Voice For Liberty

Tag: Wichita city council

  • Wichita Mayor Carl Brewer, August 12, 2008

    Wichita Mayor Carl Brewer delivered these remarks after John Todd and I testified against the creation of a tax increment financing (TIF) district benefiting Wichita minister Kevass Harding. My remarks can be read here: Reverend Kevass Harding’s Wichita TIF District: A Bad Deal in Several Ways. John’s remarks are here: Testimony Opposing Tax Increment Financing for the Ken Mar Redevelopment Project.

    I took the time to transcribe the mayor’s remarks not only because I think Wichitans need to know more about his philosophy of the way government should work, but also because they reveal a few of the mayor’s beliefs that I found astonishing. The mayor appeared to be speaking informally, without prepared remarks.

    Commentary on the mayor’s remarks is here: Wichita Mayor Carl Brewer Saves Us From Covered Wagons. Video is at Wichita Mayor Carl Brewer on role of government and free enterprise.

    Wichita Mayor Carl Brewer: You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

    I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

    Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

    Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

    But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

    This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

    But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

    But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

    So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

    So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

    And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

    So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.

  • Testimony Opposing Tax Increment Financing for the Ken Mar Redevelopment Project

    Testimony of John Todd, opposing the formation of a tax increment financing (TIF) district, delivered to the Wichita City Council on August 12, 2008.

    Mr. Mayor and members of the Wichita City Council, thank you for allowing me this opportunity to speak before you today. My name is John Todd. I stand before you today as a citizen in opposition to the Establishment of a Redevelopment District, Tax Increment Financing for the Ken Mar Redevelopment Project. (District I)

    There are dozens of neighborhood shopping centers across Wichita that have a greater need for redevelopment than the Ken Mar shopping center that you are considering for public taxpayer assistance today.

    The question that needs to be answered today is, “What is the Proper Role of Government Relating to Economic Development Activity?” And the specific question the council needs to answer before granting public money for this project is: “Why is the Ken Mar shopping center being considered for public money, and not the dozens of similar shopping centers across our city, with particular emphasis on those dozens of centers possessing greater redevelopment needs than Ken Mar?”

    It is my understanding that the proposed Ken Mar TIF is $2.5 million dollars. A commercial real estate broker friend of mine advised me that in his opinion, the Ken Mar center redevelopment project would not work without the $2.5 million public cash infusion. My reply to this observation: 1. If the potential owners/buyers for Ken Mar have not closed on their purchase transaction of the shopping center, perhaps as part of their contract “due diligence” clause, they need to negotiate $2.5 million dollars off the purchase price of the Ken Mar center, and in the event they fail to obtain the lower purchase price, they need to either scale back their plans for the redevelopment of the center or to simply walk away from the project since the project is not economically feasible for them. 2. Or, if on the other hand, the current owners of Ken Mar paid $2.5 million dollars more than the shopping center was worth, what makes them immune from taking responsibility for this $2.5 million dollar error in judgment? And 3. If this City Council were truly acting as stewards of the public treasury, why would you even consider using public money to correct this alleged $2.5 million developer-problem?

    In a free-market economic system, private business enterprises should have the opportunity and the freedom to succeed and to enjoy the fruits of their success. By the same token, they should also have the freedom to fail and suffer whatever consequences that brings. Thousands of other businesses enterprises across our city play by these rules every day without the government parachute or the backing of the public treasury that is being considered for this private group. Why should the Ken Mar shopping center group be an exception to these rules?

    Please vote against the proposed TIF.

  • Wichita City Council’s misunderstanding of tax increment financing

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

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

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

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

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

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

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

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

    It is as simple as this.

  • Wichita Council Member Jeff Longwell: We Can, and Do, Read

    Wichita City Council Member Jeff Longwell, in the news article Little time to review Warren loan terms (July 1, 2008 Wichita Eagle), was reported as remarking “It’s unlikely many residents would read the full contract even if it had been made public earlier.”

    Mr. Longwell, many people in Wichita do read documents such as these. I think a better question is whether city council members read and understand these documents. This is from before Mr. Longwell’s time on the council, but in the article The Real Scandal at City Hall, I report how city council members are sometimes not aware of even the most basic facts about city affairs:

    … council members were described as being surprised upon learning that the industrial revenue bonds and property tax abatement awarded to a local business also included a sales tax break. How could they be surprised? The City of Wichita website contains a nicely-done page titled “Industrial Revenue Bonds” (located at http://www.wichitagov.org/Business/EconomicDevelopment/IRB) (This is the first result that appears when you use the wildly popular Google search engine and search for “Wichita IRB.”) The first link on this page is titled “IRB Overview: Industrial Revenue Bond Issuance in the State of Kansas,” and you don’t have to read very far before you come to the sentence reading “Generally, property and services acquired with the proceeds of IRBs are eligible for sales tax exemption.”

    (The city’s website has been rearranged a little since then. The new location for this page is http://www.wichita.gov/CityOffices/CityManager/Urban/EconomicDevelopment/IRB/.)

    Besides being wrong on whether people read documents like these, I think Mr. Longwell’s statement reveals an unfortunate attitude towards the people of Wichita. I don’t think he always felt this way, as earlier this year it was reported he “strongly believes in transparency in government.” (Rule seeks to stop leaks after private city council meetings)

    Mr. Longwell is correct in that the Old Town Warren Theater loan documents should have been released to the city council and the public earlier. Mr. Longwell could have shown us evidence of his belief in transparency by moving to delay yesterday’s council action until these documents could be read, digested, and debated.

  • Wichita Old Town Warren Theater Public Hearing Remarks

    From John Todd.

    Testimony I presented before the Wichita City Council on July 1, 2008 in opposition to the proposed Old Town Warren Theater LLC loan.

    The question before the council today relates to the proper role of government.

    I believe the role of government is that of acting as a non-partial judge from the sidelines, protecting the rights and property of all citizens, through the rule of law, and not acting as a participant in any activity, particularly economic, that places it in a partnership role with one group of citizens to the exclusion of all others. When government becomes an active participant in economic activity or acts as an agent for one party to the exclusion of other citizens, it abdicates its proper role of providing the legal framework and physical security needed for private economic activity.

    The dilemma our city faces today is a result of its participation in an economic activity that it should never have been involved in, in the first place. For starters, our city government needs to divorce itself from further involvement with the Old Town Warren Theater project for a number of reasons.

    Our city is not a bank, and the proposed loan being discussed today is an inappropriate role for city government.

    If the Old Town Theater group is facing financial problems, they need solve those problems without help from the public treasury. Based on what I have read about the principals in this group, I believe they possess the management talent and skills to succeed without public assistance.

    The beautiful thing about the free-market is the freedom for a business enterprise to succeed and enjoy the fruits of that success. By the same token, a business should be allowed the freedom to fail, and suffer whatever consequences that brings. Thousands of other businesses across our city play by those same rules every day without the government parachute or the backing of the public treasury that is being proposed for this private group. The Old Town Theater project owners should be no exception to these rules.

    I talk daily to other people in our city and have found no public support for the Old Town Theater loan, and, in fact, I have been surprised at the high level of outrage people are expressing towards this proposal.

    I request that you vote NO for this project. I believe, by voting NO, you will be exercising the will of your constituents and the public, and will be exercising the stewardship they expect from you as their elected officials.

    P.S. After a strong lecture from Mayor Carl Brewer about the economic advantages of public/private partnerships like Old Town, the council voted 6-0 to grant the Old Town Warren Theater loan with Council Member Jim Skelton abstaining from the vote.

    NOTE: I had the following material ready for presentation, but decided not to be too philosophical with the council so I did not present either.

    I believe a quote by 18th Century French economist Frederic Bastiat, is appropriate for today’s discussion when he was describing the socialism that permeated his native France when he said, and I quote: “The state is that great fiction by which everyone tries to live at the expense of everyone else.” I believe Bastiat would describe the work of today’s city council as legal plunder or the use of political power to redistribute wealth from others what they are unwilling to obtain through the voluntary exchange in the marketplace.

    To paraphrase a statement made by President Cleveland prior to 1900 when he was called upon to save a struggling orphanage in New York City during a severe economic crises. He said something to the effect, that “I cannot be a party to taking money (from the public treasury) from one group of citizens and give it to another group of citizens, no matter how worthy the cause, it is the responsibility of citizens to support their government, it is not governments responsibility to support its citizens.”

  • Remarks to Wichita City Council, April 1, 2008

    Following are remarks I delivered to the Wichita City Council, asking them to not approve tax increment financing (TIF) for a project in Wichita. The council approved the financing by a vote of six to one. Thank you to council member Paul Gray for his dissenting vote.

    Mr. Mayor and members of the Wichita City Council, I ask you to not approve this TIF financing request, and to cease this practice in the future.

    We need to allow markets to channel capital and investment to where people value it greatest. The profit and loss system provides that guidance.

    By asking for the TIF financing, developers are sending us a signal that without the special tax favor, their project would not be economically feasible. They evidently have judged that it would not be profitable. They must feel that they will not be able to sell or rent at prices that will cover their costs of developing this project.

    This means that proceeding with the project is investing capital somewhere other than its most-valued use. We know that because developers build other things in Wichita without receiving a subsidy, and they are able to earn a profit.

    Now this project may satisfy the political goals of some people who believe that not enough development is happening in their politically-desired part of town. But these people are not spending their own money to accomplish this goal.

    If these developers want to build something in this area, they need to figure out what will appeal to people, what will fill enough of a need, that the project is profitable on its own. That’s how we will know that this investment is wise. They won’t have to appear before governmental bodies seeking approval for their plans. They can just do it.

    That’s market entrepreneurship. It is the way that wealth is created. These developers, instead, are practicing political entrepreneurship, where they seek to please various governmental bodies, rather than satisfying consumers who express their desires through the mechanism of markets.

    This leads to a corrosive environment where nearly every week someone appears before this council requesting special treatment, that favor paid for by the rest of the the community. This is harmful.

    Supporters of TIF explain them in a way that makes it seem as though there is no cost involved in granting the subsidy. But there is. Why would these developers want them, and why would this council not grant them to everyone if there were no cost?

    I propose a pledge that this council could take that will help our community become aware of the cost of these subsidies, and will also alleviate some of the inequity. When the City of Wichita grants special tax treatment, it must reduce its spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.

  • Testimony on the Wichita New Communities initiative

    From John Todd.

    City of Wichita Mayor and Council Members
    455 N. Main
    Wichita, Kansas 67203

    Subject: Testimony in Opposition to Funding for the current New Communities Initiative Area (tract known as 67214 Target Area) or New Urban Renewal Target Area.

    Dear Mr. Mayor and City Council Members,

    My name is John Todd. I am a Wichita area real estate broker and developer, and I am here to speak as a private citizen. I speak in opposition to the city’s $250,000 Funding proposal for the current New Communities Initiative Area, because I believe this program in reality, represents the resurrection of the failed government Urban Renewal housing programs of the 1960-70’s.

    Several months ago I attended a public “kick-off” meeting for the New Communities Initiative program at the Hughes Metroplex Center (Wichita State University) presented by Mr. Richard Baron (McCormack Baron Salazar). Mr. Baron delivered a power point presentation touting his firm’s expertise in replacing failed government Urban Renewal “Public Housing” projects of the past like the one shown in the attachment market Exhibit “A”.

    Please take a close look at Exhibit “A”. When these types of Government housing projects of the past as shown on Exhibit “A” were built, they no doubt were sold to the taxpaying citizens by well meaning local public officials who saw a future vision (emphasis added) as to how their communities could solve their city’s blight problems, and at the same time provide “affordable housing” for the economically challenged people in their communities, and that the “collective good” (emphasis added) to be gained by projects such as these were worth the sacrifice of the individual property owners who were forced out of their homes or businesses to make way for these projects through the local government’s use of its eminent domain power. I believe the picture of the Public Housing project shown in Exhibit “A” speaks for itself regarding the failure of government in it’s attempt to socially-manipulate peoples lives by believing they knew what was best for people and by then mandating this view. The economic and social costs of these projects both private and public I suspect were staggering.

    Please take a close look at Exhibit “B” that is also attached that shows a modern day “Communities” (Urban Renewal?) project that I believe Mr. Baron’s company is developing in another city. The painted rendering of the project is beautiful, but how does a project of this nature fit in with the proposed New Communities Initiative Area known as the “67214 Target Area”? Here is my interpretation of the information that I gathered from Mr. Baron’s presentation at the Wichita State University meeting. Of course I would suggest the need for the City Council to verify this information for them selves before making a decision to endorse a project of this magnitude. I am of the opinion that projects of this nature involve a mixture of privately owned town homes with Section 8 rental subsidized units with a common area owned by some sort of non-profit organization with ties to city government and other groups, but safely outside the control of a policy making City Council. Financing of these types of projects relied heavily on (I suspect tax deductible) private gifts, and other government grants and subsidies (Or money which many groups view as “free money”.). I did not pick up on who paid and how much development fees or management fees would be, if any, or how much financial exposure the city might have since public money would be involved. Mr. Baron suggested that projects of this nature take considerable tract sizes and suggested that tract acquisition many times required the use of eminent domain.

    Before you consider promoting any public housing project(s) for the New Communities Initiative Area tract known as the 67214 Target Area, please take time to consider the following.

    Currently, there are approximately 41 homes listed in the South Central Kansas Multiple Listing Service as available for sale in the 67214 Target Area. Exhibit “C” shows pictures of four of those homes. All four homes exhibit pride of ownership signs, and with current financing options, could be purchased with estimated monthly payments ranging from around $250 to just over $500 per month with minimal buyer costs needed to close the transaction. I continually hear government and quasi-government housing connected staff people continually crying out about the need for “Affordable Housing”. Well folks, we have it!!! I hear about the need to clear “Blight”. Item #29 Repair or Removal of Dangerous & Unsafe Structures on today’s City Council Agenda lists several houses that are scheduled for upgrade or demolition some of which appear to be in the Target Area under discussion today. And, with the recent upgrade of the housing code, you have given city officials all the tools they need to deal with blight. The attached Exhibit “D” shows some of the new and newer homes in the 67214 Target Area. Perhaps the money spent upgrading the 21st Street Corridor and the new grocery store on 13th are beginning to pay off. And we absolutely don’t need for the people currently living in their “Affordable Housing” units in the Target Area worrying whether or not they are safe from the hand of eminent domain.

    The 67214 Target Area represents opportunity. There are vacant treed lots all over the area. In the early 1990’s I was personally involved in the building and marketing of new “Affordable” homes on approximately 175 vacant “in-fill” lots in Park City. I believe that this privately driven economic activity represents part of what everyone recognizes today as the Park City success story.

    I believe that people all across our great city want to participate in the American Dream of home ownership by owning their own home rather than ending up in their retirement years with a handful of rent receipts from a Section 8 program.

    Sincerely,

    John Todd

  • Tax increment financing in Wichita benefits few

    Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood.

    How does a TIF district work? The Wichita Eagle reported: “A TIF district doesn’t cost local governments any existing tax money. It takes property taxes paid on new construction that would ordinarily go into government coffers and redirects it to the bond holders who are financing the project.”

    In the present case, the value of the benefit the developer sought is estimated to be worth $3.5 million to $4 million. Whether this benefit is given at no cost to existing government, as The Wichita Eagle article implies, is open to debate. If the new development does not use any local government services, then perhaps there is no cost in giving the benefit. But if that’s true, we might ask this question: if the development does not consume any government services, why should it have to pay taxes at all?

    There is evidence that TIF districts are great for the developers — after all, who wants to pay taxes — but not so good for the rest of the city and county. The article “Tax Increment Financing: A Tool for Local Economic Development” by economists Richard F. Dye and David F. Merriman states, in its conclusion:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development — not a surprising finding. What about the rest of the city? Continuing from the same study:

    We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

    So TIF districts may actually reduce the rate of economic growth in the rest of the city.

    There’s also evidence that TIF districts are simply a transfer of wealth from the taxpayers at large to a privileged few. In the paper titled “Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth?” by Iowa State University economists David Swenson and Liesl Eathington, we can read this:

    There is indirect statistical evidence that this profligate practice [establishing TIF districts] is resulting in a direct transfer of resources from existing tax payers to new firms without yielding region-wide economic and social gains to justify the public’s investment.

    This analysis suggests that the enabling legislation for tax based incentives deserves revisiting. … there is virtually no evidence of broad economic or social benefits in light of the costs.

    In the present case in Wichita, the developer says that without the benefit the TIF provides, the project is not economically viable. This is the standard rationale given for the requirement of the TIF district. Without the TIF, the development would not take place.

    It may be true that this project in College Hill is not economically viable. If so, we have to wonder about the wisdom of investing in this project. More importantly, we should ask why our taxes are so high that they discourage investment and economic activity.

    It may also be that the developer simply wishes to gain an advantage over the competition by lobbying for a favor from government. As government becomes more intrusive, this type of rent-seeking behavior is replacing productive economic activity.

    There is one truth, however, if which I am certain: when businesses and individuals pay less tax, they have the opportunity to invest more. TIFs and tax abatements are tacit recognition that the cost of government is onerous and serves to decrease private economic activity and investment.

    Here’s a better idea: reduce taxes for everyone, instead of only for companies and individuals that are successful in extracting favors from our local governments.

  • Consider carefully costs of a new Wichita airport terminal

    As Wichita considers building a new terminal at its airport, we should pause to consider the effect an expensive new terminal would have on the cost of traveling to and from Wichita, and by extension, the economic health and vitality of our town.

    My reading reveals that airlines are starting to become alarmed at the high costs some airports charge airlines for using their facilities. A recent Wall Street Journal article (“Airports Start to Feel the Sting Of Airline Cost-Cutting Efforts” published on May 17, 2006) reads, in part:

    The same economic forces in the air-travel business that have created buy-your-own box lunches in coach and fully reclining seats for long flights in business class are now showing up in a split at airports. The split is creating tensions as cash-strapped airlines balk at paying for first-class airports. Air Canada, the main tenant of the new terminal in Toronto, says it can’t afford the high fees.

    Airports have long been considered economic-development tools for the communities that own them. Many, like Toronto, erected palatial terminals to showcase their cities and passed on the costs to airlines and passengers. Even as airlines have gone bankrupt, airport earnings have risen.

    Now, the combination of financial woes of traditional airlines and the explosion of low-cost competitors around the world is forcing big changes in airport design and operation. Airlines, which have already won concessions from employees, travel agents and suppliers, are now putting pressure on airports to cut costs and fees. And low-cost carriers have sparked the creation of bare-bones depots, like Schiphol’s “Pier H,” in Europe and Asia.

    “Many airport monopolies still operate in the dark ages. And our patience has worn out,” says Giovanni Bisignani, director general of the International Air Transport Association, the airline trade group that has spearheaded an attack on airport charges in Europe, Asia and the Americas.

    Closer to home, and very relevant to Wichita’s desire to attract additional low-cost carriers such as Southwest Airlines, we learn from the same article that Southwest is quite sensitive to the costs it faces:

    Denver International, which was attacked for its high fees when it opened in 1995, has since cut costs and reduced fees, winning back low-cost Southwest Airlines. And some airports, such as Schiphol and the Cologne Bonn Airport in Germany, have moved ahead by luring new airlines with low operating costs. In the low-margin airline world, a savings of a few dollars per passenger can turn an unprofitable flight into a money-maker, especially among discount airlines charging less than $100 per ticket.

    “Nowadays if you start to build a new terminal, you are no longer able to build a castle,” says Michael Garvens, chairman of the Cologne Bonn Airport, which opened a terminal for low-cost airlines in December 2004.

    We certainly don’t want to be placed in the position of Seattle, where Southwest cut its service there because of costs. From the article “Airport costs climb” from the Puget Sound Business Journal (Seattle) on March 5, 2004 we can read this:

    The $587 million cost of the South Terminal expansion at Seattle-Tacoma International Airport is driving away at least one of the very carriers it was intended to attract. … But Southwest Airlines in January cut its daily flights between Seattle and Spokane from eight to five, reducing its overall daily flights through Sea-Tac to 36. According to Southwest manager of properties Amy Weaver, the move was largely due to the airport’s rising per-passenger costs for carriers.

    Talking to some people and reading some remarks, it seems as though not many are too concerned about the costs of a new terminal, as it will be paid for by federal money and airline fees. But someone pays those federal tax dollars, and now we learn that airlines, especially discount carriers, are sensitive to the fees they must pay to use airports.

    The Wichita Eagle recently reported that Wichita airport officials have been talking with the airlines, and the airlines are “happy with the prospect of a new terminal.” That is directly contradictory to the reporting contained in the two articles cited above.

    Local business leaders tell us that we must have an airport that makes a good first impression for Wichita. A grand airport terminal is impressive until you realize who pays for such things. I have been in terminals in fine cities — Denver and Salt Lake City come to mind — where the gate area is quite spartan, being built from corrugated steel in the manner of a warehouse. And if I remember correctly, in Salt Lake City the concourse I used was not even sealed to the elements.

    In Cincinnati, Comair, part of the Delta network, has its own remote gate area. That building is plain in its construction, but worked very well. (As Delta and Comair no longer fly to this destination from Wichita, I guess it doesn’t matter now.) I appreciated these facilities for what appeared to be their concerted effort to hold down costs.

    In Wichita, we should remember that fewer passengers used our airport in 2005 than did in 2004. In 2006, each month’s traffic has been less than that for same month from last year. We are told not to worry about this, that air traffic is down nationwide, but the decline in Wichita is several times that of the nationwide trend.

    (From the ATA Monthly Passenger Traffic Report, enplanements nationwide are down 0.6% for the first five months of 2006, compared to the same months from 2005. In Wichita, enplanements for the first five months of 2006 are 284,848, compared to 300,169 for the first five months of 2005. That is a drop of 5.1%.)

    At the same time our airport traffic is rapidly declining, AirTran, the local discount carrier, is experiencing increased passenger counts, meaning that we are becoming increasingly dependent on a discount carrier. (For the first five months of 2005, AirTran’s share of traffic in Wichita was 6.7%. For the first five months of 2006, AirTran’s share is 10.6%.)

    As the articles cited above tell us, these low-costs carriers are very sensitive to the cost of using airports. AirTran may not be concerned, at least not regarding its cost in using the Wichita airport, as our local governments reimburse AirTran for its losses.

    Airport officials tell us that fixing what is wrong with our existing terminal will cost nearly as much as building a new terminal. It is difficult for me to believe this. We must find a way to hold down the costs that airlines and travelers face when flying to and from Wichita. Our current airport officials do not seem to agree.