Tag Archives: Wichita city council

In Wichita, new stadium to be considered

The City of Wichita plans subsidized development of a sports facility as an economic driver.

West Bank Redevelopment District. Click for larger.
This week the Wichita City Council will consider a project plan for a redevelopment district near Downtown Wichita. It is largely financed by Tax Increment Financing and STAR bonds. Both divert future incremental tax revenue to pay for various things within the district.1 2

City documents promise this: “The City plans to substantially rehabilitate or replace Lawrence-Dumont Stadium into a multi-sport athletic complex. The TIF project would allow the City to make investments in Lawrence-Dumont Stadium, construct additional parking in the redevelopment district, initiate improvements to the Delano multi-use path and make additional transportation improvements related to the stadium project area. In addition to the stadium work, the City plans to construct, utilizing STAR bond funds, a sports museum, improvements to the west bank of the Arkansas River and construct a pedestrian bridge connecting the stadium area with the Century II block. The TIF project is part of the overall plan to revitalize the stadium area and Delano Neighborhood within the district.”3

We’ve heard things like this before. Each “opportunity” for the public to invest in downtown Wichita is accompanied by grand promises. But actual progress is difficult to achieve, as evidenced by the example of Block One.4

Trends of business activity in downtown Wichita. Click for larger.
In fact, change in Downtown Wichita — if we’re measuring the count of business firms, jobs, and payroll — is in the wrong direction, despite large public and private investment. 5

Perhaps more pertinent to a sports facility as an economic growth driver is the Intrust Bank Arena. Five years ago the Wichita Eagle noted the lack of growth in the area. 6 Since then, not much has changed. The area surrounding the arena is largely vacant. Except for Commerce Street, that is, and the businesses located there don’t want to pay their share of property taxes. 7

I’m sure the city will remind us that the arena was a Sedgwick County project, not a City of Wichita project, as if that makes a difference. Also, the poor economic performance cited above is for Downtown Wichita as delineated by zip code 67202, while the proposed stadium project lies just outside that area, as if that makes a difference.

By the way, this STAR bonds district is an expansion of an existing district which contains the WaterWalk development. That development has languished, with acres of land having been available for development for many years. We’ve also found that the city was not holding the WaterWalk developer accountable to the terms of the deal that was agreed upon, to the detriment of Wichita taxpayers. 8

Following, selected articles on the economics of public financing of sports stadiums.

The Economics of Subsidizing Sports Stadiums

Scott A. Wolla, “The Economics of Subsidizing Sports Stadiums,” Page One Economics, May 2017. This is a project of the Federal Reserve Bank of St. Louis. Link.
“Building sports stadiums has an impact on local economies. For that reason, many people support the use of government subsidies to help pay for stadiums. However, economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact. Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.”

What economists think about public financing for sports stadiums

Jeff Cockrell, Chicago Booth Review, February 01, 2017. Link.
“But do the economic benefits generated by these facilities — via increased tourism, for example — justify the costs to the public? Chicago Booth’s Initiative on Global Markets put that question to its US Economic Experts Panel. Fifty-seven percent of the panel agreed that the costs to taxpayers are likely to outweigh benefits, while only 2 percent disagreed — though several panelists noted that some contributions of local sports teams are difficult to quantify.”

Publicly Financed Sports Stadiums Are a Game That Taxpayers Lose

Jeffrey Dorfman. Forbes, January 31, 2015. Link.
“Once you look at things this way, you see that stadiums can only justify public financing if they will draw most attendees from a long distance on a regular basis. The Super Bowl does that, but the average city’s football, baseball, hockey, or basketball team does not. Since most events held at a stadium will rely heavily on the local fan base, they will never generate enough tax revenue to pay back taxpayers for the cost of the stadium.”

Sports Facilities and Economic Development

Andrew Zimbalist, Government Finance Review, August 2013. Link.
“This article is meant to emphasize the complexity of the factors that must be evaluated in assessing the economic impact of sports facility construction. While prudent planning and negotiating can improve the chances of minimizing any negative impacts or even of promoting a modest positive impact, the basic experience suggests that a city should not expect that a new arena or stadium by itself will provide a boost to the local economy.

Instead, the city should think of the non-pecuniary benefits involved with a new facility, whether they entail bringing a professional team to town, keeping one from leaving, improving the conveniences and amenities at the facility, or providing an existing team with greater resources for competition. Sports are central to cultural life in the United States (and in much of the world). They represent one of the most cogent ways for residents to feel part of and enjoy belonging to a community. The rest of our lives are increasingly isolated by modern technological gadgetry. Sport teams help provide identity to a community, and it is this psychosocial benefit that should be weighed against the sizeable public investments that sports team owners demand.”


Notes

  1. Weeks, Bob. STAR bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/star-bonds-kansas/.
  2. Weeks, Bob. Wichita TIF projects: some background. Available at https://wichitaliberty.org/wichita-government/wichita-tif-projects-background/.
  3. Wichita City Council, agenda packet for July 18, 2017.
  4. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/.
  5. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  6. “Ten years ago, Elizabeth Stevenson looked out at the neighborhood where a downtown arena would soon be built and told an Eagle reporter that one day it could be the ‘Paris of the Midwest.’ What she and many others envisioned was a pedestrian and bike-friendly neighborhood of quaint shops, chic eateries and an active arts district, supported by tens of thousands of visitors who would be coming downtown for sporting events and concerts. It hasn’t exactly turned out that way. Today, five years after the opening of the Intrust Bank Arena, most of the immediate neighborhood looks much like it did in 2004 when Stevenson was interviewed in The Eagle. With the exception of a small artists’ colony along Commerce Street, it’s still the same mix of light industrial businesses interspersed with numerous boarded-up buildings and vacant lots, dotted with ‘for sale’ and ‘for lease’ signs.” Lefler, Dion. 5 years after Intrust Bank Arena opens, little surrounding development has followed. Wichita Eagle. December 20, 2014. Available at http://www.kansas.com/news/local/article4743402.html.
  7. Riedl, Matt. Has Commerce Street become too cool for its own good? Wichita Eagle. April 8, 2017. http://www.kansas.com/entertainment/ent-columns-blogs/keeper-of-the-plans/article143529404.html.
  8. Weeks, Bob. Wichita WaterWalk agreement not followed. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-agreement-not-followed/.

More Cargill incentives from Wichita detailed

More, but likely not all, of the Cargill incentives will be before the Wichita City Council this week.

A division of Cargill, Cargill Meat Solutions Corporation, is moving from an office on North Main Street in downtown Wichita to the site of the former Wichita Eagle building, also in downtown Wichita. Last year it was widely reported that Cargill was considering moving this division to another city. Reports of incentives offers to Cargill from other cities spurred the City of Wichita to offer its own incentives if Cargill would remain in Wichita. This week the city council will consider additional subsidies and incentives besides those already offered. 1

As summarized in the agenda packet:

“In exchange for Cargill’s commitment, the City has negotiated the following:

  • Issue Industrial Revenue Bonds (Letter of Intent approved April 18, 2017) 100% property tax abatement; 5+5 year basis
  • Sales tax exemption
  • Acquisition of a 15 year parking easement for public access to the garage in the evenings and on weekends (estimated cost of $6,500,000)
  • Expedited plan review (50% reduction in time)
  • Reduced permitting fees (50%) (estimated savings of $85,000)
  • Assign a project manager/ombudsman for a single point of contact for the company”

Industrial Revenue Bonds

In April the city council approved a letter of intent regarding Cargill’s participation in the Industrial Revenue Bond program. 2 The city won’t be lending Cargill money. Instead, IRBs are a (convoluted) method whereby local governments are able to forgive the payment of property taxes. For the case of Cargill, city documents from April state the tax forgiveness could be worth $1,359,531 per year. 3 This would be shared by these taxing jurisdictions in these annual amounts, again according to city documents:

  • City of Wichita: $378,450
  • Sedgwick County: $340,958
  • USD 259, the Wichita Public School District: $622,723
  • State of Kansas: $17,400

Cargill has agreed to make an annual Payment-In-Lieu-Of-Taxes (PILOT) of $413,900, according to city documents.

In addition to the property tax exemption, the IRBs also carry a sales tax exemption for purchases related to construction. City documents give an estimated value of $2,026,291 for the sales tax Cargill will not have to pay. 4

Parking easement

At one time, it was thought that the city would build a parking garage and let Cargill use it an no cost, or at a greatly reduced cost. Instead, the city now proposes that Cargill build the garage and the city will acquire an easement. This has sounded almost benign, but now we realize that the city will pay Cargill an estimated $6.5 million. In return, the city will be able to use up to approximately 700 parking spaces outside of Cargill business hours for a period of 15 years.

Is this a good deal for the city? The city has agreed to pay $9,286 for the use of each parking space for 15 years during non-business hours. 5 For comparison, recently the city rehabilitated the parking garage at 215 S. Market at a cost of $17,609 per parking space. The city rents 180 of these to a nearby company at the rate of $35 per month, which is $420 per year. 6 In the case of Cargill, the city is paying — effectively — $619 dollars per parking spot per year, and for off-hours use only.

It is not known whether the city will charge fees to the public to use the garage. It is also unknown whether there is much demand for public parking at the Cargill location, but present market conditions would suggest there is not much additional demand.

Expedited plan review, reduced fees, and ombudsman

The city has agreed to cut permit fees and speed response time for approvals. 7

This incentive — the need for it and its value to Cargill — is an explicit admission that City of Wichita regulations are burdensome. If not, why would the city devote time and expense to helping Cargill obtain relief from these regulations?

Consider this aspect of public policy: Cargill is a large company with — presumably — fleets of bureaucrats and lawyers trained to deal with burdensome government regulation. These costs can be spread across a large company, meaning that Cargill can afford to overcome burdensome regulations.

But what about the small companies that don’t have fleets of bureaucrats and lawyers? What about the young or small companies that can’t spread the costs of regulation across a large volume of business? What will the city do for these companies? This is especially important because the spirit of entrepreneurship the city wants to cultivate is most commonly found in small, young, companies — the type of company without fleets of bureaucrats and lawyers.

The city says it would do for any company what it is doing for Cargill. Except: How are companies supposed to know to ask for regulatory relief, streamlining, and a discount on fees?

If the city really wants to help all companies, it would — at its own initiative — cut fees and reduce response time across the board, for everyone. Until then Wichita offers special regulatory treatment for special circumstances, which widens the gulf between the haves and have-nots. 8

Other subsidy programs

The agenda packet for the city council meeting doesn’t mention this, but from the State of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill. 9 (Not all; only 95 percent.) Some very rough calculations show that PEAK benefits might be worth some $2 million annually to Cargill. 10

Ironically, with the recent increases in Kansas income taxes, PEAK is even more valuable to Cargill.

Is this needed?

In the past, economic development subsidies of this type were justified by local governments as necessary to recruit new companies to the area. These subsidies, however, are used simply to retain a company that is already located in downtown Wichita.

The city has asked Wichita State University’s Center for Economic Development and Business Research to produce benefit/cost ratios. They show that the costs the city, county, and state incur will generate benefits that exceed these costs. For the school district, costs exactly equal benefits — a remarkable coincidence.

The reasoning and calculation behind these benefit/cost ratios is opaque. The general idea is that spending by a company spawns other spending that results in economic benefit and growth. That’s true. It’s important to know, however, that this benefit also occurs when companies move to Wichita or expand in Wichita, without the benefit of economic development subsidies.

The question, then, becomes are these incentives necessary? Would Cargill have moved to another city if not for these incentives? It’s only if Cargill would have left Wichita that the benefit/cost ratios have any meaning.

The City of Wichita says Cargill received lucrative offers from other cities. But these offers have not been seen, to my knowledge. We’re left to take the word of Cargill that it received offers from other cities, and that it would have moved from Wichita if not for Wichita’s incentives.

Cargill, as we’ve seen, has a multi-million dollar motive. City of Wichita officials also have a large motive, as do officials and politicians at the state level. The politicians and bureaucrats want to — need to — be seen as doing something to improve the economy. It costs none of them one dime to pay these incentives. But the Cargill building will fulfill their ediface complex when they preside at groundbreaking and ribbon-cutting ceremonies.

If Wichita leaders wanted to gain the trust of Wichitans, to have us believe and understand that these incentives are necessary to keep Cargill in Wichita, the city could reveal the other offers Cargill received. Cargill itself could reveal offers it received from other cities. These actions would help Wichitans understand whether these incentives are truly needed. But the world of economic development incentives is a murky swamp.

Finally, Mayor Jeff Longwell, other council members, and city hall bureaucrats tell us that the city has moved beyond cash incentives. Cash will not be paid for jobs, they say.

But forgiving a tax bill is just like paying cash. Discounting the cost of permits is just like paying cash. Paying $6.5 million to use a company’s parking garage during hours the company has no use for it: How is that different from simply paying the company a cash incentive?

Perhaps the mayor and others have a different understanding of the economics of transactions than I.


Notes

  1. City of Wichita. Agenda Packet for July 18, 2017. Approval of Development Agreement with Cargill Meat Solutions Corporation.
  2. Weeks, Bob. Industrial revenue bonds in Kansas. https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  3. City of Wichita. Council agenda packet for April 18, 2017.
  4. Weeks, Bob. Cargill subsides start forming. Available at https://wichitaliberty.org/wichita-government/cargill-subsides-start-forming/.
  5. $6,500,000 / 700.
  6. Weeks, Bob. Why is this man smiling? Available at https://wichitaliberty.org/wichita-government/man-smiling/.
  7. “Section 4.03. Approvals. The City agrees to provide a 50% reduction in the fees charged by the City for permits and approvals, including plan review, utility and building permitting fees, for all matters related to the Project. The City also agrees to reduce the response time for approval of building plans from the standard 30 days to 15 days for all matters related to the Project.” Also: “The reduction in the permitting fees will be paid from the Economic Development fund.”
  8. Weeks, Bob. Regulation in Wichita, a ‘labyrinth of city processes.’ Available at https://wichitaliberty.org/regulation/regulation-wichita-labyrinth-city-processes/.
  9. Weeks, Bob. In Kansas, PEAK has a leak. https://wichitaliberty.org/kansas-government/kansas-peak-leak/.
  10. For the first year of the agreement, Cargill is expected to have 750 or more employees at an average salary of $66,814. That annual salary / 26 pay periods = $2,570 biweekly. For a family with two children (this is just a guess and could be way off), there are two withholding allowances, so $2,570 – ($86.54 x 2) = $2,397. Using the new withholding tables for married workers (another assumption), bi-weekly withholding is $48.17 + 5.7% x ($2,397 – $1,298) = $48.17 + $62.64 = $110.81. That means $2,881 annual withholding, so Cargill’s 95% share is $2,737. For 750 employees, this is an annual subsidy to Cargill of $2,052,750.

Naftzger Park public hearing to be considered

The Wichita City Council may set August 15, 2017 as the date for a public hearing on the future of Naftzger Park in downtown Wichita.

On Tuesday July 11, 2017, the Wichita City Council will consider setting August 15, 2017 as the date for the public hearing for consideration of the plan for the future of Naftzger Park. The relevant pages of the council agenda may be read here.

Much of the document is boilerplate material regarding tax increment financing districts. But there is some additional information.

First, the project is expected to cost $3,000,000: “Park improvements are projected to costs approximately $3,000,000, with $1,500,000 of such costs to be financed from proceeds of the City’s full faith and credit tax increment bonds.”

Second, we see some evidence of the care — or lack of — that the city puts into preparing these documents. The document contains a table called the “Projected Tax Increment Report.” It shows, year by year, the financial projections for the TIF district. Except: The table is subtitled “West Bank Redevelopment District / Delano and Stadium Project.” I think it’s safe to say that is a mistake. A second table titled “Projected Bond Cash Flow Report” has the same mistaken subtitle.

Here we see one of the real reasons for developing Naftzger Park:

“Seneca Property, LLC and Sunflower Wichita, LLC intend to develop the property immediately adjacent to Naftzger Park . The development of the area will consist of renovation the Spaghetti Works building into 41 apartments and the construction of approximately 62,000 square feet of Class A office and retail space. The development is planned to be designed to complement the Naftzger Park redevelopment design and is anticipated to generate a significant portion of the revenue necessary to support the Project.”

A company is developing property adjacent to Naftzger Park, and the company would like to see the park renovated to its liking. It is proposed that the new property taxes the company will pay be used to pay for the renovation.

Normally increased property taxes are used to pay for things like police and fire protection, city council salaries, and schools. But through tax increment financing (TIF), these increased property taxes will be rerouted for the benefit of the private property owner. In the process, a beautiful park will be replaced with an astroturf-covered plain.

For more information on Naftzger Park, including photographs, see Naftzger Park in Downtown Wichita.

A possible plan for Naftzger Park from the City of Wichita

Wichita WaterWalk agreement not followed

Does the City of Wichita enforce its public-private partnership agreements? In some cases the city doesn’t even ask for the information that is needed for enforcement.

A Wichita Eagle article reports on a 2002 public-private partnership that called for the private-sector company to submit an annual report to the city. But the company did not submit the reports, and the city didn’t ask for them. The city did after the Eagle inquired. 1

The deal involves the city leasing land to a private developer for a project now known as WaterWalk. Part of the deal called for the city to possibly receive annual payments in a form of profit-sharing. Annual reports to the city were to provide figures from which the city’s payment would be calculated.

There is an important issue here apart from the wisdom of striking the initial deal in 2002. That is, neither the city nor the company followed the terms of the deal. The annual reports were not supplied by the company, and they were not requested by the city, according to Eagle reporting. As it turns out the annual reports purport to show that the city was owed no money under the profit sharing agreement.

But that’s not the point. The issue is that the city did not enforce a simple aspect of the agreement, and the private-sector company felt it did not need to comply.

Some of the Eagle article is devoted to explaining that the deal was struck some years ago, and: “No city official who played a major role in the 2002 contract is still actively involved in government.”

I’m sure we will hear that excuse from current city council members and bureaucrats, that all this happened before our time. Anyone taking cover using that excuse deserves to be terminated immediately.

We should not accept this or any excuse. This is because in 2012 the city entered into a same or similar agreement in the same WaterWalk development with the same developer, Jack P. Deboer. It also called for the city to potentially earn payments, called “additional annual rent.” It also called for reports to be made, although the exact language used is “provide that calculation.” 2

I wonder: When city staff drafted the new agreement in 2012, and when the council deliberated the agreement, did anyone wonder how the 2002 agreement worked out? Did anyone wonder if the city earned any payments from that deal? The 2012 agreement was controversial, at least to some. I and others spoke to the council expressing our concerns. 3

I also wonder: Has the developer filed the annual reports from the 2012 agreement? I’ve asked the city.

Here is the article I filed in 2012: Wichita WaterWalk apartment deal not good for citizens.


Notes

  1. Lefler, Dion. WaterWalk profit-sharing: 15 years, zero dollars for Wichita. Wichita Eagle, July 8, 2017. Available at http://www.kansas.com/news/politics-government/article160147944.html.
  2. “As Additional Annual Rent Tenant shall pay a sum equal to twenty-five percent (25%) of the Adjusted Net Cash Flow commencing with the first day the Tenant Improvements open for business. The Tenant shall calculate Adjusted Net Cash Flow for each Current Year within forty-five (45) days after the end of the Current Year (or portion thereof) and provide that calculation, and pay to the Landlord the Additional Annual Rent, within sixty (60) days after the end of the Current Year. Additional Annual Rent shall continue until this Lease expires. Adjusted Net Cash Flow is Gross Revenues less Total Expenses, less the total amount of capital expenses for furniture, fixtures, and equipment for the Tenant Improvements in excess of the aggregate amount expended from any reserve during such year.” Amendments to WaterWalk Developer Agreements. August 21, 2012. Available at https://drive.google.com/file/d/0B97azj3TSm9Mdm1tWjlQbVAzemM/view?usp=sharing.
  3. Wichita City Council. Minutes of August 21, 2012 meeting. Available at http://wichitaks.granicus.com/MinutesViewer.php?view_id=2&clip_id=1843.

WichitaLiberty.TV: John Todd and Wichita issues

In this episode of WichitaLiberty.TV: John Todd joins Bob Weeks and Karl Peterjohn to discuss issues involving the City of Wichita, including the future of Naftzger Park and economic development. View below, or click here to view at YouTube. Episode 157, broadcast July 9, 2017.

Shownotes

  • Wichita Pachyderm Club on Facebook
  • Article link: An information resource regarding the future of Naftzger Park in downtown Wichita
  • Article link: Downtown Wichita business trends: There has been much investment in Downtown Wichita, both public and private. What has been the trend in business activity during this time?
  • Article link: Downtown Wichita jobs, sort of: The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice.
  • Article link: Wichita economic dashboards

From Pachyderm: Wichita city council candidates

From the Wichita Pachyderm Club this week: Wichita City Council Primary and General Election Candidates. This audio presentation was recorded June 30, 2017.

District 1 voters will vote in a primary election on August 1. Two candidates will advance to the general election on November 7. For districts 3 and 6, there will be no primary election, and the candidates will compete in the general election. Maps of city council districts are here. Or, to find who represents you in the city council and other offices, use Kansas Voter View, specifically this form.

The candidates are, in order of first speaking:

From District 1
District 3
District 6
  • Cindy Claycomb (Facebook: Cindy Claycomb)
  • Sybil Strum (Did not attend)

Naftzger Park in Downtown Wichita

An information resource regarding the future of Naftzger Park in downtown Wichita.

A possible plan for Naftzger Park
The City of Wichita is proposing to spend $1,500,000 to transform Naftzger Park from its present form to something else. Here are information resources:

Update: The city council will consider setting the date for a public hearing. See Naftzger Park public hearing to be considered.

Metro Monitor for the Wichita economy

A research project by The Brookings Institution illustrates the performance of the Wichita-area economy.

Metro Monitor from The Brookings Institution rates metropolitan areas on several indicators. For this year’s report, the most recent data included is from 2015.

For this year’s report, the news for the Wichita area is mixed. For the period 2010 to 2015, Wichita ranks 88th in growth, 69th in prosperity, and 44th in inclusion. (The 100 largest metro areas were ranked.)

Looking at just the most recent years, 2014 to 2015, Wichita ranks 73rd in growth, 42nd in prosperity, and 9th in inclusion. That’s moving in the right direction. So perhaps there is hope for progress, in that the rankings for the most recent years are better than the rankings for the past five years.

There is good news in these numbers, too. Wichita does well in most measures of “Inclusion,” which Brookings describes: “Inclusion indicators measure how the benefits of growth and prosperity in a metropolitan economy — specifically, changes in employment and income — are distributed among individuals. Inclusive growth enables more people to invest in their skills and to purchase more goods and services. Thus, inclusive growth can increase human capital and raise aggregate demand, boosting prosperity and growth.”

Wichita’s productivity ranking is good, also.

Brookings computed a measure called “Metro area competitive shift.” It’s described as “The difference between the actual job growth and the expected job growth. It indicates whether the metro area overperformed or underperformed given its industrial structure.” For the period 2010 to 2015, Wichita scored -4.2 percent. For 2014 to 2015, the measure is -0.5 percent. Again, movement in the right direction.

Looking at more recent data gathered from the Bureau of Labor Statistics through April 2017, we see that at a time private sector employment in the entire nation is rising steadily, in Wichita (and Kansas) employment rose at a slower rate, and has been (roughly) level since 2016.

Looking forward, the employment situation may not improve, or improve only slowly. Recently Wichita State University’s Center for Economic Growth and Business Research revised its forecast downward: “Revised employment numbers showed that Wichita’s economic growth came to a screeching halt in October of 2016. Even though employment growth presumably stopped, there is lacking evidence that the slowed employment growth is systemic. Employment growth is expected to pick up marginally, but multiple headwinds could derail that growth.” 1

Other data from BLS that I’ve charted through the Federal Reserve Bank of St. Louis show that Wichita’s unemployment rate is going down, and so is the civilian labor force. Manufacturing employment is far below previous levels, and is on a slow downward trend. You may view the Wichita dashboard here. A similar dashboard for Kansas is here.


Notes

  1. Center for Economic Growth and Business Research. Wichita State releases 2017 employment forecasts. Available at http://www.wichita.edu/thisis/wsunews/newsrelease/?nid=3675.

As Wichita considers new ventures, a look back at some data

The City of Wichita will soon be flooded with data regarding downtown convention and performing arts facilities. Past experience should warn us to be skeptical.

Goody Clancy, a planning firm hired by Wichita Downtown Development Corporation, told a Wichita audience that the planning effort for downtown Wichita is grounded in data and hard analysis.1

But at least some of the data Goody Clancy used turned out to be total nonsense.

Specifically, Goody Clancy presented Walk Score data for downtown Wichita. Walk Score is purported to represent a measure of walkability of a location in a city. Walkability is a key design element of the master plan Goody Clancy has developed for downtown Wichita. David Dixon, who leads Goody Clancy’s Planning and Urban Design division, used Walk Score in a presentation delivered in Wichita.

Walk Score is not a project of Goody Clancy, as far as I know, and David Dixon is not responsible for the accuracy or reliability of the Walk Score website. But he presented it and relied on it as an example of the data-driven approach that Goody Clancy takes.

For example, the score for 525 E. Douglas, the block the Eaton Hotel is in and mentioned by Dixon as a walkable area, scored 91, which means it is a “walker’s paradise,” according to the Walk Score website.

Walk score data for 525 E. Douglas, in 2010. Click for larger.
But here’s where we can start to see just how bad the data used to develop these scores is. For a grocery store — an important component of walkability — the website indicates indicated a grocery store just 0.19 miles away. It’s “Pepsi Bottling Group,” located on Broadway between Douglas and First Streets. Those familiar with the area know there is no grocery store there, only office buildings. The claim of a grocery store here is false. It’s an office, not a store.

For a nearby library, it listed Robert F. Walters Digital Library, which is a specialized geological library costing $1,500 per year to use — over the internet.

For a drug store, it listed Rx Doctor’s Choice, which is a company selling oral chelation treatments by mail order. It’s nothing at all like a general-purpose drug store. One of those is nowhere nearby.

There were other claimed amenities where the data is just as bad. But as Larry Weber, then chairman of the Wichita Downtown Development Corporation told me, Walk Score has been updated. I should no longer be concerned with the credibility of this data, he said.

He was correct — partially. Walk Score was updated, but we should still be concerned about the quality of the data. Now for the same location the walk score is 85, which is considered “very walkable.” The “grocery store” is no longer the Pepsi Bottling Group. It’s now “Market Place,” whose address is given as 155 N. Market St #220.

If anyone would ever happen to stroll by that location, they would find that address — 155 N. Market number 220 — is the management office for an office building whose name is Market Place. It’s not a grocery store. It’s an office. So I became even more concerned about the credibility of this data and the fact that Goody Clancy relied on it. I was also concerned that Weber thinks thought this was an improvement, and that he felt I should not be concerned.

David Dixon and Goody Clancy did not create the Walk Score data. But he and his planning company presented it to Wichitans as an example of the data-driven, market-oriented approach to planning that they use.

But anyone who relies on the evidence Dixon and Goody Clancy presented would surely be confused unless they investigated the area on their own.

And since this reliance on Walk Score was made after Goody Clancy had spent considerable time in Wichita, the fact that someone there could not immediately recognize how utterly bogus the data is: That should give us cause for concern that the entire planning process is based on similar shoddy data and analysis. We also ought to be concerned that no one at WDDC or city hall looked closely enough at this data to realize its total lack of correspondence to reality.

When I presented these concerns to the Wichita Metropolitan Area Planning Commission in 2010, Scott Knebel, a member of the city’s planning staff who is the city’s point man on downtown planning, address the concerns raised by me. He said, “In terms of the Walk Score, I suspect Mr. Weeks is absolutely right, it probably is a relatively flawed measurement of Walk Score.” He added that the measurement is probably flawed everywhere, downtown and elsewhere. He said that Goody Clancy used it “as an illustration of the importance of walkability in an urban area.”

An isolated incident, long ago?

Seven years later, should we be concerned about this incident?

If that was the only example of low-quality and deceptive data, we could say sure, that was long ago. Let’s forget this and go forward. Our city leaders are smarter now.

Except they’re not.

The oft-cited claim of 26,000 workers in downtown Wichita is another example of misuse of data, and in a very big way. It comes from the U.S. Census Bureau. This particular data set counts all Wichita school district employees as downtown workers, even though nearly all work at locations scattered throughout the city.2

If we accept this data as meaning what WDDC and the city says it means, we’d have to believe that 7,740 people work in a one square block area from First to Second Streets, and Wichita to Water Streets. That block is mostly surface parking, but it does hold the administrative offices of the Wichita school district. So all school district employees are counted as working in this block.

There is similar problem in another block. All City of Wichita employees are treated as though they work at city hall. But they don’t.

Does any of this matter? It ought to matter. The planners tell us they use data to make decisions. This week the city council decided to hire a consulting firm to investigate the feasibility of a refurbished or new convention center and performing arts center. I’m sure much data will be presented. Based on our past experience, we’ll have to carefully examine data for appropriate usage.


Notes

  1. Weeks, Bob. Goody Clancy market findings presented to Wichita audience. Available at https://wichitaliberty.org/wichita-government/goody-clancy-market-findings-presented-to-wichita-audience/.
  2. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.

Wichita about to commit to more spending. Bigly.

This week the Wichita City Council considers hiring a consulting firm to develop plans for a new performing arts and convention center.

Options from the City of Wichita.
It’s no secret that many in Wichita want a new performing arts and convention center to replace Century II. Documents produced by the city sketch four possibilities ranging in price from $272 million to $492 million.1 2

The two least expensive scenarios keep the existing Century II structure, while two call for completely new buildings, including the possibility of a performing arts center located a few blocks to the east of the present Century II and proposed convention center site.

Apart from the financial desirability of these projects is the question of how to pay. The traditional approach would be for a city to build, own, and operate the project, paying for it through long-term borrowing. (Governments, including Wichita, often speak of “bonding” projects, a word which seems less foreboding than “borrowing.”)

This week’s business for the city council foreshadows the city using a different method. The firm the city wants to hire, Arup Advisory, Inc., is an advocate of “P3” or public-private partnerships. A report Arup prepared for the City of Los Angeles3 recommended that the city use a method known as Design Build Finance Operate and Maintain (DBFOM), which Arup says is used interchangeably with P3.

In the DBFOM or P3 model as applied to Wichita, a third party — thought to be George Laham — would do all the work of designing, financing, building, and operating a convention center and possibly a performing arts center. Then, the city simply pays a fee each year to use the center. It’s called an “availability payment.” Most people call this rent or lease payments.

The Los Angeles document explains the potential benefits of using DBFOM or P3:

Here, the City as asset owner hires a developer team to take on the full project development responsibility (design, build, finance, operate, maintain) and pays them an annual service fee for the availability of the functioning capital asset (i.e. infrastructure as a service). The service fee is called an “availability payment” in the P3 industry; it is a contractually scheduled pay-for-performance arrangement where the private partner is paid to design, build, and finance a turnkey capital asset and then is responsible for the operation and maintenance of the asset according to performance standards set by the City. The availability payments are fixed at the time the P3 contract is signed and are only subject to indexation to an agreed inflation index (e.g., US or Los Angeles region CPI) and deductions for non-performance against the contractually defined performance standards. The availability payments, which are the only form of compensation by the owner to the P3 developer, start only when the P3 developer has satisfied all the conditions stipulated in the contract for successful completion of construction and start of operations. These features provide substantial incentives for the P3 developer to achieve on-schedule and on-budget construction, as well as optimized life-cycle maintenance over the long term that meets the owner’s needs.

A common strategy recommended by Arup is to “cross-subsidize” with real estate. This is vaguely defined as to “unlock significant land value” in city-owned real estate near the convention center. Specific to Wichita, the proposal from Arup to the city includes, “Assess potential revenue from the monetization of city’s owned land located in proximity to the Century II facility and determine the size of the cross subsidy to the project expansion design schemes 1 and 3.”4

What are the benefits to the city of pursuing the DBFOM/P3 path? The Los Angeles document gives these: “No impact on debt capacity; significantly reduced cost to the General Fund, structured as an obligation to pay a service fee (i.e. availability payment) to the private partner where the value of the service fee is less than the sum of all the relevant LACC costs [for other options].”

To emphasize, again from the Los Angeles document: “… the City’s budgetary obligation is in the form of a service fee (i.e. availability payment) to the private partner, recorded as a contractual liability on the City’s balance sheet, as opposed to a debt obligation, which does not impact the City’s debt capacity.”

In other words, the city can make a decades-long financial committment without appearing to take on debt. Yes, the city’s committment — the “availabity payments” — will be characterized as payments that need be made only if the convention center facility is kept up to certain standards. If, not, then the city can stop paying. But then Wichita would have no cenvention center, and no performing arts center. Instead, the city would have one or two big, hulking, empty buildings in downtown.

Should Wichita do this?

Convention business is on a long downward trend. The Arup report for Los Angeles recognizes this:

Over the last two decades, most large and medium size American cities have experienced a spur in convention center development. According to the Brookings Institution (2005), exhibit hall space in the US grew from 40 million square feet in 1990 to 85 million in 2014 distributed among 400+ facilities. There is a sense in the Convention business that the supply may be exceeding demand.

(For more on convention center trends, see Should Wichita expand its convention facilities? The Brookings report by Heywood Sanders is available at Space Available: The Realities of Convention Centers as Economic Development Strategy.)

A commitment of this size needs public input in the form of a vote. The “availability payments” the city may commit to will be characterized in various ways, but they represent a long-term commitment by the city that it can’t escape. If promised revenues from expanded convention trade don’t cover these payments, taxpayers will have to pay. The city, unfortunately, doesn’t have a good record of honesty with citizens:

  • In 2014 the city told citizens that $250 million in new sales tax revenue was required to provide drought protection. After the vote on the tax failed, the city found less expensive ways to provide the same protection.5
  • Subsidized city projects have not delivered promised benefits.6
  • The city is not truthful in reporting the number of people working in downtown Wichita.7
  • Despite much investment in downtown Wichita, both public and private, business activity is declining.8
  • Despite much investment in downtown Wichita, both public and private, total property valuation is declining.9
  • While touting transparency, the city fails in many basic ways, even though the city communications staff has been expanded.10 11 12

Citizens and taxpayers should insist the city address these issues before committing to any new project, much less one the size of a renovated or new performing arts and convention center.

And — most importantly — the people need to vote up or down on this project.

Update: On May 9 the city council decided to hire this firm.


Notes

  1. City of Wichita. Grand Vision: Wichita Performing Arts & Convention Center: ‘Millenials Place.’ Available at https://wichitaliberty.org/wp-content/uploads/2017/05/Century-2-Vision.pdf.
  2. City of Wichita. The Heart of Downtown: Catalyst to a 21st Century Riverfront. Available at https://wichitaliberty.org/wp-content/uploads/2017/05/Analysis-of-century-2.pdf.
  3. City of Los Angeles, Office Of The City Administrative Officer. Public-private Financing Options For The Los Angeles Convention Center Expansion Project. Available at http://cao.lacity.org/Reports/20151223%20CAO%20LACC%20Alternative%20Financing.pdf.
  4. City of Wichita. Agenda Packet for May 9, 2017.
  5. Weeks, Bob. In Wichita, the phased approach to water supply can save a bundle. In 2014 the City of Wichita recommended voters spend $250 million on a new water supply. But since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot. Available at https://wichitaliberty.org/wichita-government/wichita-phased-approach-water-supply-can-save-bundle/.
  6. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/.
    Also: Ken-Mar TIF district, the bailouts. Available at https://wichitaliberty.org/wichita-government/ken-mar-tif-district-the-bailouts/. Since the bailout, the situation at the former Ken-Mar center has worsened.
    Also: Wichita TIF district disbands; taxpayers on the hook. Available at https://wichitaliberty.org/wichita-government/wichita-tif-district-disbands-taxpayers-hook/.
    Also: Wistrom, Brent. Warren bailout poses dilemma — city loan, vacant theater both carry risks. Wichita Eagle. Available at https://brentwistrom.wordpress.com/clips/eagle-exposes-lost-taxdollars-in-downtown-theater-loan/.
  7. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.
  8. Weeks, Bob. Downtown Wichita business trends. There has been much investment in Downtown Wichita, both public and private. What has been the trend in business activity during this time? https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  9. Weeks, Bob. Downtown Wichita tax base is not growing. There’s been much investment in downtown Wichita, we’re told, but the assessed value of property isn’t rising. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-tax-base-not-growing/.
  10. Weeks, Bob. Wichita check register. A records request to the City of Wichita results in data as well as insight into the city’s attitude towards empowering citizens with data. Available at https://wichitaliberty.org/wichita-government/wichita-check-register-2016/.
  11. Weeks, Bob. Wichita doesn’t have this. A small Kansas city provides an example of what Wichita should do. Available at https://wichitaliberty.org/wichita-government/wichita-does-not-have-this/.
  12. Weeks, Bob. During Sunshine Week, here are a few things Wichita could do. The City of Wichita says it values open and transparent government, but the city lags far behind in providing information and records to citizens. Available at https://wichitaliberty.org/open-records/sunshine-week-wichita/.

On Wichita’s STAR bond promise, we’ve heard it before

Are the City of Wichita’s projections regarding subsidized development as an economic driver believable?

Map of STAR bond districts. Click for larger.
This week the Wichita City Council will consider a project plan for a STAR bonds district near Downtown Wichita. These bonds divert future incremental sales tax revenue to pay for various things within the district.1

City documents promise this: “The City plans to substantially rehabilitate or replace Lawrence Dumont Stadium as a modern multi-sport stadium as part of a larger project to develop the river and stadium areas. … Combined, the museum, pedestrian bridge, waterfront improvements and multi-sport stadium will generate significant new visitor tourism as well as provide signature quality of life amenities for the citizens of Wichita and the region.”2

We’ve heard things like this before. Each “opportunity” for the public to invest in downtown Wichita is accompanied by grand promises. But actual progress is difficult to achieve, as evidenced by the lack of progress in Block One.3

Trends of business activity in downtown Wichita. Click for larger.
In fact, change in Downtown Wichita — if we’re measuring the count of business firms, jobs, and payroll — is in the wrong direction, despite public and private investment.4

Perhaps more pertinent to a sports facility as an economic growth driver is the Intrust Bank Arena. Five years ago the Wichita Eagle noted the lack of growth in the area.5 Since then, not much has changed. The area surrounding the arena is largely vacant. Except for Commerce Street, that is, and the businesses located there don’t want to pay their share of property taxes.6

I’m sure the city will remind us that the arena was a Sedgwick County project, not a city project, as if that makes a difference. Also, the poor economic performance cited above is for Downtown Wichita as delineated by zip code 67202, while the proposed STAR bond project lies just outside that area, as if that makes a difference.

By the way, this STAR bonds district is an expansion of an existing district which contains the WaterWalk development. That development has languished, with acres of land having been available for development for many years.


Notes

  1. Weeks, Bob. STAR bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/star-bonds-kansas/.
  2. Agenda packet for May 2, 2017. Excerpt available at https://drive.google.com/file/d/0B97azj3TSm9MajNOUmQ3dDV0dXc/view.
  3. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/.
  4. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  5. “Ten years ago, Elizabeth Stevenson looked out at the neighborhood where a downtown arena would soon be built and told an Eagle reporter that one day it could be the ‘Paris of the Midwest.’ What she and many others envisioned was a pedestrian and bike-friendly neighborhood of quaint shops, chic eateries and an active arts district, supported by tens of thousands of visitors who would be coming downtown for sporting events and concerts. It hasn’t exactly turned out that way. Today, five years after the opening of the Intrust Bank Arena, most of the immediate neighborhood looks much like it did in 2004 when Stevenson was interviewed in The Eagle. With the exception of a small artists’ colony along Commerce Street, it’s still the same mix of light industrial businesses interspersed with numerous boarded-up buildings and vacant lots, dotted with ‘for sale’ and ‘for lease’ signs.” Lefler, Dion. 5 years after Intrust Bank Arena opens, little surrounding development has followed. Wichita Eagle. December 20, 2014. Available at http://www.kansas.com/news/local/article4743402.html.
  6. Riedl, Matt. Has Commerce Street become too cool for its own good? Wichita Eagle. April 8, 2017. http://www.kansas.com/entertainment/ent-columns-blogs/keeper-of-the-plans/article143529404.html.

Growth in Downtown Wichita Jobs

Even if we accept the measure of jobs used by the City of Wichita, the trend is in the wrong direction. Citizens should ask for truth and accountability.

Click for larger.
Click for larger.
Click for larger.
The City of Wichita and its surrogates tell us there are 26,000 daytime workers in downtown Wichita, defined as zip code 67202. There is a serious problem with that number, as it includes workers whose “administrative home” is downtown, even though they work somewhere else.1 The largest example of this is the counting of all Wichita school district employees as downtown workers, even though almost all work in schools and other locations throughout the city.

But even if we use the statistic promoted by the Wichita Downtown Development Corporation, the trend in jobs is in the wrong direction. WDDC promotes the large investment in downtown Wichita, by both private and public sources. But employment is trending in the opposite direction.

As Wichita considers other large downtown investments, such as STAR bond financing for the west bank of the Arkansas River or a new convention center and performing arts center, we should ask at least two questions:

  • Can we depend on the city to use meaningful and truthful data?
  • Will the city recognize the lackluster results of its economic development efforts?
  • Shouldn’t we insist on progress in projects like Block One before proceeding elsewhere?2


Notes

  1. Weeks, Bob. Downtown Wichita jobs, sort of. The claim of 26,000 workers in downtown Wichita is based on misuse of data so blatant it can be described only as malpractice. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-jobs/.
  2. Weeks, Bob. Downtown Wichita’s Block One, a beneficiary of tax increment financing. Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-block-one-beneficiary-tax-increment-financing/.

Downtown Wichita’s Block One, a beneficiary of tax increment financing

Before forming new tax increment financing districts, Wichita taxpayers ought to ask for progress on current districts.

Windows in the former Henry’s building promote Block One. They’re fading from exposure to the sun. Click for larger.
I’ll not bore you with the mechanism of tax increment financing (TIF). But if you’re curious, please read Wichita TIF projects: some background and Tax increment financing district (TIF) resources.

Whatever the mechanism, tax increment financing is meant to spur economic growth. But in one of Wichita’s largest TIF districts, economic activity, much less growth, is difficult to find.

In particular, “Block One” — a square block bounded by Douglas and William, Broadway and Topeka — has benefited from TIF money, but has stumbled. There is the Ambassador Hotel, which received many millions in taxpayer subsidy in addition to TIF benefits. There is also the Kansas Leadership Center, a handsome new building.

Block One retail space sits mostly empty, despite the benefit of tax increment financing. Click for larger.
But on William Street, progress is harder to find.

The former Henry’s building remains empty. Promotional materials in its display windows have been fading in the sun for four years. Across the alley to the east is 8,400 square feet of retail space, all empty for four years except for a used book store. It’s not for lack of parking that this space is empty, as it lies underneath a taxpayer-funded parking garage. There’s plenty of on-street parking too, as little happens on this block.

Some of the surrounding property is not doing well, either. The Broadway Plaza building features a large ground floor office or retail space that has been empty for years. South of that, the former State Office Building — directly across Broadway from the former Henry’s building — faces possible demolition.

Block One ribbon cutting, March 2013.
Has there been lack of promotion for Block One? No. The downtown development agency uses it as an example of the success of its efforts in downtown Wichita. It has called it “the first complete city block of development along the core of Douglas Avenue.”

But the legacy of this, at least along William Street, is empty storefronts and a hulking vacant building.

Now the City of Wichita has approved the formation of yet another tax increment financing district. Sedgwick County and the Wichita School District have an opportunity to veto its formation. Before approving any new tax increment financing districts, we might want to ask for some progress in what we have.

Block One promotional material. Click for larger.

Cargill subsides start forming

Details of the subsidy programs used to keep Cargill in Wichita are starting to take shape.

This week the Wichita City Council will consider one of the (potentially many) subsidy programs offered to keep Cargill in Wichita.

Cargill Protein Group is currently located at 151 N. Main. The plan is for Cargill to purchase and demolish the Wichita Eagle building at 825 E. Douglas, then build a new office building in its place. The subsidy program to be considered this week is the Industrial Revenue Bond program1. The city won’t be lending Cargill money. Instead, IRB’s are a (convoluted) method whereby local governments are able to forgive the payment of property taxes. For the case of Cargill, city documents state the tax forgiveness could be worth $1,359,531 per year.2 This would be shared by these taxing jurisdictions, again according to city documents.

  • City of Wichita: $378,450
  • Sedgwick County: $340,958
  • USD 259, the Wichita Public School District: $622,723
  • State of Kansas $17,400

Of note, the city is in a hurry to handle this matter. Pending legislation would reduce the amount of property tax able to be exempted.3

In addition to the property tax exemption, the IRBs also carry a sales tax exemption for purchases related to construction. City documents give an estimated value of $2,026,291 for the sales tax Cargill will not have to pay.

Not the entire subsidy package

The action to be considered this week is likely just a portion of total subsidy package. For example, at one time it was speculated that the City of Wichita would build a parking garage and let Cargill use it as their own. With a proposed capacity of 750 parking spots, this would cost many millions.4

Now, the city plans to let Cargill construct the garage, and the city will, according to city documents, “purchase a parking easement from Cargill to obtain public access to the parking structure Cargill will complete as part of this project.” It sounds like the city will rent spaces in the garage. It will be interesting to see the rate the city will agree to pay.

From the state of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill.5 (Well, only 95 percent goes back to Cargill. The state keeps five percent.)


Notes

  1. Weeks, Bob. Industrial revenue bonds in Kansas. https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  2. City of Wichita. Council agenda packet for April 18, 2017.
  3. Kansas Legislature. SB 146: Continuation of 20 mill statewide levy for schools and property tax exemption of certain portion of property used for residential purposes from such levy. http://www.kslegislature.org/li/b2017_18/measures/sb146/.
  4. Recently the city paid $4.73 million (not including change orders) to build a downtown garage with 270 parking spaces, a cost of about $17,500 per stall. Applying that to a 750 stall garage results in a cost of $13.1 million).
  5. Weeks, Bob. In Kansas, PEAK has a leak. https://wichitaliberty.org/kansas-government/kansas-peak-leak/.

Cash incentives in Wichita, again

The City of Wichita says it does not want to use cash incentives for economic development. But a proposal contains just that.

Update: The council did not approve this project, by a vote of four to three.

This week the Wichita City Council will consider a package of incentives for the developer of a large downtown building, the Finney State Office Center. While the city has said that it does not want to use cash incentives, they are proposed for this project.1

Finney State Office Building environs
Elements of the proposal are these:

The Wichita Public Building Commission will sell the building for $100,000.

The project is also asking for the city to issue Industrial Revenue Bonds. Despite the use of the term “bond,” the city is not lending money to anyone. Someone else will purchase the bonds. Instead, the IRBs are a vehicle for conveying property tax abatements and sales tax exemptions.

In this case, the developer requests a sales tax exemption for purchases during the renovation. City documents don’t give a value for the sales tax that might be exempted. But the developer has requested IRBs for an amount up to $35,000,000. Therefore, a sales tax exemption might be worth up to $2,625,000, depending on the price of taxable products and services purchased, and the sales tax rate at the time.

If someone excuses you from paying millions in sales tax, that’s better than receiving cash. But cash incentives are proposed, too. The city proposes a grant of up to $2,000,000, although the city calls this an “investment.”2

Whatever it is called, this is a cash incentive.

Also, the Wichita Public Building Commission will pay up to $1,000,000 for improvements to the building.3

This proposed payment from the WPBC seems to be in violation of the city statutes governing the commission, which read: “Under no circumstances shall any income of the public building commission inure to the benefit of any private person.”4

I’m sure the city will characterize its $2 million “investment” in some way other than a cash incentive. The city will also say the $1 million from the WPBC is not from the city, which is true. But the city will have to rationalize allowing the commission to violate the clear language of its statutes.

There are some good aspects of this agreement with the developer, such as a timeline and performance bond requirement. But the cash incentives are against stated city policy and its laws.


Notes

  1. Wichita City Council agenda packet for April 11, 2017.
  2. ibid. “The City proposes to invest up to $2,000,000 to be used to modernize the building. The investment would only be paid upon completion of the entire building renovation project.”
  3. ibid. “On April 5, 2017, the WPBC approved the Development Agreement/Purchase and Sale Agreement and agreed to commit up to $1,000,000 for building improvements as well.”
  4. Wichita Municipal Code. Sec. 2.12.640 (i). Under no circumstances shall any income of the public building commission inure to the benefit of any private person. https://www.municode.com/library/ks/wichita/codes/code_of_ordinances?nodeId=TIT2ADPE_CH2.12BOAGCO_S2.12.640SAUNCO.

In Kansas, the war on property rights

John Todd makes an appearance on The Voice of Reason with Andy Hooser to talk about proposed legislation in Kansas that would be harmful to private property rights. View below, or click here to view on YouTube. Recorded on March 16, 2017.

For more information on this important issue, see In Kansas, the war on blight continues: Kansas governments are trying — again — to expand their powers to take property to the detriment of one of the fundamental rights of citizens: private property rights.

Wichita property tax rate: Level

The City of Wichita says it hasn’t raised its property tax mill levy in many years. For this year, the city is correct.

Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
In 1994 the City of Wichita mill levy rate — the rate at which property is taxed — was 31.290. In 2016 it was 32.685, based on the city’s Comprehensive Annual Financial Report and the Sedgwick County Clerk. That’s an increase of 1.395 mills, or 4.46 percent, since 1994. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)

In 2015 the mill levy was 32.686, so the mill levy dropped by .001 for 2016. That’s a refreshing change. While the city says the mill levy hasn’t increased, the nearby table and summary above indicate otherwise.

It is true that the Wichita City Council did not take explicit action to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.

Wichita mill levy rates. Click for larger version.
While the city doesn’t have control over the assessed value of property, it does have control over the amount it decides to spend. As can be seen in the chart of changes in the mill levy, the council decides to spend more than the previous year’s mill levy generates in taxes. Therefore, tax rates rise.

Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
Also, while some may argue that an increase of 4.46 percent over two decades is not very much, this is an increase in a rate of taxation, not actual tax revenue. As property values rise, and as the mill levy rises, property tax bills rise rapidly.

The total amount of property tax levied is the mill levy rate multiplied by the assessed value of taxable property. This amount has risen, due to these factors:

  • Appreciation in the value of property
  • An increase in the amount of property
  • Spending decisions made by the Wichita City Council

Application of tax revenue has shifted

Wichita mill levy, percent dedicated to debt service. Click for larger version.
The allocation of city property tax revenue has shifted over the years. According to the 2010 City Manager’s Policy Message, page CM-2, “One mill of property tax revenue will be shifted from the Debt Service Fund to the General Fund. In 2011 and 2012, one mill of property tax will be shifted to the General Fund to provide supplemental financing. The shift will last two years, and in 2013, one mill will be shifted back to the Debt Service Fund. The additional millage will provide a combined $5 million for economic development opportunities.”

In 2005 the mill levy dedicated to debt service was 10.022. In 2016 it was 8.508. That’s a reduction of 1.514 mills (15.1 percent) of property tax revenue dedicated for paying off debt. Another interpretation of this is that in 2005, 31.4 percent of Wichita property tax revenue was dedicated to debt service. In 2016 it was 26.0 percent.

This shift has not caused the city to delay paying off debt. This city is making its scheduled payments. But we should recognize that property tax revenue that could have been used to retire debt has instead been shifted to support current spending. Instead of spending this money on current consumption — including economic development spending that has produced little result — we could have, for example, used that money to purchase some of our outstanding bonds.

What the city council says

Despite the data that is readily available in the city’s comprehensive annual financial reports, some choose to remain misinformed or uninformed. The following video from 2012 provides insight into the level of knowledge of some former elected officials and city staff. Based on recent discussions with city officials, things have not improved regarding present staff.

WichitaLiberty.TV: Kansas conventions, taxing and spending, and Wichita economic development

In this episode of WichitaLiberty.TV: Co-host Karl Peterjohn joins Bob Weeks to discuss the Kansas congressional nominating conventions, taxing and spending in Topeka, and Wichita economic development and promotion. View below, or click here to view at YouTube. Episode 139, broadcast February 19, 2017.

Shownotes

In Wichita, the surveillance state expands again

In Wichita, we see another example of how once government starts a surveillance program, it probably won’t produce the promised results, yet will be expanded.

This week the Wichita City Council will consider adding more surveillance cameras to Old Town. City documents don’t specify how many video cameras will be installed as part of the $618,261 program (for one-time installation costs only), except that it may be “as many as 100.” The city is also asking council members to pass an ordinance with bonding authority of up to $750,000 to pay for this project. In other words, the city is borrowing to pay for this system.1

This proposed expansion of camera surveillance is another expansion of police powers in Wichita at the loss of civil liberties.2 In 2014 the city designated Old Town an “entertainment district,” giving the city increased powers to attempt to control crime.3 Critics are concerned that the extra enforcement measures granted to entertainment districts are discriminatory to certain minority groups.4

This proposed expansion of cameras is not likely to be the last. Wichita’s police chief is seeking to add more surveillance and cameras.5

Across the county, those concerned with the loss of civil liberties and privacy are concerned about the expansion of the surveillance state. Adding irony to this debate are the remarks of Wichita City Council Member Janet Miller (district 6, north central Wichita). She called the addition of the new cameras “huge” and “exciting,” adding that she is “very, very happy” at their addition.6 The irony is that she would insist that she is a protector of civil rights.

What are civil rights important in this matter? Discussing this matter on Facebook, one local political activist wondered, “How long before someone is being blackmailed with footage from a police surveillance cam, for stumbling down the road, or some other harmless but embarrassing scenario?”

In response, I added, “Or blackmailed for marital infidelity, or entering a gay bar, a marijuana dispensary, a church, an STD clinic, an abortion doctor’s office, or maybe being spotted dropping off an anonymous tip to the newspaper.” (Well, we don’t have marijuana dispensaries, but we do have complimentary stores.) (There are two newspapers in Old Town. Well, one is across the street from Old Town, but is moving into Old Town.)

We have to wonder whether the cameras work as advertised. The website You Are Being Watched, a project of the American Civil Liberties Union, comes to this conclusion: “An increasing number of American cities and towns are investing millions of taxpayer dollars in surveillance camera systems. But few are closely examining the costs and benefits of those investments, or creating mechanisms for measuring those costs and benefits over time. There is extensive academic literature on the subject — studies carried out over many years — and that research demonstrates that video surveillance has no statistically significant effect on crime rates. Several studies on video surveillance have been conducted in the UK, where surveillance cameras are pervasive. The two main meta-analyses conducted for the British Home Office (equivalent to the US departments of Justice and Homeland Security) show that video surveillance has no impact on crime whatsoever. If it did, then there would be little crime in London, a city estimated to have about 500,000 cameras.”

An irony is that law enforcement likes recording citizens, but not the other way around. As John Stossel has noted, police don’t like to be recorded. In some states its a crime to tape a police officer making an arrest. A video excerpt from Stossel’s television shows the attitudes of police towards being recorded. At Reason Radley Balko details the problem, writing “As citizens increase their scrutiny of law enforcement officials through technologies such as cell phones, miniature cameras, and devices that wirelessly connect to video-sharing sites such as YouTube and LiveLeak, the cops are increasingly fighting back with force and even jail time—and not just in Illinois. Police across the country are using decades-old wiretapping statutes that did not anticipate iPhones or Droids, combined with broadly written laws against obstructing or interfering with law enforcement, to arrest people who point microphones or video cameras at them. Even in the wake of gross injustices, state legislatures have largely neglected the issue.”

Writing for Cato Institute, Julian Sanchez noted:

It is also unlikely that cameras will be especially helpful in deterring such attacks. Even when it comes to ordinary crime — where the perpetrators are generally motivated by the desire to make a quick buck without getting caught — studies have been mixed and inconclusive about the value of CCTV cameras as a crime deterrent.

Some show significant declines in crime in some regions of cities with camera networks, which may be attributable to the cameras — but many show no discernible effect at all.

Of note, one country with a government that really likes surveillance cameras is China.


Notes

  1. Wichita City Council agenda for February 14, 2017.
  2. Weeks, Bob. Surveillance state arrives in Wichita. https://wichitaliberty.org/liberty/surveillance-state-arrives-in-wichita/.
  3. Weeks, Bob. Wichita seeks to form entertainment district. https://wichitaliberty.org/wichita-government/wichita-seeks-form-entertainment-district/.
  4. Class-action lawsuit alleges racial discrimination at Power & Light. Kansas City Star, March 10, 2014. http://www.kansascity.com/news/local/article341880/Class-action-lawsuit-alleges-racial-discrimination-at-Power–Light.html.
  5. Finger, stan. Police seek answers, reversal as aggravated assaults surge. Wichita Eagle, February 10, 2017. http://www.kansas.com/news/local/crime/article132071799.html.
  6. Lefler, Dion. Wichita working to bring Old Town under camera surveillance. Wichita Eagle, February 10, 2017. http://www.kansas.com/news/politics-government/article131952109.html.

Greater Wichita Partnership

Greater Wichita Partnership features untruthful information on its website, which casts doubt on the reliability of the organization and the City of Wichita.

Greater Wichita Partnership uses the url of its predecessor, the Greater Wichita Economic Development Coalition, or GWEDC. GWP is in charge of efforts to develop the economy in the greater Wichita area. It describes itself as “a driving force in building a remarkable city and region.”1

Greater Wichita Partnership website, featuring unreliable information. Click for larger.
But there is a problem. Based on the information GWP makes available on the front page of its website, I don’t have much confidence in the organization’s efforts. And that’s too bad.

In the past I’ve observed how GWEDC — that’s the predecessor to GWP — was derelict in keeping its information current. In 2014, I noticed that GWEDC credited itself with recruiting a company named InfoNXX to Wichita.2 But GWEDC did not update its website to reflect current conditions. When I looked at GWEDC’s website in October 2013, I found this on a page titled Office Operations:

Wichita hosts over a dozen customer service and processing centers — including a USPS Remote Encoding Center (985 employees), InfoNXX (950), T-Mobile (900), Royal Caribbean (700), Convergys (600), Protection One (540), Bank of America (315) and Cox Communications (230.)

The problem was this: At the time I looked at the GWEDC website in October 2013, InfoNXX had closed its Wichita operations in 2012.3 Still, the official Wichita-area economic development agency touted the existence of a company that no longer existed in Wichita, and claimed a job count that the company never achieved. (Also, at that time the USPS facility was in the process of closing and eliminating all Wichita jobs.)

Now, the Greater Wichita Partnership website trumpets — on its front page — the expansion of a company that has actually contracted its operations in Wichita.

The company is NetApp, a maker of computer server storage systems. It’s the type of high tech company all cities are recruiting, and for which cities and states will open the economic development incentives pocketbook. Locally, Wichita and the State of Kansas announced expansion plans for NetApp operations in Wichita in 2012. But by the end of 2015, NetApp was not meeting its job goals in Wichita, according to information from Sedgwick County. Since then, NetApp announced two rounds of job cuts, with the cuts in Wichita unspecified.4 5

NetApp has not met the lofty expectations Wichita and Kansas officials promoted. That’s unfortunate, and perhaps the situation will improve and NetApp will grow.

Relevant to public policy is that NetApp was slated to receive a lot of incentives from many levels of government, up to $35 million.6 It is likely impossible to determine how much of these incentives were actually paid to NetApp. We do know that both the City of Wichita and Sedgwick County stopped paying incentives to NetApp, as these incentives were predicated on achieving certain levels of job counts, and NetApp has not met them.

But the lesson to learn today is that the Greater Wichita Partnership, the agency in charge of economic development in the area, still advertises NetApp as a success.

The problem is not only the blatant lie that GWP promotes prominently: “NetApp doubles its Wichita footprint.” It’s a serious problem that GWP has not updated its website to reflect reality. What if a company considering Wichita for expansion or location checks the NetApp story? How would such a company reconcile reality with what GWP promotes? What does this say about the reputation and reliability of GWP?

I don’t expect GWP to highlight its failures. But we ought to expect GWP to care enough about the truth to remove false information from such a prominent presentation.

Wichita’s history

Presentation by James Chung. Click for larger.
Presentation by James Chung. Click for larger.
Presentation by James Chung. Click for larger. See text for problems with this presentation.
In September 2015 James Chung delivered several lectures on the Wichita-area economy and its outlook.7 In the event I attended, Chung showed examples of web pages from the Des Moines and Omaha chambers, and contrasted them to a similar page from the Wichita chamber. Chung got it wrong, as the page he showed to illustrate the Wichita chamber was a print version of the page, which — intentionally — is a simplified version of the page designed for viewing in a web browser.8 The print version of the page, however, is what appears in Google, and most people will not investigate beyond that.

Still, the Wichita chamber page was stale compared to the others. And Chung’s point was, and is, relevant: First impressions matter.

The Wichita chamber’s site is better now. But someone at the Greater Wichita Partnership didn’t get the message. Content — reliable content — counts.

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Notes

  1. Greater Wichita Partnership. About us. http://www.gwedc.org/about_us/about_us.
  2. Weeks, Bob. Wichita economic development not being managed. https://wichitaliberty.org/wichita-government/wichita-economic-development-managed/.
  3. Siebenmark, Jerry. KGB to close Wichita call center by end of January. Wichita Eagle. Decenber 7, 2011. http://www.kansas.com/news/business/article1081923.html.
  4. Horwath, Bryan. NetApp cuts employees in Wichita. Wichita Eagle. March 2, 2016. http://www.kansas.com/news/business/article63559417.html.
  5. Rengers, Carrie. NetApp restructures, announces layoffs. Wichita Eagle. November 3, 2016. http://www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article112339362.html.
  6. Weeks, Bob. NetApp economic development incentives: all of them. https://wichitaliberty.org/wichita-government/netapp-economic-development-incentives-all-of-them/.
  7. Wenzl, Roy. Analyst presents sobering view of Wichita economy, community. Wichita Eagle, September 22, 2015. http://www.kansas.com/news/business/article36236142.html.
  8. For a view of the page as it looked on April 5, 2015, see http://web.archive.org/web/20150405131957/http://wichitachamber.org/news_room-wichita_accolades.php.