Voice For Liberty

Tag: Richard Ranzau

Sedgwick County Commissioner Richard Ranzau

  • Sustainable planning: The agenda and details

    Sedgwick County Commissioner Richard Ranzau has produced a document that explains the dangers contained with the “sustainable development” movement that is spreading across the country. Recently both the City of Wichita and Sedgwick County voted to participate in a planning grant devoted to starting the implementation of this ideology that government can plan better than markets can.

    In the document Ranzau writes: “Proponents of these grants often speak in general terms that make it difficult to disagree. But as they say, the devil is in the details. It is very important for you to know what they are not telling you. We all need to look beyond the fancy talk and find out what the agenda is really about. … The intent of this paper is to share information and insight about ‘sustainable development’ so that citizens and elected officials can have a more complete understanding of what the planning grants will entail and what possible consequences our communities may face if these policies are implemented.”

    One of the concerns Ranzau identifies is the attack on the automobile-based suburban lifestyle that many in Wichita and the surrounding area prefer, based on their revealed choices: “One of the most important reasons to be concerned about the agenda behind these grants is the effect it could have on housing costs and property rights. Smart Growth supporters decry suburban development (single family home with a yard) as unsustainable and work to push people into high density housing (and government transportation).”

    This attitude is creeping into Wichita. At a January 2010 presentation by Goody Clancy, the planning firm that developed the plan for downtown Wichita, I reported on the attitudes expressed by planners and how they believe they know what people should want, if only the people were as smart as the planners:

    At a presentation in January, some speakers from Goody Clancy revealed condescending attitudes towards those who hold values different from this group of planners. One presenter said “Outside of Manhattan and Chicago, the traditional family household generally looks for a single family detached house with yard, where they think their kids might play, and they never do.”

    David Dixon, who leads Goody Clancy’s Planning and Urban Design division and was the principal for this project, revealed his elitist world view when he told how that in the future, Wichitans will be able to “enjoy the kind of social and cultural richness” that is only found at the core.

    The document holds many links to valuable resources, a timeline of sustainable planning activities, and contact information for local officials.

    Sustainable Planning Grants and UN Agenda 21

  • Kansas and Wichita quick takes: Friday December 9, 2011

    Ethanol subsidy. According to Wichita Eagle reporting, the head of an ethanol trade group says the subsidy for ethanol will likely disappear after January 1, but the change might be good for the industry. It has to do with image, said the speaker. The subsidy the speaker mentioned is in the form of a tax credit, and is one of the programs that would be eliminated by proposed legislation introduced by U.S. Rep. Mike Pompeo of Wichita. His bill would end tax credits for all forms of energy. … The production tax credit is just one of three government interventions that benefit ethanol. Besides the tax credit, we should also ask for the end of mandates for ethanol use, and an end to the tariff on imported ethanol. We also need to ask for the end of interventions aimed at benefiting the cellulosic ethanol industry, like the $132.4 million loan guarantee for such a plant in Kansas.

    Cronyist Warren Buffet. “Warren Buffett’s MidAmerican Energy Holdings company has agreed to buy a giant, 550-megawatt photovoltaic farm currently under construction in San Luis Obispo County for $2 billion, giving a huge boost to the solar industry that could spur investment by other major players.” Concludes John Hinderaker of Powerline Blog: “Meanwhile, I am warming up to the idea that Warren Buffett should pay more in taxes. I would settle for just getting his federal subsidies back.” More at Crony Capitalism, Episode #…What Are We Up To Now?

    Natural gas subsidies for Pickens. While on the topic of energy and harmful subsidies, Timothy P. Carney of the Washington Examiner provides an update on H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NATGAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. The goal is to promote the use of natural gas as the fuel the nation uses for transportation. … Carney explains the personal financial of the bill’s backer, energy investor T. Boone Pickens. He holds options on 15 million shares of a company known as Clean Energy Fuels. These options expire on December 28th, and their value would skyrocket if the NATGAS bill can pass by then. … Carney notes the opposition to this bill from Wichita-based Koch Industries. As a large producer of fertilizer, the price of a key input — natural gas — would likely increase if NATGAS passes. But we all ought to worry about increases in the price of fertilizer, which would like lead to higher grocery prices. These price increases harm low income families hardest.

    Planning grant to be topic of meeting. On Monday December 12th Americans for Prosperity Foundation will feature Sedgwick County Commission Member Richard Ranzau speaking on the topic “The $1.5 million dollar Regional Economic Area Partnership (REAP) HUD Sustainable Development Planning Grant: Economic Development or Economic Destruction?” Some background on this item may be found at Sedgwick County considers a planning grant. This free event is from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    Tilting at wind turbines. “Switching from conventional sources of electricity like coal and natural gas to renewables like wind and solar, our elected leaders tell us, will reduce pollution, advance renewable technology and spark a green jobs revolution. Is renewable energy really a green pathway to a brighter economic future? Or is it nothing more than a heavily subsidized impossible dream?” Reason TV takes a look at wind energy in the video Tilting at Wind Turbines: Should the Government Subsidize Renewable Energy? Locally, Wichita Mayor Carl Brewer promotes manufacturing of wind power machinery as good for Wichita’s economic development, and Kansas Governor Sam Brownback supports renewable energy standards for Kansas.

  • Wichita’s political class

    From June.

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

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

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

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

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

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

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

    Wichita general fund spending

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

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

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

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

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

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

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

    Going forward

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

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

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

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

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

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

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

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

  • Kansas and Wichita quick takes: Thursday November 10, 2011

    Occupy Wall Street. One of the most troubling things about OWS is the anti-semitism. FreedomWorks has a video which explains. Also from FreedomWorks, president Matt Kibbe contributes a piece for the Wall Street Journal (Occupying vs. Tea Partying: Freedom and the foundations of moral behavior.). In it, he concludes: “Progressives’ burning desire to create a tea party of the left may be clouding their judgment. Even Mr. Jones has grudgingly conceded that tea partiers have out-crowd-sourced, out-organized, and out-performed the most sophisticated community organizers on the left. ‘Here’s the irony,’ he said back in July. ‘They talk rugged individualist, but they act collectively.’ He and his colleagues don’t seem to understand that communities can’t exist without respect for individual freedom. They can’t imagine how it is that millions of people located in disparate places with unique knowledge of their communities and circumstances can voluntarily cooperate and coordinate, creating something far greater and more valuable than any one individual could have done alone. In the world of the contemporary Western left, someone needs to be in charge — a benevolent bureaucrat who knows better than you do. They can’t help but build hierarchical structures — a General Assembly perhaps — because they don’t understand how freedom works.”

    Johnson Controls. Rhonda Holman’s recent Wichita Eagle editorial criticized those who spoke against the award of a forgivable loan to Johnson Controls, specifically mentioning the claim by Sedgwick County Commissioner Richard Ranzau that Johnson was going to move these jobs to Wichita “no matter what.” No one has disputed Ranzau. I specifically asked at the commission meeting that someone from Johnson address this assessment. The Johnson people in the audience chose not to answer. It would be helpful if someone at the newspaper or county at least pretended as through they cared about the truth of these matters. … At one time newspapers might have objected to Commission member Jim Skelton voting on this matter due to a family member working at Johnson. True, Kansas law says he was eligible to vote on the matter. Sedgwick County has no code of ethics that prohibited it, either. But Skelton could have acted as though the county had a code of ethics, and a model code of ethics says Skelton should not have voted on this matter.

    Save-A-Lot store opens. Yesterday a Save-A-Lot grocery store opened in Wichita’s Planeview neighborhood. This is a store that was said to be impossible to build without subsidy in the form of tax increment financing (TIF) and an extra community improvement district (CID) sales tax of two cents per dollar. The Sedgwick County Commission exercised its veto power over the TIF district, and developer developer Rob Snyder canceled his plans for the store. But someone else found a way. Said Snyder at the time to the Wichita City Council: “We have researched every possible way, how do we make this project work with the existing funding that’s available to us. … We might as well say if for some reason we can’t figure out how to get this funding to go through, there won’t be a shopping center over there.” As part of his presentation to the council Allen Bell, Wichita’s Director of Urban Development explained that to be eligible for TIF, developers must demonstrate a “gap,” that is, an analytical finding that conventional financing is not sufficient for the project, and public assistance is required: “We’ve done that. We know, for example, from the developer’s perspective in terms of how much they will make in lease payments from the Save-A-Lot operator, how much that is, and how much debt that will support, and how much funds the developer can raise personally for this project. That has, in fact, left a gap, and these numbers that you’ve seen today reflect what that gap is.” … This episode has severely harmed the credibility of those who plead for incentives and subsidies, and also of the city hall bureaucrats who plead their cases for them. For more see For Wichita, Save-A-Lot teaches a lesson.

    Teacher pay. A look at public school teacher pay by American Enterprise Institute finds that — opposite of the myth spread by school spending advocates — teachers are paid much more than they could earn in the private sector. While teachers are paid less than private sector workers with similar college degree attainment, the course of study for teachers is less demanding than most other fields. Fringe benefits for teachers are much higher than for private sector workers. Job security, even in the face of recent layoffs, is much greater for teachers and has a value: “Consider that one-fifth of the highest-performing public school teachers in Washington, D.C., recently declined to give up even part of their job security in exchange for base salary increases of up to $20,000.” … The authors note the study is based on averages: “Our research is in terms of averages. The best public school teachers — especially those teaching difficult subjects such as math and science — may well be underpaid compared to counterparts in the private sector.” But teachers have formed unions that ensure that all teachers are paid the same without regard to ability. See Public School Teachers Aren’t Underpaid: Our research suggests that on average — counting salaries, benefits and job security — teachers receive about 52% more than they could in private business. … Naturally, the best way to set teacher salaries is through voluntary exchange in markets. That doesn’t happen with public school teachers.

    Ranzau, Skelton to speak. This week’s meeting (November 11th) of the Wichita Pachyderm Club features Sedgwick County Commission Members Richard Ranzau and Jim Skelton, speaking on “What its like to be a new member of the Sedgwick County Board of County commissioners?” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: On November 18th: Delores Craig-Moreland, Ph.D., Wichita State University, speaking on “Systemic reasons why our country has one of the highest jail and prison incarceration rates in the world? Are all criminals created equal?” … On November 25th there will be no meeting.

    Making economics come alive. On Monday November 14th Americans for Prosperity Foundation will show the video “Making Economics Come Alive” with John Stossel. Topics included in this presentation are Economics of Property Rights, Private Ownership and Conservation, Property Rights and the Status of Native Americans, Atlas Shrugged: Selfishness and the Economics of Exchange, Economics and the Military Draft, Regulation and Unintended Consequences, Regulation: Louisiana Florist, The Unintended Consequences of the Ethanol Subsidies, The Unintended Consequences of Minimum Wage Laws, Public Choice Economics and Crony Capitalism, Trade Restrictions and Crony Capitalism, Stimulus Spending and Crony Capitalism, and Political Versus Market Choices. This free event is from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    Economics in two minutes. In two minutes, Art Carden explains the important ideas of economics in Economics on One Foot: “Individuals strive to achieve their goals in the best ways possible, every action has a cost, incentives matter, value is determined on the margin, profits and losses help gauge value creation and destruction, and government interventions often have unintended and undesirable consequences.” … This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

  • Sedgwick County considers a planning grant

    This week the Sedgwick County Commission considered whether to participate in a HUD Sustainable Communities Regional Planning Grant.

    A letter from Sedgwick County Manager Bill Buchanan to commissioners said that the grant will “consist of multi-jurisdictional planning efforts that integrate housing, land use, economic and workforce development, transportation, and infrastructure investments in a manner that empowers jurisdictions to consider the interdependent challenges of economic prosperity, social equity, energy use and climate change, and public health and environmental impact.”

    The budget of the grant is $2,141,177 to fund the three-year plan development process, with $1,370,000 from federal funds and $771,177 of “leveraged resources” as a local match. These leveraged resources are in the form of in-kind contributions of staff time, plus $60,000 in cash.

    While Sedgwick County will be the grant’s “fiscal agent,” the work will be done by Regional Economic Area Partnership (REAP), an umbrella organization with the mission of, according to its website: “Guide state and national actions that affect economic development in the region and adopt joint actions among member governments that enhance the regional economy.”

    REAP’s members include city and county governments in a nine-county area in south-central Kansas. One of its duties is to administer the Kansas Affordable Airfares Program, the program that pays subsidies to airlines to provide service to the Wichita airport. In 2011, Sedgwick County paid $15,272 in “assessments” for its membership in REAP, while the City of Wichita paid $27,192. Governments pay smaller amounts as part of REAP’s water resources program.

    The counties that are considering participating in this planning grant are Reno, Harvey, Sedgwick, Sumner, and Butler.

    County documents specify the county’s in-kind contribution as $120,707. That consists of portions of the salary and benefits for four existing employees, plus $85,800 in “indirect administration costs.” There is no cash match at this time.

    John Schlegel, Director of Planning for the Wichita-Sedgwick County Metropolitan Area Planning Department, told commissioners that the end product of this grant would be the development of a regional plan for sustainable development. He said that we don’t know what the plan would contain, but that the purpose of the grant program is to get regions to work together on sustainability issues. The target area of the grant is a five-county area around Sedgwick County.

    He said that examples of issues would be economic development, workforce development, fiscal sustainability such as balanced budgets and spending priorities, and working together to create efficiencies in the region like joint purchasing and cost sharing.

    Commissioner Richard Ranzau asked to see a copy of the completed application, but the application is not complete.

    In his remarks, Ranzau described the application process, reading from the application document: “The applicant must show a clear connection between the need that they have identified within the region, the proposed approach to address those conditions, and the outcomes they anticipate the plan will produce.” He said that it appears that REAP will do these within the application, but the commission is being asked to approve and commit to these items without having seen them, which he described as irresponsible. He made a motion that action on the grant be delayed until these things are known.

    Joe Yager, chief executive officer of REAP, said that last year’s grant application is available on the REAP website, and that is the closest thing to a draft application that is available today. This year’s application is a second year of the program. Last year the commission voted not to participate in the grant by a 3 to 2 vote.

    Commissioner Karl Peterjohn wondered if the new planning consortium is a duplication of existing regional authorities. He listed seven different groups, besides REAP, that are involved in planning for the region.

    In further remarks, Peterjohn was concerned that smaller counties will have the same voting representation as Sedgwick County, which is many times larger than the small counties.

    In response to a question from Peterjohn, Yager said that the current application is for category 1 funds only, which are for planning purposes. If REAP is successful in the application, it could apply for category 2 funds, which are for implementation of a plan.

    Answering another question, Yager said that “livability principles,” which applicants must be committed to advance, are providing more transportation choices, promoting equitable and affordable housing, enhancing economic competitiveness, supporting existing communities, coordinating policies and leveraging investments, and valuing communities and neighborhoods. Peterjohn said these principles were not supplied in the information made available to commissioners.

    Peterjohn said these principles sound innocuous on their face, but when details are examined, he said he could not support a “Washington-driven agenda” that could not pass the present Congress. He described this effort as part of an “administrative end-around,” baiting us with a federal grant, that will allow Washington, HUD, and EPA to “drive what we do in our community.”

    The motion on deferring the item failed on a 2 to 3 vote, with Peterjohn and Ranzau voting for it.

    The commission heard from three citizens. In his remarks, John Todd referenced a slide titled “Common Concerns” from a presentation given by REAP. Todd listed these concerns, which include: “A method of Social Engineering to restrict residence in the suburbs and rural areas and force Americans into city centers; a blueprint for the transformation of our society into total Federal control; will enforce Federal Sustainable Development zoning and control of local communities; will create a massive new ‘development’ bureaucracy; will drive up the cost of energy to heat and cool your home; will drive up the cost of gasoline as a way to get you out of your car; and will force you to spend thousands of dollars on your home in order to comply.”

    Susan Estes of Americans for Prosperity challenged the attitude of some commissioners, particularly Jim Skelton, which is that approving the planning grant does not commit us to implementing the plan. She told the commissioners “If you know you don’t like the federal government coming in and planning for you, say so now. Let’s get it over with and be upfront and honest to those involved,” referring to the other cities and counties that may participate in the grant and planning process.

    She characterized the language that appears in the grant materials as meaning “more control and less liberty.”

    In his remarks, Ranzau asked Schlegel what problem we will solve by participating in the grant. Schlegel answered that the purpose of the grant is to “build the greater regional capacity for regions to better compete in what is really becoming a global marketplace.” This is the end product, he said.

    Ranzau said that we don’t need more planning, that we have more than enough planning at the present time. This grant, he said, would create another consortium that is unaccountable to the people, as no one is elected to them. The organizations receive tax dollars, and while some elected officials serve on these bodies, it is not the same as being directly accountable to the people. The fact that the grant requires a new consortium to be formed is evidence that the agenda is to circumvent the will of the people, he said.

    Ranzau also said that Schlegel told him that “acceptance of this grant will take REAP to another level, because right now they are struggling, and this will help plot the course for REAP.” He said that REAP, which is housed at the Hugo Wall School of Public Affairs at Wichita State University, needs to expand its role and authority in order to give it “something to do.” He said the grant will promote the “progressive agenda” of the Obama administration in this way.

    Later Commission Chair Dave Unruh disputed the contention regarding the workload of REAP.

    Ranzau also questioned whether we want the federal government to be a “source of solutions” for our local communities. He also questioned one of the stated goals of the program, which is to reduce cost to taxpayers. It’s a new program, he said, and would not reduce the cost to taxpayers.

    He further questioned the ability of the grant program to help teach local communities to be fiscally responsible. With federal spending out of control, he said the federal government is not in a position to help in this regard.

    He further said that talking in generalities sounds benign, and that he wanted to know what he is committing the county to this year. Repeating the concerns of Peterjohn, Ranzau said that accepting this grant would be accepting the policies of the Obama Administration as our own. He said that in the 2010 elections the people repudiated the agenda of the president, and this grant program is an example of the type of programs people have said they don’t want. It is concern with the agenda behind this grant program that is his greatest concern, he later explained.

    Continuing, Ranzau questioned the ability of the federal government to create conditions for sustainable growth: “You’ve got to be kidding me. Look at the vision they now have for growth in this county. It’s a disaster. And now they want to take the same policies that have created and made our current economic situation worse — they want to bring them to our local communities by these sorts of grants.”

    Both Ranzau and Peterjohn questioned the ability of this grant to produce affordable housing, citing the government’s role in the ongoing housing crisis.

    Ranzau, who has voted against many grants, added that this is the “the worst and most troublesome grant” he’s seen in his time in office, adding that the grant is clearly an agenda created by President Obama. He said there are politicians who ran for office on platforms of limited government and fiscal responsibility, and this grant is an opportunity for them to “act on those values.”

    In further discussion, it was brought out that each region makes its own definition of what sustainability means to it, but Yager provided this definition of sustainability: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.”

    In his remarks, Unruh said that Sedgwick County has been involved in sustainability thinking and planning for at least two years. He said this is a strategy that helps the county plan for the future. He asked manager Buchanan if the county had a definition of sustainability. Buchanan replied the County has taken a similar approach to the International City/County Management Association, which he said involves four factors: Economic stability — sufficient jobs and economic development; ensuring that local governments are fiscally healthy so that they can provide quality services; social equity, which he said ensures that the delivery of services in communities is equitable; and the environment, which he said was not about global warming, but rather making sure we’re not wasting natural resources.

    Unruh said that we are not opposed to these principles, that these are reasonable activities for elected officials. He added that regionalism is the “whole measuring stick.” We must consider communities close to us when planning, he added. It is reasonable to get these people together on a voluntary and non-binding basis. While he said he didn’t like excess spending at the federal level, it is his money that the federal government is spending, and we should take advantage of this program, adding that we need to plan. If the plans are not acceptable, he said we could simply not adopt them. He disagreed with the contention of Ranzau and Peterjohn that this process causes the county to yield to any master plan developed by the federal government. He again mentioned that we are using our money to develop this plan, and asked our federal officeholders to stop spending money in this way.

    He added that he believes in limited government and fiscal responsibility, and that accessing these resources does not make him “hypocritical, insincere, or untruthful.”

    In rebuttal to Buchanan, Ranzau said that the grant funding document says that one of the goals is to reduce greenhouse gas emissions, which are believed by many to be a cause of global warming or climate change. The document does mention helping regions “consider the interdependent challenges of … energy use and climate change.” This language was transmitted to commissioners in a letter from Buchanan. Ranzau again said it is important not to downplay the agenda that is associated with the grant funds. In earlier remarks, Ranzau had described how applications would be scored or ranked, and that winning applications would need to conform to the goals of HUD.

    The commission voted to approve the grant, with Unruh, Norton, and Skelton voting in favor, and Ranzau and Peterjohn voting against.

    Commentary

    Discussions such as these, where the role of government and the nature of the proper relationship between the federal government and states, counties, and cities, are a regular feature at Sedgwick County Commission meetings, due to the concerns of Peterjohn and Ranzau. These discussion do not often take place at the Wichita City Council, unless initiated by citizens whose testify on matters.

    The remarks of chairman Unruh illustrated one of the important conundrums of our day. Many are opposed to the level of federal (and other government) spending. Polls indicate that more and more people are concerned about this issue. Yet, it is difficult to stop the spending.

    In particular, the grant process is thorny. The principled stand of Ranzau, and sometimes Peterjohn, is that we should simply refuse to participate in the spending — both federal and local — that grants imply, and in the process also accepting the strings attached to them. Others, Unruh and Skelton in particular, have what they believe is a pragmatic view, arguing that it is our money that paid for these grant programs, and so by participating in grants we are getting back some of the tax funds we send to Washington. This reasoning allows Unruh to profess belief in limited government and fiscal responsibility while at the same time participating in this spending.

    But there is no doubt that accepting federal money such as these grant funds means buying in to at least parts of the progressive Obama agenda, something that I think conservatives like Unruh and Skelton would not do on a stand-alone basis. This is an example of the power and temptation of what appears to be “free” federal money, and Ranzau and Peterjohn are correctly concerned and appropriately wary.

    It is even more troublesome to realize that this power over us is exercised using our own money, as Skelton and Unruh rightly recognize, but nonetheless go along.

    There may be a legislative solution someday. First, we can elect federal officials who will stop these programs. But the temptation to bring money back to the home district, either through grant programs or old-fashioned pork barrel spending, is overwhelming. Just this week U.S. Senator Jerry Moran, who voted against raising the debt ceiling in August, pledged to find more federal funds to pay for Wichita’s aquifer storage and recovery program.

    An example of legislation that may work is a bill recently introduced by U. S. Representative Mike Pompeo of Wichita and others. The bill is H. R. 2961: To amend the Patient Protection and Affordable Care Act to have Early Innovator grant funds returned by States apply towards deficit reduction. The purpose of the bill is to direct the early innovator grant funds that Kansas Governor Sam Brownback returned towards deficit reduction, rather than being spent somewhere else.

    The fiscal conservatives who vote to accept federal grant funds should be aware of research that indicates that these grants cause future tax increases. In my reporting on such a study I wrote: This is important because, in their words, “Federal grants often result in states creating new programs and hiring new employees, and when the federal funding for that specific purpose is discontinued, these new state programs must either be discontinued or financed through increases in state own source taxes.” … The authors caution: “Far from always being an unintended consequence, some federal grants are made with the intention that states will pick up funding the program in the future.”

    The conclusion to this research paper (Do Intergovernmental Grants Create Ratchets in State and Local Taxes?) states:

    Our results clearly demonstrate that grant funding to state and local governments results in higher own source revenue and taxes in the future to support the programs initiated with the federal grant monies. … Most importantly, our results suggest that the recent large increase in federal grants to state and local governments that has occurred as part of the American Recovery and Reinvestment Act (ARRA) will have significant future tax implications at the state and local level as these governments raise revenue to continue these newly funded programs into the future. Federal grants to state and local governments have risen from $461 billion in 2008 to $654 billion in 2010. Based on our estimates, future state taxes will rise by between 33 and 42 cents for every dollar in federal grants states received today, while local revenues will rise by between 23 and 46 cents for every dollar in federal (or state) grants received today. Using our estimates, this increase of $200 billion in federal grants will eventually result in roughly $80 billion in future state and local tax and own source revenue increases. This suggests the true cost of fiscal stimulus is underestimated when the costs of future state and local tax increases are overlooked.

    The situation in which we find ourselves was accurately described by economist Walter E. Williams in his recent visit to Wichita. As I reported: “The essence of our relationship with government is coercion,” Williams told the audience. This, he said, represents our major problem as a nation today: We’ve come to accept the idea of government taking from one to give to another. But the blame, Williams said, does not belong with politicians — “at least not very much.” Instead, he said that the blame lies with us, the people who elect them to office in order to get things for us. A candidate who said he would do only the things that the Constitution authorizes would not have much of a chance at being elected.

    The further problem is that if Kansans don’t elect officials who will bring federal dollars to Kansas, it doesn’t mean that Kansans will pay lower federal taxes. The money, taken from Kansans, will go to other states, leading to this conundrum: “That is, once legalized theft begins, it pays for everybody to participate.”

    We face a moral dilemma, then. Williams listed several great empires that declined for doing precisely what we’re doing: “Bread and circuses,” or big government spending.

  • Kansas and Wichita quick takes: Friday August 5, 2011

    More jobs, but … Today’s jobs reports shows more jobs created than the small number many feared would be reported. Commenting on this is Americans for Limited Government President Bill Wilson: “Today the Labor Department’s announcement of the unemployment report showing 117,000 new jobs created is a testimony to America’s job creators who are fighting hard against the economic headwinds created by Obama’s bullheaded adherence to a failed 1930s economic philosophy. … The drop in the unemployment rate to 9.1 percent though is a false signal as the drop is largely attributable to even more Americans giving up hope of getting a job and dropping out of the workforce. Since Obama has become president, Americans have been leaving the workforce in droves. For them, and the almost 14 million unemployed, Obama’s change has robbed them of hope.”

    Sedgwick County budget. Wednesday’s meeting of the Sedgwick County Commission featured some actual legislative action as two fiscally conservative commissioners sought to reign in some county spending as the commissioners considered the 2012 budget. Commissioner Karl Peterjohn offered an amendment that would have reduced county spending by almost $500,000 in net spending reduction by eliminating one county center in health data, eliminating the new county lobbyist position, cutting $125,000 in airline subsidies as well as other business incentive spending, and several smaller categories of county spending. This amendment failed with only Commissioner Richard Ranzau voting with Peterjohn. A second amendment by Peterjohn deleted the new county lobbyist position to save $83,546. This amendment failed by the same vote as the first.

    There are emergencies, and then there aren’t. KAKE Television reports that during Wednesday evening’s storm, about 65 percent of the calls handled by the 911 system operators were for non-emergency reasons. “A majority of the calls from the storm were people requesting to be transferred to the electric company,” the station reports. Story and video at Majority Of Emergency Calls Were Non-Emergencies .

    Debt ceiling bill seen as feckless. The Cato Institute’s Jagadeesh Gokhale sums it up quite colorfully: “It’s been a frustrating two months watching politicians alternately squirm and spin only to achieve a damp squib of a deal.” He also writes that “The President and leaders in Congress have basically thrown in the towel.” The problems, he writes are “far too little by way of spending cuts, keeps open the possibility of new taxes, and hikes the debt ceiling substantially.” The major problems of Medicare, Medicaid and Social Security were not addressed, he adds. More from Gokhale at The Debt Deal: Failures of Leadership and Resolve. … His colleague Daniel J. Mitchell notes the path American is taking: “America is on a path to becoming a Greek-style welfare state. Thanks to the Bush-Obama spending binge, the burden of federal spending has climbed to about 25% of national economic output, up from only 18.2% of GDP when Bill Clinton left office.” Of the spending cuts, he writes “federal spending will actually be higher every year and that the cuts were based on Washington math (a spending increase becomes a spending cut if outlays don’t climb as fast as some artificial benchmark).” It is thought that spending cuts amount to only $22 billion next year. Out of likely $3.6 trillion budget, that’s 0.6 percent. Mitchell concludes: “One group of people, however, unambiguously got the short end of the stick in this budget deal. Ordinary Americans are caught in the middle. They’re not poor enough to benefit from the federal government’s plethora of income-redistribution programs. But they’re not rich enough to have the clever lobbyists and insider connections needed to benefit from the high-dollar handouts like ethanol subsidies and bank bailouts. Instead, middle-class Americans play by the rules, pay ever-higher taxes, and struggle to make ends meet while the establishment of both parties engages in posturing as America slowly drifts toward a Greek-style fiscal meltdown.” More from Mitchell at Debt Deal: Politicians Win, Middle Class Loses.

    Higher fuel standards mean higher death toll. It’s simple physics, writes the Washington Examiner. Weight is the main enemy of fuel economy, so higher fuel economy standards from the government mean lighter cars. This lighter weight translates directly into highway deaths: “In 2003, for example, a National Highway Traffic Safety Administration study estimated that for every 100 pounds of weight taken out of a car weighing under 3,000 pounds, the death rate goes up more than 5 percent; the increase is slightly less than 5 percent for those weighing more than 3,000 pounds. Two years before that, a National Academy of Sciences study estimated that the lighter vehicles required to satisfy CAFE were responsible for as many as 2,600 highway deaths in one year alone. And in 1999, a comprehensive multiple regression analysis by USA Today of the government’s Fatality Analysis Reporting System data concluded that 7,700 people died for every one additional mpg attributable to CAFE regulation.” … Thomas Sowell warned us of this in 2005 when he wrote “Many of the same people who cry ‘No blood for oil!’ also want higher gas mileage standards for cars. But higher mileage standards have meant lighter and more flimsy cars, leading to more injuries and deaths in accidents — in other words, trading blood for oil.” … This is another example of the unintended consequences of regulation, although many times the consequences are intended.

    Myths about markets. Tom G. Palmer has a wonderful paper that tackles the criticisms of free markets that have evolved into myths. For example, the first myth is that markets are immoral or amoral. Palmer states the myth: Markets make people think only about the calculation of advantage, pure and simple. There’s no morality in market exchange, no commitment to what makes us distinct as humans: our ability to think not only about what’s advantageous to us, but about what is right and what is wrong, what is moral and what is immoral. His destruction of the myth: “A more false claim would be hard to imagine. For there to be exchange there has to be respect for justice. People who exchange differ from people who merely take; exchangers show respect for the rightful claims of other people. The reason that people engage in exchange in the first place is that they want what others have but are constrained by morality and law from simply taking it. An exchange is a change from one allocation of resources to another; that means that any exchange is measured against a baseline, such that if no exchange takes place, the parties keep what they already have. The framework for exchange requires a sound foundation in justice. Without such moral and legal foundations, there can be no exchange. Markets are not merely founded on respect for justice, however. They are also founded on the ability of humans to take into account, not only their own desires, but the desires of others, to put themselves in the places of others. A restaurateur who didn’t care what his diners wanted would not be in business long. If the guests are made sick by the food, they won’t come back. If the food fails to please them, they won’t come back. He will be out of business. Markets provide incentives for participants to put themselves in the position of others, to consider what their desires are, and to try to see things as they see them. Markets are the alternative to violence. Markets make us social. Markets remind us that other people matter, too.” … The entire paper is at Twenty Myths about Markets.

    What are rights? “Individuals have rights. But are they natural? And how do they compare and contrast with legal or constitutional rights? Are legal or constitutional rights similar to those inalienable rights mentioned in the Declaration of Independence? Professor Aeon Skoble distinguishes such constitutional rights, such as the right to vote, from the rights protected by governments and constitutions — natural rights not actually granted by governments themselves. He concludes that legal systems should create rights that are compatible with natural rights.” This video is from LearnLiberty.org, a project of Institute for Humane Studies, and many other informative videos are available.

  • Job creation at young firms declines

    A new report by the Kauffman Foundation holds unsettling information for the future of job growth in the United States. Kauffman has been at the forefront of research regarding entrepreneurship and job formation.

    Previous Kauffman research has emphasized the importance of young firms in productivity growth. Research by Art Hall found that for the period 2000 to 2005, young firms created nearly all the net job growth in Kansas.

    So young firms — these are new firms, and while usually small, the category is not the same as small businesses in general — are important drivers of productivity and job growth. That’s why the recent conclusion from Kauffman in its report Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation is troubling: “The United States appears to be suffering from a long-term leak in job creation that pre-dates the recession and has the potential to persist for an unknown time. The heart of the problem is a pullback by newly created businesses, the economy’s most critical source of job creation, which are generating substantially fewer jobs than one would expect based on past experience. … This trend has only worsened since the onset of the most recent recession. The cohort of firms started in 2009, for example, is on track to contribute close to a million jobs less in its first five to ten years than historical averages.”

    The report mentions two assumptions that are commonly made regarding employment that the authors believe are incorrect:

    First, policymakers’ focus on big changes in employment because of events such as a new manufacturing plant or the recruitment of a business to a community ignore the more important fact that our jobs outlook will be driven more by the collective decisions of the millions of young and small businesses whose changing employment patterns are not as easy to see or influence. Second, it is just as easy to be deluded into thinking that the jobs problem will be solved by growth in the number of the self-employed.

    The importance of young firms is vital to formulating Kansas economic development policy. Kansas Governor Sam Brownback has incorporated some of the ideas of economic dynamism in his economic plan released in February. The idea of dynamism, as developed by Dr. Art Hall, is that economic development is best pursued by creating a level playing field where as much business experimentation as possible can take place. The marketplace will sort out the best firms. The idea that government economic development agencies can select which firms should receive special treatment is sure to fail. It is failing.

    While the governor’s plan promotes the idea of economic dynamism, some of his actual policies, such as retaining a multi-million dollar slush fund for economic development, are contrary to the free marketplace of business experimentation and letting markets pick winning firms.

    At the City of Wichita, economic development policy is tracking on an even worse direction. Among city hall bureaucrats and city council members, there is not a single person who appears to understand the importance of free markets and capitalism except for one: council member Michael O’Donnell, who represents district 4 (south and southwest Wichita).

    The policy of Wichita is that of explicit crony capitalism, with city leaders believing they have the wisdom to develop policies that recognize which firms are worthy of taxpayer support. And if they want to grant subsidies to firms that don’t meet policies, they find exceptions or write new policies. Elected officials like Wichita Mayor Carl Brewer and city council member Jeff Longwell lust for more tools in the economic development toolbox.

    At the Sedgwick County Commission, two of the five members — Karl Peterjohn and Richard Ranzau understand the importance of free markets for economic development. But the city has a much larger role in targeted incentives for economic development, as it is the source of tax increment financing districts, industrial revenue bonds, economic development exemptions, community improvement districts, and other harmful forms on economic interventionism.

  • Wichita and its political class

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

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

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

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

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

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

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

    Wichita general fund spending

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

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

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

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

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

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

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

    Going forward

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

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

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

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

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

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

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

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

  • Sedgwick County, Golf Warehouse, reveal shortcomings in procedure

    Wednesday’s decision by the Sedgwick County Commission to grant a forgivable loan of $48,000 to The Golf Warehouse is yet another example of local government relying on corporate welfare as economic development, and exposes how little deliberation is given to making these decisions.

    This subsidy was promoted by the county and TGW’s consultant as necessary to persuade the applicant company to expand its operations in Wichita rather than Indiana, where the company has other operations and had also received an offer of subsidy. The same argument had been made to the Wichita City Council in May 10th, and it was successful in persuading all council members but one to vote in favor of granting a forgivable loan of the same amount as the county.

    At the county commission meeting, commissioners received a presentation by Leslie Wagner, Director of Project Management and Development for Ginovus, an economic development and site location advisory services firm working on behalf of TGW.

    While The Golf Warehouse was started in Wichita by entrepreneurs, Wagner told commissioners that the company is now owned by Redcats, a Paris, France company. That acquisition took place in 2006, she said.

    A focus of Wagner’s presentation was how large and successful an enterprise Redcats is, with $4.8 billion in annual sales revenue and over 14,000 employees. As to TGW specifically, Wagner said it offers the largest and broadest selection of golf products in the world, and has expanded to included baseball, softball, and soccer products.

    Right away some might be inclined to ask why, with the company so large and successful, local governments find it necessary to prop up this company with public assistance.

    According to Wagner, TGW will add 105 new employees by 2015, and the company’s average annual payroll by then will be $9,995,000.

    The argument for subsidy

    In her presentation, Wagner listed the incentives offered to TGW by both Indiana and Kansas. But she did not supply the value of each incentive, which makes the comparison largely meaningless. Additionally, the list of the incentives and subsidies offered by the State of Kansas was not complete. Further, some of the incentives offered by Indiana are already present in Kansas.

    For example, one incentive offered by Indiana was an abatement on personal property tax, which Wagner indicated was a factor in favor of that state. But Kansas does not tax business personal property, that is, business machinery and equipment newly purchased, leased, or moved into Kansas. This ranges from desks, computers, and copiers to large pieces of machinery and equipment. The incentive offered by Indiana, therefore, is already in place in Kansas without companies needing to ask for it, and Wagner should not have included this as a distinguishing factor between Indiana and Kansas.

    In addition, Kansas has added “expensing,” which allows businesses to depreciate purchases in one year instead of several, which reduces Kansas state income tax. As TGW expands and makes these purchases, it will be able to take advantage of this new provision in the Kansas tax code.

    Wagner also mentioned an Indiana program called EDGE (Economic Development for a Growing Economy), which rebates employees’ state income tax withholding back to the company. We have that in Kansas, too. It’s called Promoting Employment Across Kansas (PEAK), and the range of situations where this program can be applied has been expanded by this year’s legislature. This, again, is an example where an incentive offered by Indiana and promoted by Wagner as a reason as to why the county must grant a subsidy of its own to TGW is already present in Kansas.

    Another part of Wagner’s presentation that deserves a second look is her analysis of the economic impact of TGW. Wagner said that over ten years the payroll — the wages paid to its employees in Wichita — of TGW would be $100,623,437, with a “conservative” apportionment to the county of $50,311,718.

    She then showed the commission a slide where she computed the return on the county’s investment. For the “return,” she used the $50,311,718 figure of payroll that she attributed to the county. For the “investment,” she used $96,000, which is the sum of the forgivable loans from both Wichita and Sedgwick County. (Why she used both entity’s investment but only county payroll, I don’t know.)

    Her calculations from these numbers produced a return on investment of 524 percent. “If I were making an investment, that’s a phenomenal return, and I’d make that one all day long,” she told commissioners.

    But her actual calculation should have been as follows ($50,311,718 – $96,000) / $96,000 * 100 = 52,308 percent for the rate of return, if she was looking to fluff up her numbers as much as possible.

    But even that calculation wouldn’t make economic or financial sense. The $50,311,718 is returned over a period of 10 years, so the receipt of that money needs to be spread over that time. Then, since long time periods are involved, the returns in future years need to be discounted, because a dollar expected to be received in ten years is not worth as much as a dollar received this year. I made a few other assumptions and used Excel’s internal rate of return function to compute a rate of return of 5,241 percent.

    This tremendous rate of return, of course, makes no economic sense either. The $50,311,718 used as the “return” to the county is not that at all. This money is wages paid to workers. It belongs to them, not to the county. True, the county will get some of that in the form of sales taxes these workers pay as they make purchases within the county, and perhaps in other forms of taxes. Using an estimate of that number would make sense on some level, and that is the type of reasoning the Wichita State University Center for Economic Development and Business Research uses to compute the cost-benefit figures the city and county often rely upon in making decisions.

    But the figures and calculations Wagner used to make the case for TGW make absolutely no economic or financial sense. Worse than being merely absurd, they are deceptive. Compounding the error, elected officials such as commission chair Dave Unruh cited them as a factor in making his vote in favor of granting the forgivable loan.

    Completing her presentation, Wagner said “Perhaps as important, it’s goodwill. … Does the state want us to stay, does the community want us to stay, and are they willing to help us grow?” Brad Wolansky, CEO of TGW, said the loan is part of the “element of partnership” between the county and TGW, which he said was indicative of the county’s support. This is the same attitude expressed at the Wichita City Council meeting: Many of these companies requesting incentives and subsidies believe they deserve some sort of reward for investing in Wichita and creating jobs. The profits of entrepreneurs or capitalists are no longer sufficient, it seems, for some companies.

    In remarks from the bench, Sedgwick County Commissioner Richard Ranzau questioned the need for this incentive, citing the recent example of a Save-A-Lot store which will be built by a developer without incentives, after the original developer failed to acquire all the incentive he asked for. Video of his remarks and an exchange with Wagner is below.

    In his remarks, Commissioner Jim Skelton said this decision is a “no-brainer,” and that he was proud to do this for the community. Chairman Unruh said “we’re competing with someone else for this company.” He referenced the “great return” on the county’s investment, and that he could not find a reason not to support it.

    All commissioners except Ranzau voted to grant the forgivable loan, with Karl Peterjohn absent.

    City and county information not complete

    The forgivable loan subsidy granted by both Wichita and Sedgwick County is not the only subsidy TGW will receive. An inquiry to the Kansas Department of Commerce indicates that from the state of Kansas, TGW will receive $125,000 from the Kansas Economic Opportunity Initiatives Fund, $125,000 in Kansas Industrial Retraining, $50,000 in Kansas Industrial Training, $96,000 in sales tax savings, $315,918 in personal property tax savings, and $623,796 from the High Performance Incentive Program, for total incentives from the state of $1,310,714.

    These state incentives were not mentioned by the county. The value is also much higher than the City of Wichita reported in its material for its May 10th meeting when the city approved its forgivable loan to TGW. At that time, city documents reported the value of state subsidies at $275,000, a figure just 21 percent of the value reported by the Department of Commerce.

    Corporate welfare, again

    This episode, where subsidy is heaped on a company who presents a threat — real or imagined — of leaving Wichita or expanding elsewhere, represents local officials not grounding a decision on actual facts. The wild claims of return on investment made by the company’s representative simply can’t be believed. Her information about the incentives offered and available, as well as that from the City of Wichita, is incomplete or misleading.

    With some time to analyze the claims made by Wagner (and others who appear in similar situations), we can expose them for what they are. But commissioners — city council members too — often don’t have time or expertise to examine the facts. Commissioner Ranzau told me that he did not receive Wagner’s slides before the meeting. The information delivered to the council by Sherdeill Breathett, Economic Development Specialist for the county, did not appear in the new agenda system the county recently implemented. During meetings there is not time to analyze calculations or examine the claims made by presenters.

    We have to ask, however, if local government officials have the desire to examine these presentations and claims. Once the veneer of economic development hucksterism — thin as it is — is stripped away, we are left with what Ranzau has stated several times from his position on the commission bench: a simple transfer of one person’s money to another using the force of government as the agent. This reality of corporate welfare is something that officials would rather not recognize, and it’s not economic development in my book.