In this episode of WichitaLiberty.TV: Economist Dr. Art Hall of the Center for Applied Economics at The University of Kansas talks about issues relevant to the proposed Wichita sales tax, particularly water and economic development. View below, or click here to view on YouTube. Episode 60, broadcast September 28, 2014.
Dr. Art Hall, Executive Director of the Center for Applied Economics at the University of Kansas School of Business, presented his “Thoughts on Water and Economic Development” at the Wichita Pachyderm Club Friday, September 19, 2014. Wichita voters will determine whether the city enacts a one cent per dollar sales tax increase to be used for water infrastructure and economic development incentives. View below, or click here to view at YouTube.
An expert in economic development sponsored by the Wichita Metro Chamber of Commerce tells Wichita there are no studies showing that incentives don’t work.
Finkle was in town to present the argument for the jobs fund to the pro free-market Kansas Policy Institute on Friday.
And it was something of a surprise to him that he had to come help make such a pitch at all.
“This is the first place I’ve been where this hasn’t been considered a highly successful model,” Finkle told the WBJ.
Contrary to the stance of the Coalition For A Better Wichita — the group leading the charge against the sales tax referendum — that there are numerous studies that show incentives don’t work, Finkle said the opposite is true.
“I don’t know of one study that says incentives don’t work,” he said.
Finkle said there are studies that “nick” at certain parts of certain packages, but none to his knowledge that condemn the idea as a whole.
I can help Finkle update his knowledge of the literature of economic development. Here’s a paper from Michael J. Hicks, Ph.D., titled Why Tax Incentives Don’t Work: The Altered Landscape of Local Economic Development. Its abstract holds this: “I find that benefits to communities of traditional business attraction efforts have significantly declined over the past three or four decades, and are likely to continue to decline through the middle of this century.”
In fairness to Finkle, this paper is still in draft stage and was published on September 16, just three days before the Wichita conference.
One paper that’s been around a while is from Gabe and Kraybill in 2002 titled The Effect of State Economic Development Incentives on Employment Growth of Establishments. Its conclusion holds this: “Our analysis suggests that incentives do not substantially increase, and may even decrease slightly, the amount of employment change in the two years after an establishment launched an expansion. After controlling for other factors, we found that the effect of incentives on establishments that received incentives is a decrease of 10.5 jobs per establishment.” Another result was that firms that received incentives substantially overstated growth in employment.
The Gabe and Kraybill paper is just one of several mentioned in the brief literature review section of the Hicks paper. Here is a summary of some other peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view. “Peer-reviewed” means these studies were stripped of identification of authorship and then subjected to critique by other economists, and were able to pass that review.
Ambrosius (1989). National study of development incentives, 1969 — 1985.
Finding: No evidence of incentive impact on manufacturing value-added or unemployment, thus suggesting that tax incentives were ineffective.
Trogan (1999). National study of state economic growth and development programs, 1979 — 1995.
Finding: General fiscal policy found to be mildly effective, while targeted incentives reduced economic performance (as measured by per capita income).
Fox and Murray (2004). Panel study of impacts of entry by 109 large firms in the 1980s.
Finding: No evidence of large firm impacts on local economy.
Edmiston (2004). Panel study of large firm entrance in Georgia, 1984 — 1998
Finding: Employment impact of large firms is less than gross job creation (by about 70%), and thus tax incentives are unlikely to be efficacious.
Hicks (2004). Panel study of gaming casinos in 15 counties (matched to 15 non-gambling counties).
Finding: No employment or income impacts associated with the opening of a large gambling facility. There is significant employment adjustment across industries.
LaFaive and Hicks (2005). Panel study of Michigan’s MEGA tax incentives, 1995 — 2004.
Finding: Tax incentives had no impact on targeted industries (wholesale and manufacturing), but did lead to a transient increase in construction employment at the cost of roughly $125,000 per job.
Hicks (2007a). Panel study of California’s EDA grants to Wal-Mart in the 1990s.
Finding: The receipt of a grant did increase the likelihood that Wal-Mart would locate within a county (about $1.2 million generated a 1% increase in the probability a county would receive a new Wal-Mart), but this had no effect on retail employment overall.
Hicks (2007b). Panel study of entry by large retailer (Cabela’s).
Finding: No permanent employment increase across a quasi-experimental panel of all Cabela’s stores from 1998 to 2003.
(Based on Figure 8.1: Empirical Studies of Large Firm Impacts and Tax Incentive Efficacy, in Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It, Russell S. Sobel, editor. Available here.)
Finally, Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. Their conclusion is this:
On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.
The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.
I can allow that Jeff Finkle might disagree with these studies. He might have problems with the methodologies. Perhaps he doesn’t think that peer-reviewed research is reliable or valid.
But for him to tell Wichita “I don’t know of one study that says incentives don’t work” indicates either willful blindness or intentional deception. These studies don’t merely “nick” at incentives packages. Instead, they show that there are widespread and severe problems that have been discovered many times over many years.
—
References:
Ambrosius, Margery Marzahn. 1989. The Effectiveness of State Economic Development Policies: A Time-Series Analysis. Western Political Quarterly 42:283-300.
Trogen, Paul. Which Economic Development Policies Work: Determinants of State Per Capita Income. 1999. International Journal of Economic Development 1.3: 256-279.
Gabe, Todd M., and David S. Kraybill. 2002. The Effect of State Economic Development Incentives on Employment Growth of Establishments. Journal of Regional Science 42(4): 703-730.
Fox, William F., and Matthew Murray. 2004. Do Economic Effects Justify the Use of Fiscal Incentives? Southern Economic Journal 71(1): 78-92.
Edmiston, Kelly D. 2004. The Net Effects of Large Plant Locations and Expansions on County Employment. Journal of Regional Science 44(2): 289-319.
Hicks, Michael J. 2004. A Quasi-Experimental Estimate of the Impact of Casino Gambling on the Regional Economy. Proceedings of the 93rd Annual Meeting of the National Tax Association.
LeFaivre, Michael and Michael Hicks 2005. MEGA: A Retrospective Assessment. Michigan:Mackinac Center for Public Policy.
Hicks, Michael J. 2007a. The Local Economic Impact of Wal-Mart. New York: Cambria Press.
Hicks, Michael J. 2007b. A Quasi-Experimental Test of Large Retail Stores’ Impacts on Regional Labor Markets: The Case of Cabela’s Retail Outlets. Journal of Regional Analysis and Policy, 37 (2):116-122.
Claims of a reformed economic development process if Wichita voters approve a sales tax must be evaluated in light of past practice and the sameness of the people in charge. If these leaders are truly interested in reforming Wichita’s economic development machinery and processes, they could have started years ago using the generous incentives we already have.
At a conference produced by Kansas Policy Institute on Friday September 19, a panel presented the “nuts and bolts” of the jobs portion of the proposed Wichita sales tax that voters will see on their November ballots. I asked a question:
Listening to at least two of the three speakers, it sounds like Wichita’s not been using incentives. Two-and-a-half years ago when Boeing announced it was leaving Wichita, Mayor Brewer angrily produced a document saying since 1980, we’ve given Boeing $658 million in tax forgiveness. Last year the city and the state were somehow able to come up with $84,000 per job for 400 jobs here at NetApp. So we’ve been using a lot of incentives, haven’t we? What are we going to do different now, that hasn’t worked for us, clearly, in the past.
One of the panelists, Paul Allen, provided this answer:
I’m not sure that I agree that it hasn’t worked for us in the past. In fact, Boeing is still one of the largest taxpayers in the city. It has $6 million of real estate taxes paying a year. The Boeing facilities are still paying taxes in this community. Again, the jobs aren’t here, but Boeing on its rebates paid those back, those are on incremental property that it invested that came back on the tax rolls over time, and I think 6 million is the correct number last I looked there is still on the tax rolls in this city. So you have got pay back. And NetApp? NetApp is a win for the city. If you look at the economic models measuring the results of those 400 jobs and the fact that now the NetApp relationship likely to happen on the campus of Wichita State, that’s economic growth. Those are the kinds of jobs you need to attract. What are we going to do differently? We’re going to look at infrastructure more, we’re looking at a more integrated program across the spectrum. WSU is certainly a big part of that program, we’re going to get serious about diversification. We only talk about diversification in the city when the economy is down. We need to be a long-term program for diversification, taking the skills we have and looking at those skills and attracting companies here, helping our companies to expand. We need to invest in our work force, whether it’s at college level or particular to the technical colleges. Again those are the kinds of investments that are going to create a workforce that becomes attractive. It’s just one component, I think if we said it’s one tool in the toolbox. That’s a very important tool. And we are up against communities like Oklahoma City that has $75 million sitting in a fund and believe me that’s a lot more than we’ve invested in the last 10 years. And we will continue to get beaten in the competition if we don’t get more serious about being able to fight for the jobs and you can ask most business owners, particularly manufacturing, they’re called constantly from other communities trying to recruit then out of this community. And that competition is only going to get more intense, in my opinion. So we’ve got to be prepared to wisely invest our money.
(Paul Allen was Chair of Greater Wichita Economic Development Coalition for 2011, and Chair of Wichita Area Chamber of Commerce in 1998. The Wichita Chamber selected him to present the case for the sales tax at this conference.)
Allen’s pushback at the idea that the Boeing incentives were a failure produced a few gasps of astonishment from the audience. I’m sure that if any of Wichita’s elected officials had been in attendance, they would also have been surprised.
In January 2012, when Boeing announced it was leaving Wichita, people were not happy. Mayor Carl Brewer in a written statement said “The City of Wichita, Sedgwick County and the State of Kansas have invested far too many taxpayer dollars in the past development of the Boeing Company to take this announcement lightly.” Kansas Representative Jim Ward, who at the time was Chair of the South Central Kansas Legislative Delegation, issued this statement regarding Boeing and incentives: “Boeing is the poster child for corporate tax incentives. This company has benefited from property tax incentives, sales tax exemptions, infrastructure investments and other tax breaks at every level of government. These incentives were provided in an effort to retain and create thousands of Kansas jobs. We will be less trusting in the future of corporate promises.” (See Fact-checking Yes Wichita: Boeing incentives)
But now an icon of Wichita’s business community says that since Boeing is paying $6 million per year in property taxes, it really was a good investment, after all. Today, however, no one is working in these buildings. No productive economic activity is taking place. But, government is collecting property taxes. This counts as an economic development success story, according to the people who support the proposed Wichita sales tax.
Another important thing to learn from this conference, which is hinted at in Allen’s answer, is that sales tax supporters are not recognizing all the incentives that we have in Wichita. One speaker said “It would be a travesty for you to do nothing.” (He was from out of town, but the Wichita Metro Chamber of Commerce selected him to speak and presented him as an expert.) But as we know from the premise of my question, we have many available incentives, and in large amounts, too.
Another problem is Allen’s disagreement that what we’ve done has not been working. This is contrary to the evidence the Wichita Chamber has been presenting, which is that we have lost thousands of jobs and are not growing as quickly as peer cities. That is the basis of their case for spending more on economic development.
Allen also spoke of a $75 million fund in Oklahoma City, saying it is much larger that what we’ve invested. I’m sure that Allen is not including all the incentives we’ve used. There were some years, for example, when the value of the abated taxes for Boeing was over $40 million. Last year the city initiated a process whereby NetApp saved $6,880,000 in sales tax, according to Kansas Department of Commerce documents. These tax abatements are more valuable than receiving the equivalent amount as a cash payment, as the company does not pay income taxes on the value of abated taxes.
“Yes Wichita” websiteWichita voters will also want to consider the list of things Allen said we will do differently in the future. He spoke of concepts like infrastructure, an integrated program, diversification, investing in our work force, attracting companies, and helping existing companies expand. He told the audience “So we’ve got to be prepared to wisely invest our money.” There are two things to consider regarding this. First, these are the things we’ve been talking about doing for decades. Some of them we have been doing.
Second, the people saying these things — promising a new era of economic development in Wichita — are the same people who have been in charge for decades. They’ve been chairs of the Wichita Metro Chamber of Commerce, Greater Wichita Economic Development Coalition, Visioneering Wichita, Wichita Downtown Development Corporation, and Go Wichita Convention and Visitors Bureau. They’re the members of the leadership committee the Chamber formed.
These people are Wichita’s business establishment. They’ve been in charge during the time the Wichita economy has fallen behind. Now, they promise reform. We will do things differently and better, they say. Now, we will prepare to invest wisely, Allen told the audience.
If these leaders are truly interested in reforming Wichita’s economic development machinery and processes, they could have started years ago using the generous incentives we already have.
Examining claims made by “Yes Wichita” provides an opportunity to learn about the finances of the Wichita bus transit system.
In November Wichita voters will vote yes or no on a one cent per dollar sales tax. Part of that tax, ten percent, would go to the Wichita Transit system to pay back loans, cover operating deficits, and allow for some service expansion.
Coalition for a Better Wichita, a group that opposes the sales tax, has mentioned that instead of expanding the existing Wichita Transit system, we ought to take a look at private sector alternatives for providing transportation options for Wichitans. An example is the Uber service, which started operations in Wichita last month. (Uber’s arrival is not without controversy. It appears that Uber is not compatible with Wichita’s regulations. I expect that soon the city will clamp down on Uber, which would be a mistake for the city. See Arrival of Uber a pivotal moment for Wichita.)
Yes Wichita Facebook page. Click for larger version.Regarding Uber, a Facebook user named Michael Ramsey wrote this on his Facebook profile:
Commuting to work every day from the College Hill area costs $1.90 each way and instead of using ONE PENNY from every ten dollars that we spend jumpstarting our transit system the Coalition for Better Wichita has suggested that we use Über instead. HOW DOES THAT SIMPLE MATH WORK??? VoteYes Wichita.
The “Yes Wichita” group that supports the sales tax shared Ramsey’s remarks and added this comment:
Michael Ramsey makes a great point. The simple math shows for Micahel to use public tansit to get to and from work it would cost $998.40 a year, to ride Uber it would cost $3,640 (using the low range estimate). The would cost riders an additional $2,641.60 a year. Simple reasoning shows a one-cent sales tax would be more economical for those in need. #voteyeswichita #yeswichita
Since Wichita voters are urged to consider and use “simple math” and “simple reasoning,” let’s do just that. It will help voters understand some of the finances of public transit.
First, far from “jumpstarting” our transit system, one use of sales tax funds would be to repay $1.2 million in loans the transit system owes to the city. But let’s not quibble about the enthusiasm of those who want to spend more of other people’s money.
The important consideration that needs examination is the idea that a bus ride costs $1.90. (The actual adult fare, according to the Wichita Transit website, is $1.75 or $2.00 with transfer, so I’m not sure where the $1.90 figure comes from.)
Statistics from the Wichita Transit System reveal that the fare that passengers pay is nowhere near the cost of providing the bus ride. I happen to have handy financial figures from 2011 for the Wichita transit system. For that year, total operating funds spent were $13,914,580. Revenue from fares was $1,876,991. This means that considering operating expenses only, 13.5 percent of the cost of a bus trip was paid by the passenger’s fare.
If we include capital expenses of $1,570,175, the portion of the cost of a bus trip that was paid by the passenger’s fare is 12.1 percent. Figures in this neighborhood are common for transit systems in other cities.
So far from costing $1.90 (assuming the author’s data), a bus trip actually costs much more. It’s not bus passengers that pay these costs. It’s taxpayers who pay, most of whom do not use transit.
There are a number of ways to look at the costs of providing bus service. For Wichita in 2011, and considering only the regular bus service and not the more expensive on-demand service, here are cost figures:
Operating expense per passenger mile: $0.97
Operating expense per unlinked passenger trip: $4.79
The 97 cents per mile is not the cost of moving a bus one mile down the road. It’s the cost of moving one passenger one mile. These costs are for operating expenses only and do not include the capital costs of purchasing buses.
Bus transit is very expensive. For the “Yes Wichita” campaign to imply that one-tenth of one cent per dollar sales tax will fix the system ignores the system’s tremendous costs and disrespects the taxpayer subsidy the system already receives.
There’s something else. The Facebook posts seem to imply that someone proposes replacing Wichita bus transit service with Uber. I don’t think that anyone has made that claim. Services like Uber could be a complement to traditional transit. There could be other market-based complementary services.
It’s important to remember that services like Uber generate revenue from people who willingly use and pay for its service. This is very different from Wichita Transit. As shown above, the Wichita bus system receives its revenue primarily from taxes. Money collected in the farebox is a small portion of the system’s revenues. Meeting the needs of customers is not an important factor in determining the revenue the system receives.
Wichita Transit System, showing total operating expense, passenger miles traveled, and cost per passenger mile traveled. This data is for the regular bus service only.
In this excerpt from WichitaLiberty.TV: Will the proposed Wichita sales tax result in more paved streets? It depends on what you mean by “pave.” Bob Weeks explains. View below, or click here to view at YouTube.
The case of Beechcraft and economic development incentives holds several lessons as Wichita considers a new tax with a portion devoted to incentives.
In December 2010 Kansas Governor Mark Parkinson announced a deal whereby the state would pay millions to Hawker Beechcraft to keep the company in Kansas. The company had been considering a purported deal to move to Baton Rouge, Louisiana. (Since then the company underwent bankruptcy, emerged as Beechcraft, and has been acquired by Textron.) The money from the state was to be supplanted by grants from the City of Wichita and Sedgwick County.
At the time, the deal was lauded as a tremendous accomplishment. In his State of the City address for 2011, Wichita Mayor Carl Brewer told the city that “We responded to the realities of the new economy by protecting and stabilizing jobs in the aviation industry. … The deal with Hawker Beechcraft announced last December keeps at least 4,000 jobs and all existing product lines in Wichita until at least 2020.”
The nearby table shows data obtained from the Kansas Department of Commerce for Hawker Beechcraft. “MPI” means “Major Project Investment,” a class of payments that may be used for a broad range of expenses, including employee salaries and equipment purchases. SKILL is a program whereby the state pays for employee training. The MPI payments have been reduced below the $5 million per year target as the company has not met the commitment of maintaining at least 4,000 employees.
Besides these funds, the City of Wichita and Sedgwick County approved incentives of $2.5 million each, to be paid over five years at $500,000 per year (a total of $1,000,000 per year). The company has also routinely received property tax abatements by participating in an industrial revenue bond program.
It’s unfortunate that Beechcraft employment has fallen. The human cost has been large. But from this, we can learn.
First, we can learn it’s important to keep the claims of economic development officials and politicians in perspective. Mayor Brewer confidently claimed there would be at least 4,000 jobs at Beechcraft and the retention of existing product lines in Wichita. As we’ve seen, the promised employment level has not been maintained. Also, Beechcraft shed its line of business jets. The company did not move the production of jets to a different location; it stopped making them altogether. So “all existing product lines” did not remain in Wichita — another dashed promise.
Second, Wichita officials contend that our city can’t compete with others because our budget for incentives is too small. The figure of $1.65 million per year is commonly cited. As we see, Beechcraft alone received much more than that, and in cash. Local economic development officials are likely to say that the bulk of these funds are provided by the state, not by local government. I doubt it made a difference to Beechcraft. The lesson here is that Wichita officials are not truthful when telling citizens the amounts of incentives that are available.
Third, this incident illuminates how incentives are extorted from gullible local governments. In his 2011 address, the Wichita mayor said “We said NO to the State of Louisiana that tried to lure Hawker Beechcraft.” (Capitalization in original.) But a Baton Rouge television station reported that the move to Louisiana was never a possibility, reporting: “Today, Governor Bobby Jindal said the timing was not right to make a move. He says Hawker could not guarantee the number of jobs it said it would provide.”
The Associated Press reported this regarding the possible move to Louisiana: “They [Hawker Beechcraft] weren’t confident they could meet the job commitments they would have to make to come to Baton Rouge so it just didn’t make sense at this time.”
The threat the mayor said Wichita turned back with tens of millions of dollars? It was not real. This is another lesson to learn about the practice of economic development.
Will Wichita city officials and sales tax boosters attend an educational event produced by a leading Kansas public policy institute? It will be an opportunity for city officials to demonstrate their commitment to soliciting input from the community.
Wichita voters will face a choice in November — whether to vote for or against a proposed sales tax of one cent per dollar. Wichita city council members and city hall bureaucrats say they have spent great effort educating Wichitans on issues relevant to the sales tax. Members of the “Yes Wichita” group are holding events to educate the public on why they should vote in favor of the tax.
All of the information presented by the city and the “Yes Wichita” group has a common ideological thread: That our city has problems, and the way to fix things is to implement a new tax and rely on government to provide the solutions it has determined we need.
City hall might be surprised to learn that there are differing opinions as to the nature and extent of our city’s problems, and different ideas about how to fix them. Some of these ideas are novel. Some may work, and some may not. (It’s far from certain that government-provided solutions will work.) Most of these diverse ideas are well-researched. They often rely on private sector initiative rather than government taxation and spending. They may rely on voluntary cooperation through markets rather than coercive government action.
Since city hall says that knowing the facts is important, you might think that city council members and city bureaucrats would welcome the production of educational events on sales tax topics. That’s why it was discouraging that a July forum on water issues produced by Kansas Policy Institute was attended by just a handful of city officials. Even worse, the city officials that attended left the meeting at its midpoint, as soon as the city’s public works director finished his presentation.
I understand that city council members are part-time employees paid a part-time salary. Some have outside jobs or businesses to run. But that’s not the case with the city’s public works director or its governmental affairs director. That’s not the case with the city manager, or the assistant city manager, or the city’s economic development staff.
It’s especially not the case for Mayor Carl Brewer. He is paid a full-time salary to be the leader of our community. When he shows little willingness to consider views other than those produced by city hall sycophants that work — directly or indirectly — for him and the council, we have a deficit of leadership in Wichita.
It’s especially grating because several city council members and the “Yes Wichita” group contend their opponents — like me — are misinformed and/or lying. (When pressed for specific examples, few are produced.)
If you’ve attended a city council meeting, you may have to sit through up to an hour of the mayor issuing proclamations and service awards before actual business starts. Fleets of city bureaucrats are in the audience during this time.
But none of these would spend just one hour listening to a presentation in July by a university professor that might hold a solution to our water supply issue.
I understand that city officials might not be the biggest fans of Kansas Policy Institute. It supports free markets and limited government. But city officials tell us that they want to hear from citizens. The city says it has gone to great lengths to collect input from citizens, implementing a website and holding numerous meetings.
About 70 people attended the KPI forum in July. Citizens were interested in what the speakers had to say. They sat politely through the presentation by the two city officials, even though I’m sure many in the audience were already familiar with the recycled slides they’d seen before.
But it appears that Wichita city officials were not interested in alternatives that weren’t developed by city hall. They can’t even pretend to be interested.
Now, this Friday morning September 19, Kansas Policy Institute is producing another forum on issues relevant to the proposed sales tax. The event’s agenda features six speakers over about four hours. Three speakers were selected by the Wichita Metro Chamber of Commerce. Two are from out of town. Another is an expert on the Wichita and Kansas economy. There will be opportunities for attendees to ask questions.
Will city council members, city hall bureaucrats, and members of the “Yes Wichita” leadership team attend this event?
The Fostering Economic Growth in Wichita event is open to everyone and presented at no charge by Kansas Policy Institute. For more information and registration, click here.
As the City of Wichita asks for more tax money for infrastructure, Wichita voters need to be aware of the projected costs of the city’s deferred maintenance.
When the Wichita City Council voted to increase water rates in November 2013, meeting minutes reported these remarks from the city manager explaining that Wichita has not adequately maintained its infrastructure:
Bob Layton City Manager stated the Council told staff last year that they wanted staff to continue to look at operation efficiencies to reduce the operating costs, which they are doing. Stated the rate recommendation does reflect the three percent efficiency increase. Stated over the last several years 80% of those rate increases have gone to infrastructure improvements and a lot of it is because of deferred maintenance that occurred over a long period of time. Stated they recognize even with these increases that it will difficult to keep up with the maintenance requirements of our system but are also aware of concerns residents have about significant rate increases.
This was not the first time, nor the last time, that Wichitans might have heard about problems with deferred maintenance of city infrastructure. In his 2013 State of the City addressMayor Carl Brewer told the city that over the next 30 years, “Wichita’s aging water, sewer, and storm drainage systems will require significant maintenance or replacement. Total replacement of these systems is estimated to cost $2.1 BILLION.” (emphasis in original)
Earlier this year a report presented to the Community Investments Plan Steering Committee held language like “Decades of under-investment in infrastructure maintenance … 38% of Wichita’s infrastructure is in ‘deficient/fair’ condition.”
The report also told the committee that the “cost to bring existing deficient infrastructure up to standards” is given as an additional $45 to $55 million per year.
It’s important to note that these costs are not for building new infrastructure. Also, these costs are not for routine, ongoing maintenance. Instead, these numbers are what it costs to catch up with what the city should have been doing. As the report says: To bring existing deficient infrastructure up to standards.
This is important for Wichita voters to know as they consider their decision on a proposed one cent per dollar sales tax that will appear on the November ballot. Almost two-thirds of the tax proceeds would be spent on water.
Wichita Area Future Water Supply: A Model Program for Other MunicipalitiesBut it’s important to note that the purpose of the $250 million allocated for water is not for catching up on the maintenance backlog. Instead, it’s earmarked for building additional water supply capability.
Whether the sales tax passes or not, the deferred maintenance needs of our existing infrastructure will remain. There will be pressure for water rates to rise, or for some other source of revenue to catch up on maintenance.
It won’t do us much good to have a new water source (the purpose of which is to allow for the watering of lawns and washing of cars during droughts) if the water pipes are broken. Perhaps Wichita voters should ask that the city present a plan for maintaining the assets we have before sending more tax dollars to city hall.
And let’s also ask this: Why hasn’t the city maintained the infrastructure that taxpayers and water users have already paid for?
In January 2012, when Boeing announced it was leaving Wichita, people were not happy. Mayor Carl Brewer in a written statement said “The City of Wichita, Sedgwick County and the State of Kansas have invested far too many taxpayer dollars in the past development of the Boeing Company to take this announcement lightly.” Kansas Representative Jim Ward, who at the time was Chair of the South Central Kansas Legislative Delegation, issued this statement regarding Boeing and incentives: “Boeing is the poster child for corporate tax incentives. This company has benefited from property tax incentives, sales tax exemptions, infrastructure investments and other tax breaks at every level of government. These incentives were provided in an effort to retain and create thousands of Kansas jobs. We will be less trusting in the future of corporate promises.” (See Fact-checking Yes Wichita: Boeing incentives)
Another important thing to learn from this conference, which is hinted at in Allen’s answer, is that sales tax supporters are not recognizing all the incentives that we have in Wichita. One speaker said “It would be a travesty for you to do nothing.” (He was from out of town, but the Wichita Metro Chamber of Commerce selected him to speak and presented him as an expert.) But as we know from the premise of my question, we have many available incentives, and in large amounts, too.
All of the information presented by the city and the “Yes Wichita” group has a common ideological thread: That our city has problems, and the way to fix things is to implement a new tax and rely on government to provide the solutions it has determined we need.
I understand that city officials might not be the biggest fans of Kansas Policy Institute. It supports free markets and limited government. But city officials tell us that they want to hear from citizens. The city says it has gone to great lengths to collect input from citizens, implementing a website and holding numerous meetings.
In January 2012, when Boeing announced it was leaving Wichita, people were not happy. 
