of eminent domain targeted at poorer property owners ill equipped to “fight City Hall,” in this Kansas Senate and watch this unfold. Again, SB 338 came out of the Commerce committee as well it should.

Government has redefined terms before to shape shift often dastardly need to justify ill deeds.

I remember efforts to redefine “blight” for economic purposes in another eminent domain taking for use in building the Kansas Speedway and Legends in Wyandotte County. Succinctly, the new definition of “blight” was the ability for exponentially more taxes to be levied against the future use of the land than that which the owner who it was being taken from could be expected to pay in its current use. Remnants of that economically fascist philosophy resonate in SB 338. As more people flee the “golden ghettos” of suburbia, the inner city “ghettos” will be repopulated and turned into “goldmines” at the expense I fear, once again, of the poor and unsuspecting. Ironically, we celebrated and honored some of our Korean and Vietnam War heroes today in the Senate Chamber. Was the freedom to own real property without fear of unwarranted government intrusion something for which they fought?

I protest the passage of Senate Bill 338 as is my Constitutional right as a Kansas State Senator under Article Two, Section 10 of the Kansas Constitution for reasons, beliefs afore-listed as well as others not so and hereby vow to continue to assist unnecessarily embattled real property owners in my home District as we together will face the challenges that this bill, when signed into law, will undoubtedly bring.


Notes

  1. Todd, John. Power of Kansas cities to take property may be expanded. Voice For Liberty in Wichita. Available at wichitaliberty.org/kansas-government/power-kansas-cities-take-property-may-expanded/.
  2. Video. Wichita City Council speaks on blight. Available at wichitaliberty.org/wichita-government/wichita-city-council-speaks-blight/.
  3. Weeks, B. (2012). Andover, a Kansas city overtaken by blight. Voice For Liberty in Wichita. Available at wichitaliberty.org/economics/andover-a-kansas-city-overtaken-by-blight/.
  4. Nicole Gelinas, Eminent Domain as Central Planning. (2015). City Journal. Available at www.city-journal.org/html/eminent-domain-central-planning-13253.html.
  5. Pilon, Roger. Protecting Private Property Rights from Regulatory Takings. (1995). Cato Institute. Available at www.cato.org/publications/congressional-testimony/protecting-private-property-rights-regulatory-takings.
  6. ibid
  7. ibid

Wichita economic development and capacity

An expansion fueled by incentives is welcome, but illustrates a larger problem with Wichita-area economic development.

Last week a Wichita company received economic development incentives in conjunction with an expansion. This is the third incentive the company has received in four years. The incentives are forgiven property taxes and sales taxes. 1 Simply, the company is allowed to skip paying many of the same taxes that everyone else must pay, including low-income households paying sales tax on groceries.

While the expansion of this company is welcome news, the hoopla surrounding it shows how we can’t rely on government intervention to pull Wichita out of its slump. Here are some figures.

According to the Bureau of Labor Statistics, Wichita metropolitan area employment is 14,500 less than its peak in 2008. Manufacturing jobs are down by 23,600 from the peak in 1998, or down by 15,400 from 2008. 2

In 2012 when this company requested an incentive, its employment was given as 110. 3 Current employment is given as 130, and by 2021, the company is required to employee 188 people. 4

So if everything goes as planned, 5 three economic development incentives programs will boost a company’s employment from 110 to 188. That’s an increase of 78 jobs over nine years, or about nine jobs per year.

If we look at these jobs in the larger context, we see that these jobs represent 0.5 percent of the jobs lost in the Wichita area since 2008. If we are relying on these jobs to spur a renaissance of manufacturing in Wichita, they represent 0.3 percent of manufacturing jobs lost since its peak.

This company and these three economic development incentives are not the only efforts the city has made. Other incentives to other companies have created jobs. But this company is considered a significant and major success. The awarding of this inventive was evidently such an uncommon event that it merited a large article in the Wichita Eagle. In his remarks, according to meeting minutes, Wichita Mayor Jeff Longwell said “this is how we move Wichita forward” and “this is how we grow our businesses here in Wichita and help them be successful.”

The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We need to be creating nine jobs every day in order to make any significant progress in economic growth. If it takes this much effort to create 78 jobs over nine years, how much effort will it take to create the many thousands of jobs we need to create every year?

A related problem is that we don’t know how many jobs are created by the city’s economic development efforts. As part of a campaign for a city sales tax in 2014, the city promised a web site to track the progress of jobs created. The sales tax didn’t pass, but the city still engages in economic development, and still does not track results. At least not publicly, and when I’ve asked, the results provided have been sketchy and incomplete.

On top of this, we don’t know if the incentives were necessary to enable the company to expand. Usually city documents state that incentives are necessary to make economic activity “viable.” No such claim was made in the documents supporting this incentive.

The large amount of bureaucratic effort and cost spent to obtain a relatively small number of jobs lets us know that we need to do something else in order to grow our local economy. We need to create a dynamic economy, focusing our efforts on creating an environment where growth can occur organically without management by government. Dr. Art Hall’s paper
Embracing Dynamism: The Next Phase in Kansas Economic Development Policy provides much more information on the need for this.

Another thing we can do to help organically grow our economy and jobs is to reform our local regulatory regime. Recently Kansas Policy Institute released a study of regulation and its impact at the state and local level. This is different from most investigations of regulation, as they usually focus on regulation at the federal level.

Business Perceptions of the Economic Impact of State and Local Government Regulation coverThe study is titled “Business Perceptions of the Economic Impact of State and Local Government Regulation.” It was conducted by the Hugo Wall School of Public Affairs at Wichita State University. Click here to view the entire document.

Our civic leaders say that our economic development efforts must be reformed. Will the path forward be a dynamic economy and reformed regulation? Or will it be more bureaucracy, handfuls of jobs at a time?


Notes

  1. Wichita City Council meeting agenda, April 5, 2016, p. 12.
  2. According to the Bureau of Labor Statistics, the peak of nonfarm employment in the Wichita metropolitan area was in 2008, where employment averaged 310,500. For 2015, employment averaged 296,000. That’s a loss of 14,500 jobs. For manufacturing jobs, the peak was 1998, when employment in this field was 75,900. In 2008 the figure was 67,700 jobs, and in 2015, 52,300 jobs. This is a loss of 23,600 jobs from manufacturing’s peak, or of 15,400 jobs from Wichita peak employment in 2008.
  3. Wichita City Council meeting agenda, September 11, 2012, p. 45
  4. Wichita City Council meeting agenda, April 5, 2016, p. 12.
  5. So far, employment is not progressing as planned. In the 2012 agenda item, it was said that employment would rise by 50 jobs over the next five years, which you by 2017. Current employment, according to the current city council agenda, is 130, which is 30 jobs short. The deadline for this projection has not yet arrived.

In Wichita, the phased approach to water supply can save a bundle

In 2014 the City of Wichita recommended voters spend $250 million on a new water supply. But since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot.

The events surrounding the need for a new water supply is a troubling episode in the history of Wichita government. During the prelude to the November 2014 election, citizens were presented with a gloomy scenario that could be fixed only with a sales tax and the spending of $250 million. After voters said no to that, new plans emerged that are much less expensive. Lily Tomlin once said “No matter how cynical you become, it’s never enough to keep up.” This episode shows Wichita city leaders — both in and out of government — reinforcing the truth of Tomlin’s observation.

On December 1, 2015, the Wichita City Council held a workshop on the topic “Phased Approach for New Water Supply.”1 Alan King, Director of Public Works and Utilities, was the presenter. King emphasized that the impetus for a new water supply was for drought protection: “We presently have enough water with our current water resources to last us through our planning period of 2060, without drought.”

He continued: “When we come and talk to you about additional water resources, it is really only for one purpose, and that is drought protection. If there was no drought, we have no need. The water resources that we come in and are talking to you about, the only value they have for us is in drought protection.”

But a city document leading up to the sales tax election presented a different scenario. It threatened a lack of water for even residential use: “Building a new supply, along with conservation efforts, is the lowest cost option for providing sufficient water through 2060. Significant conservation will be needed if the current supplies are the sole sources of water for the coming decades; sever [sic] conservation requirements could be harmful to local businesses and quality of life. Adding a new water supply would provide enough water for future growth for the community’s residential, commercial, and industrial base.”2

This is an important point. We have sufficient water except for a period of extended drought. Even in that case, there is sufficient water for residential, commercial, and industrial use. The purpose of a new water supply is to avoid restrictions on outdoor watering, and in the most extreme drought, a savings of 15 percent of indoor water usage.

In his December presentation to the council, King presented several phases that the city can take. The first three have no cost, and King said these are underway.

After that, the city can spend $23 million for new wells and rehabilitation of existing wells at the ASR site.

After that, there is the possibility of “operational credits,” which involve a change to state regulations. If the state approves, the city can receive credits for sending ASR water directly to Wichita instead of recharging it in the Equus Beds. If not approved, the city could spend $47.2 million for new recharge wells in 2022. If these wells are built, the cost rises to $70.2 million. (On January 22 King made a presentation to the Equus-Walnut Regional Advisory Committee on this topic.3)

Phased Approach for New Water Supply. Click for larger.
Phased Approach for New Water Supply. Click for larger.
There is also the matter of the parallel pipeline. The existing pipeline from the Equus Beds and ASR to the city’s downtown water plant is old and won’t support higher rates of water transmission. The proposed parallel pipeline provides not only redundancy of a major part of our water infrastructure, but also increased capacity. The cost of this, estimated in 2014 at $86 million, was included in the $250 million price tag for ASR expansion. If the parallel pipeline cost is added to the previous phase costs, the cost rises to either $109 million or $156.2 million, depending on the fate of the operational credits regulation reform.

Either way, the cost is much less than the $250 million the city asked voters to consider in November 2014. And I think I’m being charitable of motives when I say “consider.” The clear and revealed preference of the city council and the city’s political class was passage of the sales tax, meaning the city would spend $250 million to achieve something the city now says can be provided for $109 million or $156.2 million. (Well, everyone except then-city council member and now-mayor Jeff Longwell, but his vote against placing the sales tax on the ballot was a naked political calculation.)

In information the city presented to voters in the run up to the November 2014 election, the city promised large water bill increases if the sales tax vote failed, writing: “If a new water supply is funded only through water rate increases, the capital cost portion of the rate will increase an estimated 24%. This is in addition to anticipated annual rate increases.”4

Possible water bill increases. Click for larger.
Possible water bill increases. Click for larger.
King’s 2015 presentation to the council showed increases of nine percent for residential, commercial, and industrial customers.5

Citizens ought to wonder what lessons may be learned from this. Furthermore, I don’t believe there has been any coverage of this in the city’s mainstream news media. That is a problem, too. For more on this problem, see Wichita Eagle, where are you?


Notes

  1. City of Wichita workshop. Phased Approach for New Water Supply. Video available at https://youtu.be/mNQ26-VZBSA.
  2. Building A Better Future: A Proposed Sales Tax for Basic Services, City of Wichita, June 13, 2014. Available at http://www.wichita.gov/Government/Departments/Finance/FinancialDocuments/Sales%20Tax%20Proposal%20for%20Basic%20Services.pdf.
  3. Equus-Walnut Regional Advisory Committee Meeting Notes. Available at http://www.kwo.org/RACs/2016_RAC%20Notes/doc_EQW_Min_January_012216_mu.pdf.
  4. Plans & Background on Proposed 1¢ Sales Tax, City of Wichita, 2014. Available at https://drive.google.com/file/d/0B97azj3TSm9MS0lCQncxQkp4ODg/.
  5. Phased Approach for New Water Supply, Presentation to Wichita City Council, December 1, 2015, page 30. Available at http://wichita.gov/Government/Council/Agendas/2015-12-01%20Phased%20Approach%20for%20New%20Water%20Supply.pdf.

WichitaLiberty.TV: Wichita outreach, city council, and entrepreneurship

In this episode of WichitaLiberty.TV: A look at Wichita community outreach and communications, rewriting city council history, and entrepreneurship. View below, or click here to view at YouTube. Episode 102, broadcast December 6, 2015.

Shownotes

For Wichita’s mayor, too many public hearings

Is the Wichita city council burdened with too many public hearings? Wichita’s mayor seems to think so.

Bob Weeks Facebook post 2015-10-20It’s not like the Wichita City Council is overburdened with citizens wanting to speak at public hearings. Sure, once in a while when the council is considering something really important like renaming the airport, many will want to speak.

But by and large, the routine business of the council is conducted with little input from the public. (This includes the dishing out of grants, tax abatements, and other favors worth millions to council members’ campaign contributors and cronies.) Many public hearings draw no speakers. For others, maybe one or two citizens will appear and offer an opinion.

Yet, it has become commonplace for the new mayor and council members to carp about the length of city council meetings.

City of Wichita Facebook post.
City of Wichita Facebook post.
This is in a city that just last week received an award for, in part, “community engagement.” Which tells us a lot about the worth and validity of these awards.

But for Wichita Mayor Jeff Longwell, too many public hearings means, well, too much community engagement. Or, maybe too much of his time wasted. He didn’t say which, but I think we know what he meant.

Oh, and the public hearing where the mayor brought up his concern about wasting time with too many public hearings? No one wanted to speak. Video below.

Campaign contribution changes in Wichita

A change to Wichita city election law is likely to have little practical effect.

Currently Wichita city code prohibits certain entities from making campaign contributions to candidates for city council and mayor: “Contributions by political committees as defined by K.S.A. 25-4143, as amended, corporations, partnerships, trusts, labor unions, business groups or other such organizations are expressly prohibited.”

The intent of this law is to limit the influence of businesses and unions on city elections. This week the Wichita City Council will consider striking this portion of city code. The contribution limit of $500 to a candidate for the primary election, and $500 again for the general election, is proposed to be retained.

The practical effect of removing the restriction on campaign contributions from corporations and other entities is likely to be minor. Here’s why.

Last year, lamenting the role of money in national elections, a Wichitan wrote in the Wichita Eagle “Locally, I understand that elections for the Wichita City Council underwent ideal, nonpartisan campaign-finance reform years ago, and that these limits are scrupulously practiced.” This view is naive and doesn’t reflect the reality of current campaign finance practice in Wichita. That is, the stacking of contributions from multiple members of interested groups. For example, a frequent practice is that a business might have several of its executives and their spouses make contributions to a candidate. Because the contributions are made by multiple people, the money is contributed within the campaign finance limitation framework. But the net effect is a lot of money going to a candidate’s campaign in order to advance the interests of the business, thereby circumventing the intent of campaign finance restrictions.

Stacked campaign contributions received by James Clendenin from parties associated with Key Construction. Click for larger version.
Stacked campaign contributions received by James Clendenin from parties associated with Key Construction. Click for larger version.
Here’s how a handful of self-interested groups stack campaign contributions.

Stacked campaign contributions to Lavonta Williams from Key Construction associates. Click for larger version.
Stacked campaign contributions to Lavonta Williams from Key Construction associates. Click for larger version.
In 2012 council members James Clendenin (district 3, southeast and south Wichita) and Lavonta Williams (district 1, northeast Wichita) were preparing to run again for their offices in spring 2013. Except for $1.57 in unitemized contributions to Clendenin, two groups of related parties accounted for all contributions received by these two incumbents for an entire year. A group associated with Key Construction gave a total of $7,000 — $4,000 to Williams, and $3,000 to Clendenin. Another group of people associated with movie theater owner Bill Warren gave $5,000, all to Clendenin.

Stacked campaign contributions to Jeff Longwell from Key Construction associates. Click for larger version.
Stacked campaign contributions to Jeff Longwell from Key Construction associates. Click for larger version.
In July 2012, as Wichita Mayor Jeff Longwell (then a city council member) was running for the Sedgwick County Commission, his campaign received a series of contributions from a Michigan construction company. Several executives and spouses contributed. At the time, Longwell was preparing to vote in a matter involving a contract that the Michigan company and its Wichita partner wanted. That partner was Key Construction, a company that actively stacks contributions to city council candidates.

Longwell has also received stacked contributions from Key Construction.

The casual observer might not detect the stacking of campaign contributions by looking at campaign finance reports. That’s because for city offices, the name of the company a contributor works for isn’t required. Industry and occupation are required, but these aren’t of much help. Further, contribution reports are not filed electronically, so the information is not easy to analyze. Some reports are even submitted using handwriting, and barely legible handwriting at that.

The campaign finance reform that Wichita really needs is quite simple. It’s called a pay-to-play law, and it can be a simple as this: “A councilmember shall not participate in, nor use his or her official position to influence, a decision of the City Council if it is reasonably foreseeable that the decision will have a material financial effect, apart from its effect on the public generally or a significant portion thereof, on a recent major campaign contributor.”

In other words, you can make contributions to candidates. You can ask the council to give you contracts and other stuff. But you can’t do both. It’s a reform we need, but our elected officials are not interested.