Tag Archives: Wichita city council

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.

Wichita City Council Meeting, April 19, 2005

Some quotes and my remarks from the April 19, 2005 meeting of the Wichita City Council, where the AirTran subsidy was considered. Representatives from Delta attended and spoke.

Allen Bell, Economic Development Director for the City of Wichita:

Previous contracts had a dollar amount cap on them. The new contact, we refer to it as a no-cap contract. There is not, in the terms of the agreement, a specific dollar amount that is the not-to-exceed amount. In place of that there is a termination clause that allows the City to terminate its contract with 75 days notice for whatever reason. And the reason, of course, the major reason, would be that we know that within that 75 days, we will deplete the funds that the City believes is appropriate to spend on this.

I was startled to hear this information, that the new contract has no dollar cap, as this has not been, in my memory, reported. It has been reported that AirTran sought a no-cap contract, but that Wichita would not agree to that. But it turns out that the city has agreed to what, in effect, is a no-cap contract. Yes, I believe Mr. Bell when he says that Wichita can cancel the contract, with notice, if the city believes it will spend more than the $2.5 million it has committed to. I would submit, however, that if the City spends the $2.5 million and realizes it needs to spend more to keep AirTran in town, the City Council would vote to do so. Therefore, the no-cap contract is in effect.

Councilmember Schlapp extracted an admission from the Delta representative that Delta is not profitable on the Wichita route now, but they believe they will be soon. Ms. Schlapp concluded that there is no need, then, for a subsidy to Delta.

Mayor Mayans said we have been discriminated against, rate-wise.

Mayor Mayans: “Many of us, actually, are opposed philosophically to government interventions, because we feel that sometimes tilts the playing field.” The Mayor says one thing, but acts in a different way. What good is it to have a philosophical belief if it doesn’t guide your actions?

Mayor Mayans and the Delta representative disagreed on who made telephone calls to whom and at what time. (Mayor Mayans: “So you didn’t call me back!” “Communications is a two way street!” Delta: “My recollection of it differs slightly from yours.” “I don’t recall it was my responsibility to get back to you.”) It is disheartening to realize that major public policy decisions may be made based on incomplete information, because someone didn’t get a telephone message.

Councilmember Martz:

“I guess to me, when I look at competition, if you’re losing money, then you ought to raise your rates enough so that you’re not losing money.”

“I’m a firm believer in competition.”

“I would prefer not having any financial help from the city, but rather through pure competition, all carriers reduce their rates to a level that they number one, can make a profit, at the same time make it economical for the citizens of the whole state of Kansas to be able to fly in and out of Wichita …”

Like the mayor, Mr. Martz says one thing but acts in a different manner. His advice to airlines on how to set their fares is misplaced. We have to assume that businesses act in their best interests, and let it go at that.

Sam Williams, Chairman of Fair Fares, who evidently is so well-known to Council members that he doesn’t introduce himself when he started to speak:

“You know, Kansas in 1861 became a very important state in the history of this country, just before we went into the great dark area of the civil war. You know, we were a key state. What we did at that time had a lot to do with what happened and where we went from there. I would submit that little old Wichita, Kansas is doing that to the airline industry right now. Because of your vision, you are looking at different ways to bring fair pricing in an industry that is kind of broken, in getting them to look at themselves, us to look at ourselves, and how can we partner together to do this. Kansas again is a key, integral part of a change in this country.”

First, to equate our state’s role in the civil war with subsidizing an airline is ludicrous. Second, I feel very sad that Kansas may become the leader in subsidies, and that business leaders applaud this. Mr. Williams, I would ask you if you would welcome a governmental body deciding whether the rates that your business charges are fair, and if not fair, subsidizing your competitor?

Poetry: Welcome New Council Members

Contributed by Kenneth Kindler


WELCOME NEW COUNCIL MEMBERS

I AM OLD AND SICK AND GETTING GRAY
I DON’T KNOW WHERE I WILL GET THE MONEY THAT THE CITY WANTS ME TO PAY.

I WONDER ABOUT THIS TOWN THAT WE LIVE IN.
WHERE THE MAYOR SPENDS HIS TIME DOWN IN OLD TOWN FIGHTING SIN.

WE SUBSUDIZE A AIRLINE THAT MANY OF US CANNOT AFFORD TO FLY.
WE HAVE SPENT MILLIONS DOWNTOWN, I WONDER WHY.

HOW MANY OF US CAN AFFORD TO PAY
FOR PLACES THAT ONLY A FEW CAN PLAY.

DO WE NEED A DOWNTOWN ARENA?
A WATER WALK.
NOW WE ARE GOING TO SELL CENTURY II OR IS THAT JUST TALK.

OUR LEADERS HAVE HAD MANY MONEY LOSING SCEMES IN THE PAST.
EXPLORATION PLACE AND THE ICE RINK WERE A COUPLE
BUT THEY WERN’T THE LAST.

WHEN WILL IT STOP THIS INSANE PLAN
TO EMPTY OUR POCKETS AS FAST AS THEY CAN.

WE HAVE BEEN BULLYED, LIED TO AND RAN INTO THE GROUND.
NOW IS THE TIME FOR US TO REBOUND.

SO COUNCIL MEMBERS WE WANT YOU TO KNOW
IF THIS KEEPS UP YOU ARE GOING TO GO.

SO NEW MEMBERS WE HOPE THAT YOU WILL TAKE HEED
AND PUT YOUR COMMUNITY AHEAD OF YOUR GREED.

Kenneth Kindler

Open letter to Wichita City Council regarding AirTran subsidy

January 24, 2005

Dear Councilmember:

I am writing to express my concern about the upcoming renewal of the subsidy being paid to AirTran Airways. You may recall that I appeared before the Council last May and spoke in opposition to the subsidy. Since then I have learned more about the Fair Fares program.

As an example, Mr. Troy Carlson, then Chairman of Fair Fares, wrote a letter that was published on September 16, 2004 in the Wichita Eagle. In that letter he claimed $2.4 billion economic benefit from the Fair Fares program ($4.8 billion for the entire state). I was curious about how these figures were derived. I learned that the basis for them is a study by the Center for Economic Development and Business Research at Wichita State University that estimates the economic impact of the airport at $1.6 billion annually. In this study, the salaries of the employees of Cessna and Bombardier, because these companies use the airport’s facilities, are counted as economic impact dollars that the airport is responsible for generating.

To me, this accounting doesn’t make sense on several levels. For one thing, if we count the economic impact of the income of these employees as belonging to the airport, what then do we say about the economic impact of Cessna and Bombardier? We would have to count it as very little, because the impact of their employees’ earnings has been assigned to the airport.

Or it may be that someday Cessna or Bombardier will ask the City of Wichita for some type of economic subsidy, and they will use these same economic impact dollars in their justification. But these dollars will have already been used, as they were attributed to the airport.

My primary opposition to the AirTran subsidy is based on the superiority of free markets to government subsidies. But I believe that if the Council should consider a subsidy, it should have sensible information at its disposal. The arguments the Fair Fares supporters make seem to be based on an overextended assessment of the airport’s economic impact.

I have written more about this in on my website “Voice for Liberty in Wichita” at wichitaliberty.org.

Sincerely,

Bob Weeks

Remarks to City Council, May 11, 2004, Regarding AirTran Airways Subsidy

I delivered these remarks to the Wichita City Council as they were preparing to vote on extending AirTran Airway’s subsidy for another two years. The extension passed with only one dissenting vote.

Mr. Mayor, Members of the Council:

I speak today in opposition to the continuation of the subsidy the City is paying to AirTran Airways.

There are several reasons why I believe this subsidy should not be continued. The primary reason is that the subsidy, since it is paid to one company and one company only, is not fair to the other companies. Yes, it is true that fares are lower. But is that a legitimate reason to enrich one company at the expense of others?

If creating an environment of unfair competition is good and correct, why should we not do this in other markets?

If we feel that gasoline prices are too high, why not select a chain of gasoline stations and pay it a subsidy so that it could lower its prices?

If we feel that a chain of grocery stores has too much market power and their prices are too high, why not create and subsidize stores to compete with them?

If we feel that the commissions that real estate companies charge are too high, why not pay one of Wichita’s major firms a subsidy so that they could reduce their commissions?

Let us all hope, then, that we do not find ourselves running, or being an employee of, a business whose prices the City believes are too high.

But the situation is even worse. Through the Fair Fares program, the City has organized the potential customers of the subsidized business to ensure that they purchase from it. For the companies that pledged to Fair Fares: How would they feel if the government started a public body for the purpose of organizing their customers, and then used its powers of persuasion to compel them to buy from a competitor at the same time the City is subsidizing the competitor?

All of this is in direct opposition to the American principles of limited government, individual liberty, and fair markets.

The distortion of the market that the subsidy creates has another aspect: By creating an environment of unfair competition, we make it unlikely that any airline will consider starting service to Wichita unless they too receive a subsidy.

If the Council feels that we must subsidize an airline, consider this alternative: why not subsidize one of the other established airlines, one that that flies to many destinations? Or, why not rotate the subsidy every year to a different airline? After all, if fares can be lowered if any airline reduces their fares, it shouldn’t matter which airline does it.