Voice For Liberty

Tag: Subsidy

  • Wichita’s Naysayers Are Saying Yes to Liberty

    Wichita politicians, newspaper editorial writers, and sometimes just plain folks are fond of bashing those they call the “naysayers,” sometimes known as CAVE people. An example is from a recent Opinion Line Extra in the Wichita Eagle:

    An acquaintance in another city refers to the anti-everything people as “CAVE” people (Citizens Against Virtually Everything). I fear the GOP voters of western Sedgwick County have selected the ultimate CAVE person in Karl Peterjohn.

    Naysayers, too, can’t be happy, according to a recent statement by Wichita Mayor Carl Brewer: “And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy.”

    If you read all of Mayor Brewer’s remarks at Wichita Mayor Carl Brewer, August 12, 2008, you’ll learn that without government management of economic development in Wichita, we’d be back to the days of covered wagons. (I’m not kidding. He really said that, and I think he really believes it.)

    Wichita’s news media, led by the Wichita Eagle, continually expresses a bias in favor of government. Even in news reporting this bias can be seen, as shown in the post The Wichita Eagle’s Preference For Government. On the Eagle’s editorial page, we rarely see an expansion of government interventionism opposed by the editorial writers. I can’t think of a single case.

    But saying no to government doesn’t mean saying no to progress. It does mean saying “no” to the self-serving plans of politicians and bureaucrats. It means saying “no” to the dangers of collectivist thinking, as expressed in The Collectivism of Kansas Governor Kathleen Sebelius.

    It means saying “no” to Wichita’s political entrepreneurs, who seek to earn profits through government coercion rather than meeting the needs of customers in the marketplace. It means saying “no” to the public-private partnership, where all too often it is the risk that is public and the profit that is private. It means saying “no” to a monopoly on the use of public money in the education of children, and “no” to an expansion of that monopoly through a new bond issue.

    So yes, I guess I and Wichita’s other naysayers are saying “no” to a lot of things.

    But what we’re saying “yes” to is liberty and freedom. We’re saying “yes” to the rich diversity of human individuality instead of government bureaucracy. We’re saying “yes” to free people cooperating voluntarily through free markets rather than forced government transfers from taxpayers to favored individuals and programs.

    We’re saying “yes” to consumers choosing which businesses in Wichita thrive, rather than politicians on the city council choosing. We’re saying “yes” to people making their own choices, rather than government “incentivizing” the behavior it desires through TIF districts and tax abatements, those incentives being paid for by taxpayers.

    So let me ask you: what do you say “yes” to?

  • Reverend Kevass Harding’s Wichita TIF District: A Bad Deal in Several Ways

    Remarks to be delivered to the Wichita City Council on August 12, 2008.

    There’s several reasons why this council should not approve this request for TIF financing.

    Material in today’s agenda packet doesn’t specify an amount, but past materials indicated that the project was $2.5 million short of the total needed for the project.

    Now some on this council feel that TIF financing isn’t an outright subsidy or gift to the developers of a project. But let me ask you this: if the project is $2.5 million short without TIF financing, and then with City of Wichita TIF financing the project is fully funded, what does that tell you about the value of the TIF district to the developers of this project?

    Under TIF financing, the City of Wichita doesn’t directly give developers the money. Instead, the city issues bonds, and then uses the proceeds from the bonds to do things that directly benefit the developers.

    Now if the developers borrowed that money from a bank, they’d have to pay back the loan. Each year the developers would have to make the loan payments, and also, just like everyone else, they’d have to pay their property taxes. (Those taxes have increased as now the development is worth more due to the improvements made by the developer. That’s the “increment” in TIF.)

    But with a TIF district, the bank is the City of Wichita, which issued bonds to pay for things the developers needed to make the project work. So the developers have to pay back the city. But instead of making payments on a loan from a bank and their property taxes, all the TIF developers have to do is pay their property taxes. By merely paying the same taxes that everyone else has to pay based on the value of their property, their loan is repaid.

    That’s why a TIF district allows developers to effectively avoid paying some or all of the increased property taxes on their development. When a development is undertaken without the benefit of a TIF district, developers have to repay loans and pay higher taxes. With a TIF district, all the developers have to pay is higher taxes.

    I’m tempted to ask this rhetorical question: Why don’t we strip away all the confusion and obfuscation surrounding TIF districts and just give the developers $2.5 million? This way, we fund the development, the shopping center is remodeled, and we wouldn’t have to come back year after year, evaluating the TIF district to see if it is meeting its goals, perhaps pouring in more funds if it isn’t. Instead, we could just give Reverend Harding’s group $2.5 million, wish them good luck, and be done with it.

    But I don’t want to seriously pose that question, because I’m afraid of what this council’s response might be.

    Besides this, there’s another reason to oppose this TIF district, or at least insist this be handled in a special way. Reverend Harding is a member of a board that has to give its tacit approval to the formation of this TIF district. That board doesn’t have to take any positive action; all it has to do is nothing. I spoke to this council about the thorny ethical issues surrounding this on July 8th. At that time Reverend Harding said that he informed the city and his colleagues on the Wichita school board of what he was doing. But it’s not to them that he has an ethical obligation. Instead, it is to the citizens of Wichita and the residents of USD 259 that he has the ethical obligation to make sure that this matter is handled with appropriate transparency. To my knowledge, he has not done that.

    Finally, I have asked Reverend Harding several questions, but he has not answered me, even though I am his constituent: How much tax revenue will the Wichita public school district forgo if this TIF district is granted? And given Reverend Harding’s votes to increase property taxes and his urging for taxpayers to pass an expanded bond issue, shouldn’t he set an example and pay his full share of taxes like everyone else?

  • Downtown Wichita Arena TIF District

    Remarks to Wichita City Council, August 5, 2008.

    When I’ve been talking to people in Wichita, I find there is great confusion about the way that TIF districts work. This confusion serves to obfuscate what really happens with TIF districts: the TIF developers get to use their own property taxes to pay for things that non-TIF developers have to pay for out-of-pocket, or through special tax assessments on top of their regular property taxes.

    It is really this simple. To deny this is to deny simple arithmetic.

    Then, do TIF districts perform as promised? One of the troubling things I learned from recent Wichita Eagle reporting is that in the past four years, assessed valuations in the downtown TIF areas have grown at 14.9 percent per year, just 1.4 times the rate of all commercial property. A few weeks ago I was assured by one council member that the taxes paid by property owners in TIF districts grows “exponentially.” But now we have evidence that the growth is quite modest.

    I was going to say that I have no doubt that the members of this council have good and noble intentions in wanting downtown Wichita and the area around the arena to succeed. But establishing this TIF district is not good for the arena district or the city as a whole.

    Entrepreneurs in Wichita, or anywhere for that matter, have a difficult enough job to do in predicting what consumers want. For government to step in and create special tax-favored districts adds another measure of uncertainty and risk. It distorts the market allocation of capital. Investment will be driven by government incentives rather than market considerations.

    This is also a blow to those who have invested elsewhere. It is the city telling them they made a mistake, that they invested in the wrong part of town.

    For the arena district to succeed, it needs to be because entrepreneurs, using their own capital, decide that it is a worthwhile place to invest.

  • Wind Production Tax Credits Aren’t Free of Cost

    Nancy Jackson of the Climate and Energy Project in Kansas has some tips for citizens and candidates to use when talking about global warming. The article Tips for citizens and candidates – talking about the Production Tax Credit contains warnings about what will happen if the Production Tax Credit (PTC) isn’t extended beyond its scheduled expiration date at the end of 2008. Thousands of jobs and billions in investment will be at risk, the post says.

    Whether these tax credits are desirable is one issue. But what is not at issue is that these tax credits come with a cost. They aren’t free. Taxpayers have to pay for them, or, as is likely the case, the federal government borrows money to pay for them. Either way, the tax credits take money out of the pockets of people across the country to subsidize the production of wind power.

    When people have less money to spend because of the PTC, economic activity is reduced. Jobs are lost. Investment is not made or is deferred. The problem is that if the PTC is eliminated, the loss of jobs and investment will be concentrated and noticeable. Wind farms will cease to operate, it seems the alarmists are saying, and all the workers will be laid off. Television news crews will be at the wind farms on the workers’ last day on the job, and their plight will be reported and editorialized upon.

    But every day average people in America have a little less money in their pockets because of these tax credits. Their loss, on an individual basis, is small and not concentrated where it can be reported on. But it is real.

    We’ve seen how government subsidies to ethanol producers and corn growers have distorted markets worldwide. The same applies to wind power. To be a viable long-term strategy, wind power must be profitable on its own without subsidy.

  • Wichita City Council’s misunderstanding of tax increment financing

    On July 8, 2008 I testified at a public hearing at a Wichita city council meeting. Afterward, a council member told me that I had a “glaring error” in my arguments. I won’t identify this member in order to avoid embarrassing the member. The minutes of the meeting don’t identify the member who said this, but video is available.

    My purpose in testifying that day was not to question the merits of tax increment financing (TIF) districts. Instead, I was identifying an ethics problem that a Wichita school board member has regarding his involvement in a proposed TIF district. (See Reverend Kevass Harding and His Wichita TIF District.) In my testimony I stated, with a qualification, that the applicant for this TIF district was asking for relief from paying some of the property tax for his real estate development. After my testimony, a council member told me that I was wrong, that the TIF district won’t allow someone to avoid paying property taxes. True, I said. It was sloppy for me to have said that without clarification, but it wasn’t the point I was making that day.

    But since the city council member brought up the point, let’s examine how TIF districts work. I am sure you will be able to agree that the use of TIF districts allow developers to effectively avoid paying some of their increased property taxes.

    In material prepared by Wichita’s Office of Urban Development and presented at the March 18, 2008 city council meeting, we may read this: “The developers have identified a financing shortfall of $2.5 million, for which they are seeking tax increment financing assistance. The preliminary project budget presented to City staff indicates that TIF funds would need to be used for site acquisition costs in order to spend $2.5 million on project costs eligible for TIF funding.”

    So without the formation of the TIF district, the developers are $2.5 million short. With the TIF district, they’ve got the money they need. We must conclude, then, that the TIF district financing, no matter what it is used for, is worth $2.5 million to the developers.

    Now if the developers borrowed that money from a bank, they’d pay back the loan over some period of years. Each year, out of the cash flow the project generates, the developers would have to make the loan payments, and also, just like everyone else, they’d have to pay their property taxes. (Those taxes have increased as now the development is worth more due to the improvements made by the developer. That’s the “increment” in TIF.)

    But with a TIF district, the “bank” is the City of Wichita, which issued bonds to pay for the benefits the developers needed to make the project work. So the developers have to pay back the city. But instead of making payments on a loan from a bank and their property taxes, all the TIF developers have to do is pay their property taxes. By merely paying the same taxes that everyone else has to pay, their loan (the bonds issued by the City of Wichita) is repaid.

    That’s why a TIF district allows developers to effectively avoid paying some of the increased property taxes on their development. When a development is undertaken without the benefit of a TIF district, developers have to repay loans and pay higher taxes. With a TIF district, all the developers have to pay is higher taxes.

    It is as simple as this.

  • Government Art in Wichita

    Do we really want government art in Wichita?

    David Boaz, in his recent book The Politics of Freedom: Taking on The Left, The Right and Threats to Our Liberties writes this in a chapter titled “The Separation of Art and State”:

    It is precisely because art has power, because it deals with basic human truths, that it must be kept separate from government. Government, as I noted earlier, involves the organization of coercion. In a free society coercion should be reserved only for such essential functions of government as protecting rights and punishing criminals. People should not be forced to contribute money to artistic endeavors that they may not approve, nor should artists be forced to trim their sails to meet government standards.

    Government funding of anything involves government control. That insight, of course, is part of our folk wisdom: “He who pays the piper calls the tune.” “Who takes the king’s shilling sings the king’s song.”

    When I read Rhonda Holman’s editorial City can be proud of its arts work in the July 15, 2008 Wichita Eagle, which starts with the stirring reminder that “The arts fire the mind and feed the heart” I thought that perhaps she was going to call for less government involvement in the arts. Anything so important to man’s nature surely, I thought she would agree, should not be placed in the hands of government.

    But my hopes were not realized, because soon she described the City of Wichita’s commitment to permanent spending on arts as “a bold and even brave investment in quality of life.” It appears that even the yearnings of our hearts and minds are subject to government management and investment.

    “Government art.” Is this not a sterling example of an oxymoron? Must government weasel its way into every aspect of our lives?

    And what about the “investment” in art, which Ms. Holman claims helps “drive the economy” through its economic impact and job creation? She, and Wichita City Council member Sharon Fearey rely on a study from 2007, which I discuss in Economic Fallacy Supports Arts in Wichita. This study tells of the fabulous returns on investment by governments when they invest in the arts. Like most studies of its type, however, it focuses only on the benefits without considering secondary consequences or how these benefits are paid for. Henry Hazlitt, in his masterful book Economics in One Lesson explains:

    While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

    It is, as Hazlitt terms it, “the special pleading of selfish interests” that drive much of the desire for government spending on the arts. Either that or elitism. Do newspaper editorialists and city council members believe that the people of Wichita can choose for themselves the art they want to enjoy, and then acquire it themselves? Evidently not, as the City of Wichita government has its Division of Arts & Cultural Services.

    (The material by David Boaz is from a speech which may be read here: The Separation of Art and State.)

  • Jack Pelton, Leader of Kansas Energy and Environmental Policy Advisory Group

    Earlier this year, Kansas Governor Kathleen Sebelius created the Kansas Energy and Environmental Policy Advisory Group (KEEP) and appointed Cessna Aircraft Company chairman, president and chief executive officer Jack Pelton as its leader.

    This was a smart political move by Governor Sebelius. She appears to have put the planning for our state’s energy future in the hands of an independent, skeptical businessman, someone who will be concerned about the bottom line. Someone who won’t be overly influenced by the emotional appeals of environmentalists.

    Kansans need to understand, however, that Jack Pelton may not want to, or be able to, exhibit the independence necessary to formulate sound energy and environmental policy in Kansas.

    In a Wichita Eagle editorial on May 18, 2008, Pelton said he believes that carbon dioxide emissions must be reduced: “We are tasked with helping develop a plan to ensure Kansas energy needs are met now and in the future through policies and technologies that reduce the state’s carbon footprint.” To me, this sounds as though he’s already formed a conclusion — and one that happens to agree with our governor’s.

    That agreement with Governor Sebelius may not be a coincidence. Other motives may be a factor. That’s because earlier this year, the State of Kansas approved $33 million in incentives for Cessna, with Wichita and Sedgwick County adding another $10 million. The governor signed the legislation in a televised ceremony at Cessna’s facilities in Wichita. This award to Cessna is part of $150 million in aircraft incentives the state authorized.

    (As is often the case with economic development incentives, the state won’t directly give Cessna the money. Instead, it will issue bonds that Cessna will repay with its employee withholding taxes. Confusing maneuvers like this allow governments to say they aren’t actually giving money to companies. Instead, they’re merely issuing bonds which will be repaid, never mind what they’re being repaid with.)

    His company having received a gift like that, how could Pelton turn down the governor’s request to lead KEEP? Given Kathleen Sebelius’ national political ambitions based on her green environmentalist credentials, how can he be expected to do anything that would ruffle her feathers?

    When you combine these factors with the fact that KEEP is being facilitated by The Center for Climate Strategies, Kansans should be very skeptical of the conclusions and recommendations that will emerge from this process.

  • Wichita Old Town Theater’s Bill Warren: No Ideas?

    Recently the Wichita City Council approved a no-interest and low-interest loan to Old Town Wichita theater owner Bill Warren and his partners. Citizen opinion in Wichita seems to be mostly outrage at this giveaway, and rightly so. See Wichita Old Town Warren Theater Public Hearing Remarks and Wichita and the Old Town Warren Theater Loan.

    Now, a post by Randy Scholfield on The Wichita Eagle Editorial Blog (Bill Warren wants your ideas!) comments on how Bill Warren wants Wichitans to send him ideas. According to the Wichita Eagle news story Warren wants filmgoers’ ideas, “Warren, who typically plans his theaters and renovations down to the detail, plans to turn much of the planning for the Old Town Warren remake over to the downtown moviegoing public.” (I guess that’s only fitting, as he asked the citizens of Wichita for a subsidy to help pay for it.)

    Wrote Mr. Scholfield in the blog post: “You’d think he and his partners in the Old Town Warren might have a revival plan worked out already, as a condition of the loan, right?”

    Now, when it’s too late, Scholfield asks the question. Perhaps he can recall his editorializing in favor of the Warren theater loan.

  • Kansas Giveaways to Wealthy Homeowners

    A Wichita Eagle news story (Help with historic houses, July 4, 2008) describes two apparently wealthy College Hill homeowners who plan to benefit from Kansas tax credits. These credits are given to people who own homes that have a historic designation.

    If you own such a historic house and plan to, for example, replace the windows or the roof, the State of Kansas will give you a tax credit of up to 25%.

    Sounds like a good program, doesn’t it? Tax credits — do they cost the state anything when given? Tax credits mean that your taxes are reduced. Suppose you spent $5,000 replacing windows. 25% of that is $1,250, so with a tax credit, your Kansas income tax would be reduced by $1,250. If your taxes were going to be $4,000, after the tax credit you’ll pay only $2,750.

    (This is much better than a tax deduction, which reduces your taxable income and taxes, but by a much smaller amount. The highest Kansas personal tax rate is 6.45%, so reducing your income by the $5,000 spent on windows means a tax savings of $322.50. Not nearly as good for the homeowner as a credit of $1,250.)

    The problem with all this is that unless the state reduces its spending by the amount of the tax credits, someone else has to make up the difference.

    So, average hard-working Kansans of all income levels will pay more taxes so that gifts — wait, I mean tax credits — can be given to wealthy homeowners living in historic homes.

    Now does this seem like a good program? The irony is that liberals (or “social progressives”) are usually in favor of historic preservation laws, while at the same time decrying tax giveaways to the rich, who do not pay their fair share, they say. Go figure.