Tag Archives: Jeff Longwell

Wichita City Council Member Jeff Longwell

Wichita’s Jeff Longwell on TIF districts, tax abatements

Is a tax increment financing (TIF) district a tax abatement? Wichita city council member Jeff Longwell, now Wichita’s vice mayor, doesn’t think so. During this week’s city council meeting, Longwell said this in explaining his support of a TIF district created for the benefit of Real Development: “One of the things that people I think need to understand is that this is not a tax abatement.”

He said tax revenues will increase from $28,000 to half a million dollars, repeating that it is not a tax abatement.

So is it true that TIF is not a tax abatement?

A little background: The Wichita City council grants property tax abatements regularly as part of its Industrial Revenue Bond program. In the IRB program, the city is not the lender of funds, and it does not guarantee that the bonds will be repaid. Instead, the benefit of the IRB program is that the applicant won’t have to pay property tax on property purchased with the bond money. This abatement is generally granted for a period of ten years, although it is reviewed after five years to see if the company is fulfilling the promises it made to justify the tax abatement. In addition, a sales tax exemption may be granted on the property purchased with the bond money.

Confused? Many people are. A few weeks ago the city issued IRBs to a Wichita movie theater operator. Comments left at various online forums often argued that the city should not be lending money to the theater and its controversial ownership group. But as we’ve seen, the city is not making a loan. Instead, the IRB program is simply a vehicle that is used to grant relief from paying property taxes to the city, county, and school district.

So the IRB program, despite its name, is a tax abatement program. What about tax increment financing, then?

Under TIF, a district is formed. The property taxes being paid by a property in the district at the time of formation is noted and called the base. Usually this property is blighted or run-down, so this base is a very low value.

Then a development plan is created, perhaps to build apartments or a shopping center. Based on that plan and the property taxes that the completed project will likely pay, the city will borrow money and give it to the developers.

After the project is completed, the tax appraiser notices that there’s something new and valuable where there wasn’t before, and he levies a higher tax bill on the property. The difference between the original taxes — the base — and the new taxes is called the increment.

Under normal conditions when new property comes on the tax rolls, the tax revenue is used to provide public services such as police and fire protection. The school district is usually a recipient of a large portion of the new tax revenue, which might be used to pay for the schooling of residents of the new apartments, for example.

But in a TIF district, what happens to this new tax revenue — the increment?

Recall that the city borrowed money and gave it to the developers. The new property taxes — the increment — is used to pay off these bonds.

So council member Longwell is correct, in a way. Real Development will pay increased property taxes.

But when these increased taxes are used to pay off bonds that exclusively benefit Real Development, how is this any different from not paying property taxes?

Consider development not in a TIF district. Developers generally borrow money. Then they have to make loan payments and higher tax payments.

But TIF developers pay only higher taxes. There are no loan payments, as their increased property tax payments are used to pay off the loan.

So when considering the total economic reality, council member Longwell is wrong. Several other council members have the same mistaken belief.

Tax increment financing is a tax abatement in disguise. Actually, it’s worse than that. Tax abatements granted in the IRB program don’t require the city to be on the hook for a loan. But in a TIF district, the city is the lender, and city taxpayers are liable if the TIF district doesn’t perform up to projections. This has happened in Wichita, and taxpayers had to pay in one way or another.

Why is Longwell, now Wichita’s vice mayor, unable to grasp these facts? Perhaps he does but chooses to ignore them. He has a reason to do so. Downtown Wichita real estate developers — let’s be clear: developers who seek public subsidy instead of working to meet market demand — are generous with campaign contributions, funding both political liberals like Wichita city council member Janet Miller and self-styled fiscal conservatives such as Longwell.

Longwell’s term expires next spring, and he may choose to run for his same office or even the mayor’s office, as some political observers have speculated.

Longwell has already drawn one challenger for his city council position, tea party activist Lynda Tyler. While lacking experience holding elective office, Tyler has well-established conservative credentials and can be expected to run a vigorous and well-funded campaign.

Longwell, who along with Wichita Mayor Carl Brewer complains that Wichita doesn’t have enough “tools in the toolbox” for dishing out economic development incentives to politically-connected city hall insiders, will have to explain his actions to voters in his largely conservative west-side district.

Someone should ask him if he really understands the economic reality of tax increment financing districts.

Wichita Warren Theater IRB a TIF district in disguise

On Tuesday the Wichita City Council will consider an economic development incentive for a local business. The process the city is using to grant this incentive bypasses the scrutiny that accompanies the formation of TIF districts while providing essentially the same benefit.

The proposal provides Industrial Revenue Bond financing to American Luxury Cinemas, Inc., d.b.a. 21st Street Warren Theatre, a company owned in part by Wichita theater operator Bill Warren. Under the city’s IRB program, no city money is lent to Warren, and the city does not provide any guarantee that the bonds will be repaid.

Instead, the benefit of the IRB to Warren is that he will escape paying property taxes on the new theater. Also, he will likely avoid paying sales taxes on purchases made with the bond money. (The city-supplied material doesn’t mention the sales tax exemption, but this incentive is commonly granted, and mention of it was likely omitted by mistake from the agenda report.)

This project is a TIF district in effect. It has the same economic benefit to the applicant. But the way this deal is structured means it doesn’t have to go through the normal approval process of a TIF district. Specifically, the Sedgwick County Commission will not have a chance to consider approval of these incentives. That approval would probably not be granted.

The process being used also allows the city to bypass the 30 day notice of a public hearing required for formation of a TIF district.

In a TIF district, the city borrows money and spends it immediately for the benefit of the TIF district. What the city spends money on isn’t important, as long as it’s spent on things that the owners of the property in the TIF district would have to pay for themselves, if not for the city. This is important to remember, as defenders of TIF districts say that the city money is spent “only on infrastructure,” as if most developers don’t have to pay for their own infrastructure.

As improvements to property in the TIF district are made — buildings being built or renovated, etc. — the property taxes on the property go up. This increase in the tax payments — that’s the increment in TIF — goes to pay off the borrowed money that was spent on the TIF district.

Since the TIF district spending was for the exclusive benefit of of the TIF district applicant, and the increased property taxes are paying off the bonds that provided that spending, TIF districts, in effect, let the applicants keep the increase in their own property taxes for their exclusive benefit.

Whenever anyone else improves their property and has to pay higher taxes, those taxes go to fund the general operations of government.

(If this sounds confusing and complicated, it is. It is confusing by design. A while back I told the council: “I’ve come to realize that this confusion serves a useful purpose to this council, because if the people of Wichita knew what was really happening, they’d be outraged.”)

In the Warren deal that the council will consider on Tuesday, no TIF district is being created. But because the property is in the IRB program, property taxes will be forgiven. Warren is agreeing to make payments equal to the present tax bill on the property (plus a small annual increase).

The net effect is that the Warren group will not pay property taxes on the value of the new project. It’s the same economic effect as a TIF district, without the scrutiny that accompanies formation of a TIF district.

Some city politicians and bureaucrats — particularly Mayor Carl Brewer, council member Jeff Longwell, and the city’s economic development chief Allen Bell — have complained that the city doesn’t have enough “tools in the toolbox” when it comes to dishing out economic development incentives.

This applicant has been the recipient of economic development incentives, including a TIF district formed for its benefit. When that business was failing, the city created a special tool for Warren’s benefit: a no-interest and low-interest loan.

Here we see another new tool being created — the formation of what is, in effect, a TIF district without accompanying scrutiny.

Warren IMAX Theater Project

Waterwalk hotel issue receives public input

Tuesday’s meeting of the Wichita city council featured a lengthy discussion of a proposal that in the past, might have been passed without much public discussion. Instead, some useful information emerged, and the meeting opened the possibility of more citizen input not only on this item, but also on future city initiatives.

The issue is a proposal for a hotel in the city’s WaterWalk district. My preview of the matter, which includes the city-supplied agenda report, is at Waterwalk hotel deal breaks new ground for Wichita subsidies.

As an example of information that was revealed at this meeting, there was concern expressed by council member Sue Schlapp that the proposed hotel might be granted a period in which it would be the only hotel in WaterWalk. Bell replied that we don’t have the answer to this question, and that this has not been addressed. Later, a representative of WaterWalk revealed that the proposed hotel had an agreement that it would be the only hotel in WaterWalk for three years and possibly up to four years.

This is an important piece of new information, as downtown boosters continually speak of the idea of “critical mass.” The idea, I believe, is that multiple hotels may feed off the presence of each other, instead of being in competition with each other. Or it might be that if other hoteliers see this proposed hotel doing well, they’ll be induced to build one on their own. But if there will not be another hotel in WaterWalk for at least three years, that puts a damper on the formation of critical mass. Hotels, of course, could be built in other parts of downtown.

Council member Lavonta Williams asked about the survey the city is conducting to see if the proposed hotel would harm the city-owned Hyatt Hotel: Will it look at nearby hotels that the city doesn’t own? Bell said the consultant may look at those hotels, interview their management, and may be able to offer some information as to that. But Bell said that the present agreement considers only the Hyatt Hotel.

Council member Jell Longwell said we’re sensitive about the burden on our local taxpayers. But the taxes on the proposed hotel would fall on out-of-area taxpayers, he said. His clear implication was that taxing visitors to our city is okay. The problem is that many visitors to a city pay attention to taxes. When a $100 hotel bill blooms to $114.30 with taxes, people notice, even business travelers whose employers may pay the bill.

(The taxes are 6% for the transient guest tax or “bed tax,” 6.3% for our present sales tax, and another 2% for the Community Improvement District tax. Then if the governor has his way, there will another 1% in Kansas sales tax, and if some downtown boosters have their way, there will be yet another 1% city sales tax to provide subsidy for downtown.)

Council member Paul Gray answered his own question with: “why would you?” The question was why would anyone build a hotel downtown privately when there are several subsidized hotels already operating? The unlevel playing field was created long ago, he said, and it’s unlikely that anyone will develop a hotel without receiving similar benefits from the city. He also said that we’re on the hook for the bonds sold for the WaterWalk TIF district. He made reference to the “giant hole that we’ve already created with the financial obligations we’ve placed on that.”

After citizen John Todd spoke, Longwell asked how much lead time the council should give citizens for matters like this. He said that the Wichita Eagle reported the story, adding “I thought everybody read the Eagle.” (I wonder if Longwell has noticed the layoffs at the Wichita Eagle and the poor financial performance of most newspapers as fewer people read them.)

A search of the Eagle for stories on this topic shows a blog column from Wednesday January 6, just six days before the city council meeting where the item was to be considered. The Eagle printed stories on Friday and Sunday. These stories, however, don’t report the detailed information that some people would like to have. There’s simply not room in a newspaper, as the agenda report for this item contained ten pages of small print. Not many people are interested in such detail, either.

(The city’s agenda packet for this meeting, which is the important source of detailed information, became available on the city’s website probably late Thursday. The pdf file indicates that it was created at 4:51 pm that day.)

Longwell pressed Todd: “How much lead time do we need?” I have an answer for him. After I read the agenda packet Friday afternoon, I emailed Wichita public information officer Van Williams with a few questions. By Monday afternoon I hadn’t received a response. I’m not criticizing Williams, as he might have had any number of valid reasons for not replying to my questions right away. But even if he had replied Monday afternoon, that’s just a few business hours away from the meeting. That is definitely not enough time to digest a project of this scope.

Gray then asked Todd how much vetting does the public do on a project like this? The answer to this is: not enough, as the city has a recent history of problems with its development partners. In December 2008 the city was about to enter into an agreement with a developer when Dion Lefler of the Eagle uncovered very troubling facts about the developer’s past dealings. See Wichita city hall: more evidence of lax procedures for a summary.

Then-city council member Sharon Fearey — now a candidate for the Sedgwick County Commission — was disappointed that the Eagle uncovered these facts and reported them. See Sharon Fearey doesn’t appreciate the Wichita Eagle for the story and video.

Since then Wichita has a new city manager, and the city has said it has new procedures in place for investigation of the backgrounds of potential business partners. Other problems remain, however. Last month Wichita Eagle editorial writer Rhonda Holman wrote about missing or incorrect information provided to the city council:

Worse, when the council approved the Big Dog deal on a 5-2 vote, its members reportedly were unaware that the company had hired an investment banker to explore a possible sale or merger. Plus, city documents about Big Dog listed its employment at 115 when the number actually has dwindled to 30 to 40 (from a 2005 high of 336).

A policy meant to guide the use of tax abatements and other tools doesn’t work well if decisions are based on faulty information.

Going back to 2004, we have evidence that city council members were not familiar with even the most basic facts about our economic development programs. The article “Tax break triggers call for reform” published in the Wichita Eagle on August 1, 2004 reported this:

Public controversy over the Genesis bond has exposed some glaring flaws in the process used to review industrial revenue bonds and accompanying tax breaks.

For example, on July 13, Mayans and council members Sharon Fearey, Carl Brewer, Bob Martz and Paul Gray voted in favor of granting Genesis $11.8 million in industrial revenue bond financing for its expansion, along with a 50 percent break on property taxes worth $1.7 million.

They all said they didn’t know that, with that vote, they were also approving a sales tax exemption, estimated by Genesis to be worth about $375,000.

It’s not like the sales tax exemption that accompanies industrial revenue bonds was a secret at the time. An easily accessible web page on the City of Wichita’s web site explains it.

Regarding the present case, Schlapp said she would have liked to have known about the exclusivity period earlier. That’s just one example of something not contained in the agenda packet that is important for citizens and council members to know, and we didn’t know that before this meeting.

Gray also noted the history of some of the people at the council meeting who opposed the project, adding that he didn’t see them changing their minds. That attitude represents a simplistic view of the way public policy ought to be formed.

An issue like this has many facets. Some could possibly have merit, and some certainly are harmful. A discussion like what took place at this meeting can provide a forum for exploring these issues, and perhaps eliminating the bad in favor of the good. The fact that some might still be opposed to the project doesn’t negate this.

In the end, the council voted unanimously to defer this matter until its February 2 meeting.

Wichita city council discusses economic development incentives, again

At this week’s meeting of the Wichita City Council, underperforming companies that have received economic incentives was at issue.

Wichita grants incentives — usually in the form of an escape from paying property taxes — to companies. Usually there are conditions attached to the incentives, such as a certain amount of capital investment or employment targets. Recently — and in the past two or so years — several companies that received incentives have not met employment goals. Should the city rescind the tax breaks in these cases? Or should there be recognition that there’s a tough economy at the moment, and should the company be excused from meeting the goals it pledged?

During a period of questions from the bench, council member Sue Schlapp remarked: “We have to be flexible, don’t we? … Especially in today’s economy, we need to be very careful that we’re not too rigid in what we’re doing.”

Council member Jeff Longwell said he’d like to see something that rewards companies that bring in business from outside our community. Economic development head Allen Bell answered that the policy is limited to companies that bring in wealth from outside. Businesses that are here because their customers are here are not eligible for economic incentives, he said.

Longwell also expressed concern about companies that use temporary employees. Should that increase in payroll be included as a benefit, even if the employees are only temps? Bell said yes, even though these jobs are not as good as direct hire placements. Wichita City Manager Bob Layton interjected that we shouldn’t count seasonal peak employee ramp-up in benefit calculations.

Longwell added that we ought to include the fact that some companies drive up hotel occupancy rates due to the nature of their business. Bell said that this is a factor in the WSU analysis.

Vice-mayor Jim Skelton inquired about details of the model that WSU uses to calculate the economic benefit of incentives. These calculations, Bell said, are required by the Kansas Legislature. The model presently used is unique to WSU. It focuses on the fiscal impact that an economic development project has on cities, counties, school districts, and the state. It takes into account jobs created, capital that is invested, and other factors. It includes such factors as the need for additional police and other government services, additional sales and bed tax, and other revenue sources. It then performs a present value calculation and produces a ratio. A value greater than one means the benefits exceed the costs.

City manager Layton said that these incentives represent a contract between the business and the city. The business promises to grow the economy, and the city makes an investment in the company. The council presently is struggling with how to judge the performance of companies that have received incentives in a down economy. The WSU index makes sense, he said. If economic conditions are poor, we now have a tool to judge the performance of the companies that received incentives. There are now extenuating circumstances, he said.

Mayor Carl Brewer said that we recognize there are challenges, and that in an ideal world we shouldn’t have to provide incentives. But he said we have several options: Be competitive and provide incentives and fight to keep what we have, or don’t provide incentives and see what happens. He said we know what would happen in that case. Businesses will go where they can get these incentives, he said, and we can’t argue that. There will always be incentives, he said, and we have to be competitive.

The council unanimously approved a revision to the policy that recognizes down periods of economic activity. Then, it approved the extension of tax breaks to three companies that had not met all their performance goals. Passage was not unanimous in two cases, with some council members voting against the extension of the incentives. Dion Lefler’s reporting in the Wichita Eagle is at Wichita City Council eases rules on tax abatements.

Analysis

Contrary to the belief of the mayor, council members, and city hall bureaucrats, economic development incentives aren’t all they’re promoted to be. The state of Kansas spent some $1.3 billion on incentives over five years. In a recent report produced by the Kansas Legislative Division of Post Audit, one of the summary points is this: “Most studies of economic development incentives suggest these incentives don’t have a significant impact on economic growth.” See In Wichita, let’s have economic development for all for more on this report and a link to the document.

There is an interesting academic paper titled The Failures of Economic Development Incentives, published in Journal of the American Planning Association. A few quotes from the study, with emphasis added:

Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

On the surface of things, to the average person, it would seem that spending (or granting tax breaks, it’s the same thing) to attract new businesses makes a lot of sense. It’s a win-win deal, backers say. Everyone benefits. This is why it is so appealing to politicians. It lets them trumpet their achievements doing something that no one should reasonably disagree with. After all, who could be against jobs and prosperity? But the evidence that these schemes work is lacking, as this legislative audit and article show.

I have suggested to the city council that a broad-based tax abatement on new capital investment could propel economic growth in Wichita. See Wichita universal tax exemption could propel growth.

But a plan like this doesn’t give bureaucrats much to do, and gives politicians little to crow about to their constituents at election time. All it’s good for is the people who want economic growth.

Wichita city council discusses economic development incentives

Last week a Wichita company that’s expanding made an application for industrial revenue bonds and accompanying property tax abatements. The company’s application wasn’t timely, and for that reason is not likely to receive the requested help. The discussion surrounding the item provides insight into city council members’ ideas about the role of the city in economic development.

Industrial revenue bonds, or IRBs, are not a loan from the city, and the city does not make any guarantee that the bonds will be repaid. The primary benefit to the recipient of IRBs is that the property purchased with the bonds will generally be exempt, in whole or in part, from property taxes for some period. Also, the company may not have to pay sales tax on the property purchased with the bonds.

The agenda report for this item is at Request for Letter of Intent for Industrial Revenue Bonds, Michelle Becker, Inc. (District V).

In introducing the item, the city’s economic development chief Allen Bell said that because the project has already started construction, it falls outside the guidelines for the city’s IRB program. The construction is 85% to 90% complete.

A question by council member Sue Schlapp established that if the company had made application before the building was started, the application would have been approved as routine.

She also asked that if we approve this action today, will we have to go back and look at other businesses that are in the same place? Wichita City Manager Bob Layton asked that the council establish guidelines that if a project has already started, a project is not eligible for this type of assistance.

There was also some discussion about whether this company would move away from Wichita if the tax abatement was not granted. Since the building is already under construction, Bell said this is evidence that the company is intending to stay in Wichita. “It’s difficult to think of an incentive as something that’s given after the fact,” he said.

A question by council member Paul Gray established that there have not been many cases where companies have asked for tax breaks retroactively, according to Bell’s answer. Bell also said that he didn’t think that approving the current application would spur an avalanche of similar requests.

Gray also noted that we can create economic disparities between companies by granting incentives, so how do we justify doing this? Bell’s answer was that an important consideration is bringing business from out of state instead of taking business away from other local companies.

Layton added that an important consideration is whether the project can more forward without public assistance.

Council member Jeff Longwell remarked that “we really don’t have that many tools in our toolbox for emerging businesses.” Bell agreed.

In later discussion, Longwell said “I hate to penalize this emerging company … I should have got them in on this process long before we did and we wouldn’t even be having this argument. So I suppose I am at fault in part of this delay.”

Gray said that because we’re not competing against another community for this company — the normal use of incentives — he can’t support this application.

Council member Janet Miller said that the appropriate time to look at incentives is, as the manager said, when we think a company can’t move forward without the incentive. She also noted that we’re being asked to approve an action for which we’re going to soon have a policy against.

Schlapp, indicating a desire to approve the incentive, asked for justification: “We have a company here that doesn’t need an incentive but wants an incentive … can somebody justify that?”

Longwell said it’s not as simple as a need and a want. He said the applicant is a smart, well-managed company. But we shouldn’t use the qualifier of helping only the companies that couldn’t succeed without the city’s help. “Why not reward some some of those companies that are very well managed and run smart and have the ability to grow even more with our help than without it?” Again he referred to the lack of tools for emerging businesses. “We ought to be helping these types of companies that we think can truly prosper even more with our help … I think they fully warrant our help because they’re successful …”

Mayor Carl Brewer said that we have a proven track record of trying to help businesses and to get businesses to come to our area. He agreed with Longwell in that we need additional tools to use for economic development, as other communities have been competing successfully. We don’t have the same tools that other communities have, he said.

Longwell suggested the city visit with the applicant about her financing. He made a motion to defer this item. Council member Williams asked about the impending completion of the project, since it’s scheduled to be completed at the end of December. The answer from the manager was that with regard to IRBs, the project would not be eligible after it’s complete. The motion passed with Council member and Vice-mayor Jim Skelton opposed.

Analysis

What’s striking about the discussion are these two things:

First, many council members and some city staff believe that the city doesn’t have enough “tools in the toolbox” for shoveling incentives on companies for economic development purposes. Evidently the ability to grant exemptions from property taxation — and not only the city’s property tax levy, but also that of the county, school district, and state — along with the ability to make outright gifts of money is not enough.

Second, many council members and some city staff believe that they can determine which companies are worthy of incentives.

According to city manager Layton, the city is going to revisit its economic development policies soon. This would be a good time for Wichita to come up with ideas that would benefit all companies, not only those that fall within guidelines that the council or city staff creates. My suggestion, explained in Wichita universal tax exemption could propel growth, is to give all new capital investment a tax abatement for a period of five years.

At the state level, there has been some discussion about the costs of tax abatements or exemptions. In a recent debate in Wichita, Kansas Secretary of Revenue Joan Wagnon used the term “tax expenditures” to describe these giveaways of the state’s income. The idea is that if the state (or other governmental body) didn’t create tax abatements or exemptions, revenue to the government would be higher. Her debate opponent Alan Cobb said it’s wrong to term these tax giveaways as “expenditures,” as the money belongs to the people first, a position I agree with.

There is the related issue of these tax abatements or exemptions really being appropriations of money that, if processed through the normal process of legislative hearings, etc., would be noticed for what they are. In Wichita city government we don’t have hearings quite like the Kansas Legislature, but the idea is the same: if this company had asked for a grant from the city for $22,253 (that’s the value of the first year of the requested tax abatement, with a similar figure for the following nine years, less $2,500 a year to the city for administrative fees), citizens — news media too — would quite likely look at this matter differently. Presented as industrial revenue bonds — just what are those anyway? — and a tax abatement, well, it all seems so … so innocent, so municipal.

A few more observations:

Council member Jeff Longwell’s confession of being at fault for the lateness of this company’s application should be remembered by voters in the next election, should he decide to seek to retain his current post, or — as some have told me — he seeks the mayorship of the city.

There’s also Longwell’s use of the term “reward,” in that the city should “reward some some of those companies that are very well managed and run smart.” I’d like to remind him and the rest of the council that the free enterprise system contains a very powerful reward mechanism for companies that do well: profit. That alone is sufficient.

Coverage from the Wichita Eagle is at Wichita City Council puts off tax breaks for accounting firm.

Wichita City Arts tech studio proposed

Randy Roebuck, in a presentation at the Wichita city council workshop, promoted the idea of a “digital oasis” in Wichita. It would be a place where people can go to get free help with technologies such as cell phones and computers.

He told of how an Apple Genius Bar does things like this. Council member Jim Skelton asked who runs an Apple Genius Bar? Apple Computer Corporation, of course.

Later council member Paul Gray continued with questions based on Skelton’s. Why not an Apple Genius Bar in Wichita? Why is the city competing with private business? City officials insist they are not trying to compete with private business. Instead, it’s a resource for training and education.

Council member Jeff Longwell said this idea is “on the right path,” as long as it doesn’t cost a lot.

Lavonta Williams said this will attract a different group of people to downtown Wichita. She said it’s something we need.

Mayor Carl Brewer mentioned that not everyone who would want to use a facility like this might not be able to afford its cost. He didn’t mention that someone else should pay for them, but that’s what this program will do.

“It’s part of creating an environment where we have everything that anybody could possibly want. … If the private sector’s really wanting to get out there and they’re willing to invest their dollars and they want to start their business, we should let them.”

This illustrates the mayor’s — and several other council members’ — vision of an expansive city government, providing for citizen needs all the way through arts, entertainment, and now computer tech support.

Then there’s the mayor’s language that we (Wichita city government) should let the private sector do something. I really hope the mayor misspoke here.

This is a bad idea. It seems to me that there may be people in Wichita city hall with too much time on their hands if they have time to come up with ideas like this.

View the video of the portion of the city council workshop where this presentation was made by clicking on Wichita city council workshop, March 24, 2009.

The slides shown to the council members aren’t available on the city’s website, to my knowledge. I captured them from video, and they may be viewed by clicking on Wichita City Arts tech studio presentation.

Read Wichita Eagle reporting by clicking on Cyber Alliance plans to offer free technical training. reporting on KWCH is at Wichita Considers “Digital Oasis”.

YMCA – Wichita conflict of interest

A local non-profit organization, held in high esteem, seeks to purchase property owned by the City of Wichita. So what’s the problem?

During his State of the City address for 2009, Wichita Mayor Carl Brewer revealed his plan for a partnership between the city and the YMCA. So far this partnership has revealed itself in the city’s plan to sell some city-owned land at First and Waco Streets to the YMCA.

Council members Jeff Longwell and Sharon Fearey were appointed to represent the city in negotiations.

The problem is that Longwell is a member of the advisory board for the northwest branch YMCA. This is possibly a conflict of interest. It certainly is the appearance of a conflict of interest, and for that reason, Longwell should step away from the negotiations.

At the same time, the YMCA should request that Longwell be replaced with another council member.

I’m not accusing the YMCA of any wrongdoing.

I’m also not accusing council member Longwell of any wrongdoing.

But I’ve talked to several elected officials and many citizens about this, and only one has thought there wasn’t a problem with this arrangement.

This is especially confounding to me in that I’m sure there is probably no actual conflict of interest — at least as these things go — but its appearance is beyond doubt in the minds of most citizens.

A representative of the YMCA told me that the board Longwell serves on is an advisory board with no decision-making authority.

I asked Longwell if he could understand how people might think there is a conflict of interest, and he said he could appreciate that position. He added that’s why there is more than one city council member representing the city, and, of course, it takes four votes on the council to take any action.

Furthermore, he told me that he was out of town and missed a meeting, so he hasn’t been present at the negotiations.

I’ve talked with several people who have reminded me of the good things the YMCA does for Wichita and the surrounding area.

So why can’t the YMCA and the city conduct these negotiations in a way that eliminates even the slightest whiff of any appearance of a conflict of interest?

People are wondering, especially when it is likely that the land will be sold for much less than what some believe it to be worth.

Wichita TIF public hearing was bait and switch

This appeared in today’s Wichita Eagle.

On Tuesday December 2, 2008, the Wichita City Council held a public hearing on the expansion of the Center City South Redevelopment District, commonly known as the downtown Wichita arena TIF district. As someone with an interest in this matter, I watched the city’s website for the appearance of the agenda report for this meeting. This document, also known as the “green sheets” and often several hundred pages in length, contains background information on items appearing on the meeting’s agenda.

At around 11:30 am Monday, the day before the meeting, I saw that the agenda report was available. I download it and printed the few pages of interest to me.

At the meeting Tuesday morning, I was surprised to hear council member Jim Skelton expressed his dismay that a change to the TIF plan wasn’t included in the material he printed and took home to read. This change, an addition of up to $10,000,000 in spending on parking, is material to the project. It’s also controversial, and if the public had known of this plan, I’m sure that many speakers would have attended the public hearing.

But the public didn’t have much notice of this controversial change to the plan. Inspection of the agenda report document — the version that contains the parking proposal — reveals that it was created at 4:30 pm on Monday. I don’t know how much longer after that it took to be placed on the city’s website. But we can conclude that citizens — and at least one city council member — didn’t have much time to discuss and debate the desirability of this parking plan.

The news media didn’t have time, either. Reporting in the Wichita Eagle on Monday and Tuesday didn’t mention the addition of the money for parking.

This last-minute change to the TIF plan tells us a few things. First, it reveals that the downtown arena TIF plan is a work in progress, with major components added on-the-fly just a few days before the meeting. That alone gives us reason to doubt its wisdom. Citizens should demand that the plan be withdrawn until we have sufficient time to discuss and deliberate matters as important as this. What happened on Tuesday doesn’t qualify as a meaningful public hearing on the actual plan. A better description is political bait and switch.

Second, when the business of democracy is conducted like this, citizens lose respect for both the government officials involved and the system itself. Instead of openness and transparency in government, we have citizens and, apparently, even elected officials shut out of the process.

Third, important questions arise: Why was the addition of the parking plan not made public until the eleventh hour? Was this done intentionally, so that opponents would not have time to prepare, or to even make arrangements to attend the meeting? Or was it simple incompetence and lack of care?

The officials involved — council members Jeff Longwell and Lavonta Williams, who negotiated the addition of the parking with county commissioners; Allen Bell, who is Wichita’s director of urban development; and Mayor Carl Brewer — need to answer to the citizens of Wichita as to why this important business was conducted in this haphazard manner that disrespects citizen involvement.

Additional coverage:
Wichita TIF Districts Mean Central Government Planning
Downtown Wichita Arena TIF District Testimony
Jim Skelton is Frustrated
Downtown Wichita Arena TIF District Still a Bad Idea
Wichita Mayor and City Council Prefer to Work Out of Media Spotlight
Wichita’s Naysayers Are Saying Yes to Liberty
Tiff over Wichita TIFs
Downtown Wichita Arena TIF District
Do Wichita TIF Districts Create Value?
Wichita City Council’s Misunderstanding of Tax Increment Financing
Tax Increment Financing in Wichita Benefits Few
Tax Increment Financing in Iowa

Wichita Smoking Ban Starts. Sharon Fearey is Excited.

Today, September 4, 2008, marks the first day of the ban on smoking in Wichita. It’s not quite a total ban, and that has some smoking ban supporters upset. In a letter to the Wichita Eagle, anti-smoking activist Cindy Claycomb writes “If you are a supporter of clean indoor air, please do not spend your money in businesses that allow smoking indoors, including smoking rooms. If we continue to spend our money at places that allow smoking indoors, that tells the business owners that we do not care — that we will tolerate secondhand smoke even though we all know the harmful effects.”

Not everyone is upset, though. In the Wichita Eagle article Smoking ban takes effect; for smokers, end of an era, Wichita city council member Sharon Fearey is quoted as “I feel this is an exciting time for the city.” If, like council member Fearey, you appreciate increasing government and bureaucratic management of the lives of Wichitans, you might be excited, too. Those who value liberty and freedom, however, are saddened — even if they aren’t smokers.

Fortunately Ms. Fearey is precluded from running again for her seat on the city council by term limits. The two architects of this smoking ban — Lavonta Williams and Jeff Longwell — can run for election again. The position held by Ms. Williams is up for grabs in the March 2009 primary. Hopefully the citizens of Wichita city council district one will elect someone respectful of property rights, not to mention personal rights.

For more coverage of the smoking issue and why it’s important, these articles will be of interest: It’s Not the Same as Pee In the Swimming Pool, Haze Surrounds Wichita Smoking Ban, Property Rights Should Control Kansas Smoking Decisions, Let Property Rights Rule Wichita Smoking Decisions, Testimony Opposing Kansas Smoking Ban, and No More Smoking Laws, Please.

Do Wichita TIF Districts Create Value?

A recent Wichita Eagle article City tax districts aren’t breaking even reports on some of the problems with tax increment financing, or TIF, districts in Wichita:

One promise of TIFs was that revitalizing certain areas — such as Old Town and the East Bank — would boost property values throughout downtown.

In the past four years, assessed valuation has risen 14.9 percent a year within the downtown TIF areas where millions of dollars of public money have been invested.

But take away those TIF districts and valuations have grown at 4.1 percent a year for the rest of the downtown area. Countywide, commercial property values have gone up about 10.7 percent a year.

One question I have, and one that might be difficult to answer, is if property values in TIF districts are being assessed accurately and fairly. For assessed valuations in TIF districts to grow at only 1.4 times the rate as all commercial property seems to indicate that perhaps TIF district property is undervalued by the assessor. After all, it is in TIF districts that we expect to see rapid growth — “exponential,” as Wichita city council member Jeff Longwell explained to me — in value as developers renovate old buildings or build new buildings.

The primary problem, however, is that these TIF districts represent the city government’s desire for more development in places or things that people don’t value it as much as they do in other places. It is government central planning, led by politicians and bureaucrats, making decisions rather than people expressing their preferences through voluntary transactions in a free market.

Since politicians and bureaucrats have different goals than entrepreneurs, it is not surprising that TIF districts may not live up to the expectations of the public. Of course, it depends on your expectations. If you desire simply to get something built — this would be the politicians’ goal — then TIF districts work. Buildings, indeed, are built.

If, on the other hand, your goal is to create wealth by building something that the public values enough that you can earn a profit — this being the goal of entrepreneurs — government central planning simply doesn’t work.

Kansas Blog Roundup for July 3, 2008

Even with a holiday-shortened week, there was quite a bit of activity in Kansas blogs.

At the Kansas Republican Assembly blog, the post Sebelius: Slattery needs help raises questions about U.S. Senate candidate Jim Slattery’s acquisition of certain email addresses, and the etiquette of using them. In Democratic delegate shunned for endorsing McCain over Obama, the anonymous writer of this blog wonders whether the Democratic Party is really the big tent party.

The Kansas Trunkline reports that U.S. House of Representatives candidate Nancy Boyda is not shy with her support for increasing motor fuel taxes in Nancy Boyda: Yes, new taxes! Also, reporting on Kansas Republican Party chairman Kris Kobach and his remarks in Slattery fundraising wilting, DSCC bailing.

This week, the Kansas Meadowlark has posts on judicial nominating commissions in Kansas. First, can campaign contributions of $13,000 to Kansas Governor Kathleen Sebelius and covering some airplane expenses purchase a seat on the Kansas Supreme Court Nominating Commission? The post Did $13,000 given to Gov. Sebelius play part in Supreme Court Nominating Commission appointment? answers. Second, the title of the post Political makeup of Third District Court Nominating Commission doesn’t reflect district? asks the question that needs answers. This district is Shawnee County, where Topeka is located.

The Kansas Governmental Ethics Commission seems to fall short of fulfilling its duties in these two posts: Kansas Ethics Commission can’t find political activist, who didn’t file PAC report, but newspapers can? and Kansas Ethics Commission ignores missing $25,000 payment by PAC?

The anonymous blogger Stay Red Kansas supplies in Talk around T-Town some political gossip obtained from some “power players.” It’s hard to know how much weight to give to posts like this from an anonymous blogger. Is the information real, or just the sowing of the seeds of rumor? Unless we know who the blogger is, or unless you read the blog enough to form an opinion as to the writer’s reliability, it’s hard to treat these posts seriously.

In the post Is Congress shilling their constituents?, The Patriots (news from citizen advocates) blogger Allen Williams wonders about U.S. Energy policy.

Kansas Federalist blogger Currie Myers comments on the difference between Iowa Floods versus New Orleans Floods.

At the Joyful Cynic, the very fine post Charity at a Distance explains the difference between charity and “legally mandated charity,” although I believe Sharon is too mild in describing government activity as anything resembling charity.

Just when I think I’ve become aware of all blogs with a Kansas connection, I find out that I’ve been missing out on a very good blog. The Blog About All Things MBM (market-based management) is a blog that I’m sorry I’ve overlooked. One of its contributors is a Kansan, and market-based management was developed by Wichitan Charles Koch. The post Did Adam Smith Hate Businesspeople? contains the sentence “MBM considers any form of political profit completely unacceptable.” When you read my Voice For Liberty in Wichita post Wichita and the Old Town Warren Theater Loan, you’ll realize why I am glad I found this blog.

At The Quite Conservative, the post When the Republic Hung by a Thread comments on the recent U.S. Supreme Court decision and the right to bear arms.

At In Media Res the interesting post Ten Things I Like About Canada (In Honor of Canada Day) contains this good thing about Canada: “Relative avoidance of sugar processed from high fructose corn syrup.” Why in the U.S. do we use corn syrup instead of sugar? Do government tariffs have anything to do with it? If you don’t like the government meddling with the way we sweeten soft drinks, how will you like another “good thing” in Canada, which is number four in this list: socialized medicine.

At the Voice For Liberty in Wichita, Karl Peterjohn of the Kansas Taxpayers Network contributed the article Socialism And Big Government Expand In Kansas.

In Wichita, big news this week was the Wichita City Council’s giveaway to a theater owner. My remarks to the council are in the post Wichita and the Old Town Warren Theater Loan. John Todd testified too; his remarks are here: Wichita Old Town Warren Theater Public Hearing Remarks. Some follow-up analysis is here: In Wichita, is Economic Development Proven Public Policy?, and you may read of Wichita city council member Jeff Longwell’s unfortunately low opinion of Wichitan’s interest in these civic matters in the post Wichita Council Member Jeff Longwell: We Can, and Do, Read.

Some Wichita news media outlets revealed some sloppy reporting and bias in these posts: Wichita Business Journal: Where is the Increasing Enrollment in Wichita Schools?, Wichita Business Journal: Please Explain the Wichita School Bond Impact, and Wichita Eagle Reporting Bias.

Some coverage of a candidate forum is here: Kansas School Board Candidate Forum, June 30, 2008.

How is former Wichita public school superintendent Winston Brooks doing at his new post in Albuquerque? Someone there doesn’t have too high of an opinion: In Albuquerque, Someone Already Doesn’t Like Winston Brooks.

An important series of posts at the Voice For Liberty in Wichita deal with the involvement of Earthjustice, a radical environmentalist group, in Kansas energy policy. This, to my knowledge, has not been covered by Kansas news media util very recently. The post Kansas Governor Kathleen Sebelius at Earthjustice reports on the governor’s recent talk an at Earthjustice event. Earthjustice in Kansas: What is Their Agenda? contains a fellow blogger’s interpretation of the motives of Earthjustice. In Earthjustice in Kansas: The Press Release I report on how I have made a records request to the governor’s office so that Kansans can learn more about the activities of this extremist group and its relationship to our governor.

Wichita Council Member Jeff Longwell: We Can, and Do, Read

Wichita City Council Member Jeff Longwell, in the news article Little time to review Warren loan terms (July 1, 2008 Wichita Eagle), was reported as remarking “It’s unlikely many residents would read the full contract even if it had been made public earlier.”

Mr. Longwell, many people in Wichita do read documents such as these. I think a better question is whether city council members read and understand these documents. This is from before Mr. Longwell’s time on the council, but in the article The Real Scandal at City Hall, I report how city council members are sometimes not aware of even the most basic facts about city affairs:

… council members were described as being surprised upon learning that the industrial revenue bonds and property tax abatement awarded to a local business also included a sales tax break. How could they be surprised? The City of Wichita website contains a nicely-done page titled “Industrial Revenue Bonds” (located at http://www.wichitagov.org/Business/EconomicDevelopment/IRB) (This is the first result that appears when you use the wildly popular Google search engine and search for “Wichita IRB.”) The first link on this page is titled “IRB Overview: Industrial Revenue Bond Issuance in the State of Kansas,” and you don’t have to read very far before you come to the sentence reading “Generally, property and services acquired with the proceeds of IRBs are eligible for sales tax exemption.”

(The city’s website has been rearranged a little since then. The new location for this page is http://www.wichita.gov/CityOffices/CityManager/Urban/EconomicDevelopment/IRB/.)

Besides being wrong on whether people read documents like these, I think Mr. Longwell’s statement reveals an unfortunate attitude towards the people of Wichita. I don’t think he always felt this way, as earlier this year it was reported he “strongly believes in transparency in government.” (Rule seeks to stop leaks after private city council meetings)

Mr. Longwell is correct in that the Old Town Warren Theater loan documents should have been released to the city council and the public earlier. Mr. Longwell could have shown us evidence of his belief in transparency by moving to delay yesterday’s council action until these documents could be read, digested, and debated.

Warren Old Town Wichita Theater: Good Money After Bad?

This letter is from my friend Darrell Leffew. Not everyone seems to understand the folly of throwing good money after bad. “Taxpayers are already on the hook” is Wichita city council member Jeff Longwell’s opinion as expressed in a Wichita Eagle article. Mr. Longwell, I realize you weren’t a member of the council when we taxpayers were placed on the hook, but don’t help us on another, please.

Let us not throw more good money after bad. The Wichita City Council has approved a business loan to the Limited Liability Company that owns the Old Town Warren Theater.

That same company was quoted in an Eagle article earlier this month as saying the remodel paid for by the loan would cut the losses. No mention of ending the losses, just reducing. What are the exact estimates? Taxpayers should be fully informed.

An Eagle article of November 2004 talked about revenues related to the TIF, which funded Old Town development, being woefully short. How many millions of taxpayer dollars are already at risk? And if the business goes into foreclosure before the loan is repaid, we the taxpayers have first claim on a failed, debt ridden property.  Our interim City Manager advised against the loan.

Our elected officials are not just offering commercial banking now but BAD commercial banking. And the “Open for Business” sign is bright neon.

Has our City Council overstepped its authority? Voters will decide at the polls.