Here’s a map of improvement and development districts in Wichita and Sedgwick County.
Sometimes critics of tax increment financing districts (TIF districts) say things like “If TIF districts are good for development, why not make the entire city a TIF district?” Maybe we’re headed that way.
Can the Lord’s work be funded by taxation? If you’re Reverend Kevass Harding, the answer is sure, why not? He might even think it’s his calling.
Never mind that at its fundamental level, taxation takes money from one person against their will and gives it to another.
Sure, some people will argue that taxes are “the price we pay for civilization” or something like that. Or they will say that since we all benefit from, say, police and fire protection, we all have to pay taxes.
Even if true, these rationalizations are a long way from using taxation to support private real estate development. At least these arguments don’t invoke the name of Jesus. But Harding does in order to accomplish through government, in the form of tax increment financing, what he couldn’t through voluntary action. Is this what Jesus would do?
The Wichita Eagle story KenMar part of pastor’s work in neighborhood tells us of Harding’s belief that “he is doing the Lord’s work, in part, in renovating the run-down KenMar Shopping Center at 13th and Oliver.”
The story also states “The project is a private, for-profit venture, he said, but it springs in part from his spiritual vocation.”
This taking of money, shrouded in morality and spirituality, is even more egregious than most. High atop his moral high horse, Harding believes he is doing good for the community. For the entire city, I’m sure he believes.
Here’s something from another man of religion, C.S. Lewis, reminding us about moral busybodies: “Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”
Remarks to be delivered to the Wichita City Council on January 6, 2009.
Mr. Mayor, members of the council:
Last month it was discovered that procedures used to investigate the background of potential city business partners were lacking in some respects. It is now recognized that the process that were in place failed to give city council members information that they needed in order to make a fully-informed decision about the desirability of partnering with a certain development firm.
Today the council is facing a similar situation. As with the previous case, the TIF district itself has already been approved. Now the actual project plan is before you.
Also as with the case last month, these developers made application under the vetting process that this council has now realized was faulty.
To my knowledge, no one has made any allegations that the developers before you today have problems like those that caused the postponement of the project in December. But since these developers applied for and were approved for TIF financing under a system that is now recognized as flawed, we really don’t know.
There is one thing in particular I would like to know: The developers have been asked to agree to what the city calls a “Tax Increment Shortfall Guaranty.” It seems to me that this guaranty is only as good as the financial condition of the guarantor. Has the city examined financial statements of Reverend Harding and his partners, in order to determine whether they have the financial capacity to make good on this commitment, if it becomes necessary?
I think the citizens of Wichita would sleep better at night if these developers would go through the new qualification process that the city is preparing. It’s been reported that this new process will be ready soon. Mr. Mayor, why don’t we wait a month or two and investigate these developers under the new process that is presently being developed? Then the citizens of Wichita can have confidence in this council and the project the taxpayers have been asked to subsidize.
Mr. Mayor and members of the council, there’s another issue that I’d like to call your attention to. That’s the possibility that the city or county — perhaps both — might decide to raise their sales tax rates in exchange for lowering the property tax mill levy. If that were to happen, what would be the impact on TIF districts? The assumptions used in the projection for this TIF district assume that the mill levy in future years is the same as it is today. But if either the city or county were to reduce or eliminate its mill levy, it seems that this — and other — TIF districts would not generate enough property tax to service their debt.
Last week I spoke to the Wichita Pachyderm Club about tax increment financing, or TIF districts, in Wichita. John Todd spoke about the same topic, too.
Surprisingly, my remarks contained some different material from the talk given to the same group by Allen Bell, Wichita’s director of urban development.
My talk was about 20 minutes in length. YouTube limits videos to 10 minutes, so my talk is contained in two videos. The first part is here, and the second part is here. Click here to download the handout mentioned in my talk.
At the December 2, 2008 meeting of the Wichita City Council, Jeff Fluhr, the new president of the Wichita Downtown Development Corporation, spoke on behalf of the expansion of the Center City South Redevelopment District, commonly known as the downtown Wichita arena TIF district.
Attending the meeting with him were several members of that organization’s board of directors, headed by Joe Johnson of Schaefer Johnson Cox Frey Architecture. This board, emblematic of the “good ol’ boy” network, is stocked with those who seek to profit in the halls of government power rather than in the marketplace where consumers rule. It’s easier that way — no pesky consumers with their varied wants and desires.
The problem Mr. Fluhr faces is that in order to lure developers to downtown Wichita, incentives must be offered. Now some on the Wichita city council act as though incentives come at no cost. The proceeds from TIF financing, they say, are used only for infrastructure, as though this is something the city is obliged to provide. But as I show in my post Many Wichita Developers Pay for Infrastructure, market-based developers pay for their infrastructure. The city doesn’t give away much to them.
The TIF developers, they being the political entrepreneurs, are privileged to use their own property taxes to pay for their infrastructure, and for other things, too. This sets up a situation where the city, through its attempts at centralized planning, thwarts the will of the people by forcing Wichitans to subsidize developers who are lured — “incentivized,” as one city council member put it — to develop where politicians want them to.
This sets up a tension. Citizens are starting to realize the reality of the transfer of wealth from taxpayers to the political entrepreneurs, and they don’t like it. They’re starting to realize that public/private partnerships mean the public takes the risk, and the “privates” earn the profits. This is far removed from capitalism, which is what we need to build the wealth of our city. “Crony capitalism” is a better term for the relationship between the TIF district developers and local government officials.
Then there’s the defect in the process surrounding the public hearing before the Wichita city council. As Randy Brown wrote about this meeting: “Among other transgressions, we had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue.” Mr. Fluhr needs to decide if he’s on the side of open and transparent government, or whether he’s in favor of crony capitalism and the good ol’ boy network. If he would request that the City of Wichita withdraw this TIF district until a proper public hearing is held, we’d get a good indication of his thinking. Of course, if he doesn’t make such a request, we’ll know just as well.
Finally, Mr. Fluhr stated in his presentation to the Wichita city council: “[The TIF district] will greatly contribute to Wichita’s development as a destination river city, which will in turn enhance the economic vitality of downtown and the community at large.” (emphasis added)
I would ask that Mr. Fluhr and the citizens of Wichita familiarize themselves with the research to the contrary. A number of studies tell us that TIF districts, while good for the subsidized developers, are not a good deal for the city as a whole. As economists Dye and Merriman (see below) found out: “We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.”
Kenneth A. Kriz: Tax Increment Financing: Its Effect on Local Government Finances
Dye, Richard and David Merriman: Tax Increment Financing: A Tool for Local Economic Development
Dye, Richard and David Merriman: The Effects of Tax Increment Financing on Economic Development
Danny Santivasci: Tax Increment Financing: Private Investment at the Expense of Local Community
Rhonda Holman’s editorial from yesterday’s Wichita Eagle (Parking plan finally coming together) contains this paragraph:
A confusing move last week by the Wichita City Council didn’t help build public trust, unfortunately. Without time for public consideration, city leaders added up to $10 million for parking structures to the proposed tax-increment financing plan for the 16-block area around the arena; the council unanimously approved the plan Tuesday. There are good reasons for the council’s action, which simply puts parking in the mix of things that up to $10 million in TIF money can fund in the future along with street improvements, sidewalks, lighting, signage and other basics. But the last-minute handling left much of the public out of the public hearing, raising suspicions that the council sought to slide in the parking dollars under the radar.
Look at the language here: “confusing move … didn’t help build public trust, unfortunately.” “left much of the public out of the public hearing,” “raising suspicions,” “under the radar.”
This type of action is corrosive to the democratic process. I think that Ms. Holman realizes that, but she won’t call for the city council to take the proper action, which would be to hold a proper public hearing. No parking facility — indeed, nothing the city could ever build — is so important that it should be approved through this type of process.
This appeared in today’s Wichita Eagle.
On Tuesday December 2, 2008, the Wichita City Council held a public hearing on the expansion of the Center City South Redevelopment District, commonly known as the downtown Wichita arena TIF district. As someone with an interest in this matter, I watched the city’s website for the appearance of the agenda report for this meeting. This document, also known as the “green sheets” and often several hundred pages in length, contains background information on items appearing on the meeting’s agenda.
At around 11:30 am Monday, the day before the meeting, I saw that the agenda report was available. I download it and printed the few pages of interest to me.
At the meeting Tuesday morning, I was surprised to hear council member Jim Skelton expressed his dismay that a change to the TIF plan wasn’t included in the material he printed and took home to read. This change, an addition of up to $10,000,000 in spending on parking, is material to the project. It’s also controversial, and if the public had known of this plan, I’m sure that many speakers would have attended the public hearing.
But the public didn’t have much notice of this controversial change to the plan. Inspection of the agenda report document — the version that contains the parking proposal — reveals that it was created at 4:30 pm on Monday. I don’t know how much longer after that it took to be placed on the city’s website. But we can conclude that citizens — and at least one city council member — didn’t have much time to discuss and debate the desirability of this parking plan.
The news media didn’t have time, either. Reporting in the Wichita Eagle on Monday and Tuesday didn’t mention the addition of the money for parking.
This last-minute change to the TIF plan tells us a few things. First, it reveals that the downtown arena TIF plan is a work in progress, with major components added on-the-fly just a few days before the meeting. That alone gives us reason to doubt its wisdom. Citizens should demand that the plan be withdrawn until we have sufficient time to discuss and deliberate matters as important as this. What happened on Tuesday doesn’t qualify as a meaningful public hearing on the actual plan. A better description is political bait and switch.
Second, when the business of democracy is conducted like this, citizens lose respect for both the government officials involved and the system itself. Instead of openness and transparency in government, we have citizens and, apparently, even elected officials shut out of the process.
Third, important questions arise: Why was the addition of the parking plan not made public until the eleventh hour? Was this done intentionally, so that opponents would not have time to prepare, or to even make arrangements to attend the meeting? Or was it simple incompetence and lack of care?
The officials involved — council members Jeff Longwell and Lavonta Williams, who negotiated the addition of the parking with county commissioners; Allen Bell, who is Wichita’s director of urban development; and Mayor Carl Brewer — need to answer to the citizens of Wichita as to why this important business was conducted in this haphazard manner that disrespects citizen involvement.
Additional coverage:
Wichita TIF Districts Mean Central Government Planning
Downtown Wichita Arena TIF District Testimony
Jim Skelton is Frustrated
Downtown Wichita Arena TIF District Still a Bad Idea
Wichita Mayor and City Council Prefer to Work Out of Media Spotlight
Wichita’s Naysayers Are Saying Yes to Liberty
Tiff over Wichita TIFs
Downtown Wichita Arena TIF District
Do Wichita TIF Districts Create Value?
Wichita City Council’s Misunderstanding of Tax Increment Financing
Tax Increment Financing in Wichita Benefits Few
Tax Increment Financing in Iowa
At the December 2, 2008 meeting of the Wichita City Council, John Todd and I testified against the expansion of the Center City South Redevelopment tax increment financing (TIF) District, commonly known as the downtown Wichita arena TIF district.
You can read John’s remarks here, or watch a video from YouTube here. Bob’s remarks are here, or click here for the YouTube video.
From John Todd.
Update: Watch John’s testimony on YouTube here.
Testimony delivered by John Todd before the Wichita City Council on December 2, 2008 in opposition to the proposed Tax Increment Financing (TIF) plan for the Center city South Redevelopment District located generally around the new Intrust Bank Arena.
In 2004, proponents of the new Intrust Arena were assuring voters that their approval of the new arena would provide the “economic boost” and the “synergy” needed for effective downtown redevelopment without the need for increased property taxes. No mention was made at that time of the need for additional taxpayer subsidies for downtown development.
In recent testimony before the City Council, I heard a staff member advise the Mayor and this City Council that county property appraisals in the area adjacent to the new Intrust Area had increased more than 10% in the prior year. Does this proposed TIF District sound like a blighted and declining area headed for economic stagnation? Or is it time for private developers to seize this development opportunity our Mayor envisions, and of course without the need for risking the taxpayer’s wallet that is a common element in private/public partnerships?
Since the parcels of land around the new Intrust Arena appear to be owned by dozens of small private property and business owners, private developers will need to assemble the parcel(s) they need for development through voluntary exchange rather than through government’s involuntary and coercive taking of property by either the threat of eminent domain or the actual use of eminent domain. Street improvements, if needed for the project(s), should be paid for by the private developers or through the use of special assessment financing. Can anyone believe that city and/or county planners failed to plan for the street improvements needed for the new arena and a method of paying for them prior to beginning construction of the arena? (Note: In addition to the nearly $12 million TIF proposal for streets, a last minute change added an additional $10 million the TIF for a parking garage.) Also, I believe the original Arena project the voters approved in 2004 included $14 million dollars for a parking garage.
One doesn’t have to look very far around our city to see and appreciate the success of our many risk-taking private developers who through their knowledge of the market and their problem solving abilities, plus most importantly the investment of their own money, continue to expand our tax base, create jobs, and enhance our quality of life. Perhaps these are the people you need to call on to bid on downtown development work without the need for a massive public subsidy?