Tag: Wichita city council

  • At Wichita city council, special pleading of selfish interests

    At yesterday’s meeting of the the Wichita City Council, a matter was presented to the council that provided an illustration of basic economic principles that are foreign to the council.

    A condominium homeowners association asked for special assessment tax financing to make repairs to the building. My remarks that I delivered at the meeting were based on my post In Wichita, waiving guidelines makes for bad policy.

    David M. Bryan, a Wichita attorney and resident of the building, represented the the homeowners association that is asking for the special assessment financing. He spoke after I did. His wife accompanied him to the podium.

    Bryan’s case for help was based on factors that — besides being irrelevant — show just what a fiasco this matter is. It also illustrates just how selfish these condominium owners are in expecting the city to bail them out of their problem.

    First, he says that he and the other condo owners represent one of the goals of downtown redevelopment. “We all took that leap of faith and bought the lofts” when the building was still under construction.

    He didn’t know what tuckpointing was when he moved in to this building, and he and the other residents didn’t know that this [the need for repair] was going to happen.

    He said that he thinks the building represents a sound and good investment in downtown redevelopment, and that the building is part of what the city council wants to accomplish.

    Conventional financing for these repairs would, Bryan said, require personal guarantees by all residents, and that would prevent the individual units from being sold unless the entire loan was paid off.

    (In my testimony, I made the point that the amount that each condominium owner needs to pay to fix the building is on the order of what it would cost to paint a conventional house of the same value as these units. There’s also a defect in the ownership structure of this building if there is no way to pay for repairs like the present situation, as things like this are foreseeable.)

    Council member Paul Gray, speaking from the bench, expressed concern that approval of this request sets a precedent for other condominium buildings in Wichita to make the same request that this building has made.

    In the end, council member Lavonta Williams made the motion to approve the financing. All members except Gray voted for it. Vice-Mayor Jim Skelton was not present.

    After the council voted, Mrs. Bryan gave Wichita economic development director Allen Bell a pat on the back, and Bell and Mr. Bryan shared a congratulatory handshake. You can see these things by attending the meetings in person.

    It appears that the city’s desire for downtown redevelopment is an unsustainable goal that can’t be maintained without continued subsidy. The message is this: When a downtown development gets in financial trouble, make a beeline to city hall. This was the case last year when the Warren Theater received a no- and low-interest loan from the city, propping up the city’s ill-conceived investment in a TIF district benefiting that theater.

    Recently we learned that rehabilitation of a downtown hotel is on hold because historic tax credits — that is, outright gifts to developers — are on hold because the state can’t afford to grant them.

    Now, buildings that need small repairs that can be deemed to be part of the city’s plan for downtown redevelopment are eligible for special assessment financing.

    I don’t think the council is aware of the corrosive effect of these special favors. No news media reported this story. It is a small amount of money that is involved in this case. This matter is emblematic, however, of an activist city council and city staff who believe they can direct economic investment in Wichita better than its citizens can on their own.

    While listening to Bryan make his case, I thought this is an illustration of the lessons Henry Hazlitt taught us in his classic work Economics in One Lesson. The first chapter may be read at One Lesson, which I excerpt here:

    Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics, or medicine — the special pleading of selfish interests.

    While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. …

    In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups.

  • In Wichita, waiving guidelines makes for bad policy

    Remarks to be delivered to the August 18, 2009 meeting of the Wichita City Council.

    Mr. Mayor, members of the Wichita City Council,

    I am here to ask you to deny the request for special assessment financing for the Lofts at St. Francis homeowners association to make repairs to their building.

    I’ve spoken to this council about how the facade improvement program, in general, is bad public policy. In this case, it’s bad public policy compounded by the waiver of principles or guidelines that this council recently set in place.

    I realize that special assessment financing means that the city is not making a grant of money to the homeowners association. Instead, the city is making a loan, which is required to be repaid over time.

    What concerns me about this situation is that two guidelines in the city’s facade improvement program must be waived for this project to obtain special assessment financing.

    The first is the private investment match. This is designed to ensure that the property owners have “skin in the game” and that the taxes will be paid back.

    Here, the city is proposing that since the building’s owners have made a past investment in this property, there’s no need to require a concurrent investment. It hardly needs to be noted that anyone who has purchased property has made a past investment in that property.

    Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the city’s report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”

    So the city proposes to waive this requirement as well.

    There seems to me to be a defect in the manner of ownership of this building. While the homeowners association and the individual condominium owners might not have anticipated that repairs would be needed so soon after the building’s opening, they must have contemplated that repairs and maintenance — to either exterior or interior common areas — would be needed at some time. How does the association plan to pay for these?

    So what will happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”

    Isn’t that what private property owners do: fund the cost of repairs to their property?

    According to the Sedgwick County Treasurer’s office, the appraised values of these condos range from $103,000 to $310,200, with an average value of $201,943. The maximum amount being added to each condo’s assessment is $4,022, although I have learned that the actual amount may be closer to $3,000.

    That’s along the lines of what it might cost to perform a few repairs and paint a house that’s worth what these condos are worth. So I think it’s hard to make the case that these property owners can’t afford to make these repairs on their own without a loan from the city.

    Furthermore, if the goal of the facade improvement program is to provide an incentive for property owners to fix up their buildings, I would submit that such incentive is not necessary in this case. This building is a valuable residential property, and the homeowners have a strong incentive to maintain the integrity and value of their property.

    Mr. Mayor and members of the council, let’s ask these owners do just what thousands of homeowners in Wichita do every year: take responsibility for the maintenance of their own property without looking to city hall for help.

  • Travel should be the first Wichita expense to be cut

    At tomorrow’s meeting of the Wichita City Council, council members have this item on their agenda:

    “Approval of travel expenses for Council Member Janet Miller and Kelly Harper, Wichita Area Sister Cities President, to attend the International Cities Conference in Paris, France and the Sister Cities Loire Festival in Orleans, France, September 21-27.”

    The city council office didn’t have a specific amount that the council is being asked to approve, and it’s possible that the city might not pay for Harper’s expenses.

    Still, travel to France for nearly a week, even for one person, is expensive.

    Whatever the amount is, it is a small amount when considered next to the magnitude of the city’s entire budget.

    But when people are losing their jobs and the city is cutting its budget, expenses like this are highly symbolic.

  • Wichita special assessments for repairs is bad policy

    Lofts at St. Francis, Wichita, Kansas

    At Tuesday’s meeting of the Wichita City Council, a privately-owned condominium association is seeking special assessment financing to make repairs to its building. In order for the association to succeed in its request, the council will have to waive two guidelines of Wichita’s facade improvement program.

    Special assessment financing means that the cost of the repairs, up to $112,620 in this case, will be added to the building’s property taxes. Actually, in this case, to each of the condominium owners’ taxes. They’ll pay it off over the course of 15 years. (A conversation with the president of the homeowners association brought out the possibility that the actual assessment may be in the neighborhood of $75,000.)

    So the city is not giving this money to the building’s owners. They’ll have to pay it back. The city is, however, setting new precedent in this action.

    Special assessment financing has traditionally been used to fund infrastructure such as streets and sewers, and new infrastructure at that. The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if the building is located in one of the politically-favored areas of town.

    By using special assessment financing in this way, the city seeks to direct investment towards parts of town that it feels doesn’t have enough investment. This form of centralized government planning is bad public policy. The city should stop doing this, and let people freely choose where to invest.

    Besides this, two guidelines in the city’s facade improvement program must be waived for this project to obtain special assessment financing.

    The first is the private investment match. This is designed to ensure that the property owners have “skin in the game” and that the taxes will be paid back.

    Here, the city is proposing that since the building’s owners have made a past investment in this property, there’s no need to require a concurrent investment. It hardly needs to be noted that anyone who has purchased property has made a past investment in that property.

    Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the city’s report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”

    So the city proposes to waive this requirement as well.

    There seems to me to be a defect in the manner of ownership of this building. While the homeowners association and the condominium owners might not have anticipated that repairs would be needed so soon after the building’s opening, they must have contemplated that repairs and maintenance — to either exterior or interior common areas — would be needed at some time. How does the association plan to pay for these?

    So what will happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”

    Isn’t that what private property owners do: fund the cost of repairs to their property?

    According to the Sedgwick County Treasurer’s office, the appraised values of these condos range from $103,000 to $310,200, with an average value of $201,943. The maximum amount being added to each condo’s assessment is $4,022, although the actual amount may be closer to $3,000.

    That’s along the lines of what it might cost to perform a few repairs and paint a house that’s worth what these condos are worth.

    Let’s ask that these owners do just what thousands of homeowners in Wichita do every year: take responsibility for the maintenance of their own property without looking to city hall for help.

    Lofts at St. Francis Agenda Report 2009-08-18

  • Wichita arts funding plan passes

    On a five to zero vote, the Wichita City Council has passed a revised arts funding plan. The plan may be viewed at the end of this article.

    Speaking for the plan, former Wichita City Council member and Arts Council Board Member Joan Cole spoke in favor of arts funding. She promoted the financial return on investment for these public taxpayer dollars spent supporting arts organizations. As I’ve shown in my post Economic Fallacy Supports Arts in Wichita, Cole is relying on faulty economic analysis.

    She also spoke of the benefit that Wichitans receive from the artistic and cultural events and activities. I wonder how she knows that? In free markets, where people are allowed to decide where to spend their leisure and entertainment dollars, we know exactly what types of events people want. They vote with their spending.

    But when government takes tax money and lets a commission composed of people like Cole decide how to allocate and spend money, do we have any assurance that it’s spent the way people want it spent? Of course not.

    The problem — at least to some — is that the way a lot of people want to spend their money isn’t the way that Cole and her fellow highbrow board members feel it should be spent. But they shouldn’t count.

    Cole mentioned that “attendance has increased at a number of these venues this year.” She seemed surprised that this happened — but acknowledged that the recession may be the cause, as people stay in Wichita rather than travel for vacations.

    Wichita would do better to stop funding arts and let people spend money the way they want. Each person can choose just the right amount and mix of arts and culture for them. Taxation and a spending commission won’t be necessary.

    Other coverage of this issue:

    Government Art in Wichita “‘Government art.’ Is this not a sterling example of an oxymoron? Must government weasel its way into every aspect of our lives?”

    Economic Fallacy Supports Arts in Wichita “The single greatest defect in this study is that it selectively ignores the secondary effects of government spending on the arts.”

    Let Markets Fund Arts and Culture “… if the government would stop funding arts, there would be no need for government-mandated performance measures, and the outcomes that occur would be precisely what people really want.”

    How to Decide Arts Funding “There is a common tendency to judge ‘highbrow’ culture — art museums, the symphony, opera, etc. — as somehow being more valued than other culture. But what people actually do indicates something different. When people spend their own money we find that not many go to the piano recital, the symphony, or the art museum. Instead, they attend pop, rock, or country music concerts, attend sporting events, go to movies, eat at restaurants, rent DVDs, and watch cable or satellite television. I’m not prepared to make a value judgment as to which activities are more desirable. In a free society dedicated to personal liberty, that’s a decision for each person to make individually.”

    Arts Funding in Wichita Produces Controversy “… there is a very simple way to decide which arts and cultural organizations are worthy of receiving funds: simply stop government funding. Let the people freely decide, though the mechanism of markets rather than government decree, which organizations they prefer.”

    (This is a Scribd document. Click on the rectangle at the right of the document’s title bar to get a full-screen view.)

  • Wichita Local Government 101 announced

    Here’s an announcement of an event that I hope is just the start of an ongoing operation.

    Wichita Area Chapter Meeting of Americans For Prosperity
    Monday July 6, 2009 and Tuesday July 7, 2009

    Topic: Local Government 101: Learn how to get involved in Wichita city government and how to influence public policy as a citizen activist.

    First meeting:
    7:00 p.m. – 8:30 p.m., Monday, July 6, 2009
    Americans for Prosperity meeting room
    800 E. 1st, Suite 401, (in Old Town), Wichita, Kansas 67202
    (Northeast corner of First and Mead Streets. For a Google map, click here.

    The first meeting is followed by this event:
    Attend a Wichita City Council Meeting
    9:00 a.m. – 11:30 a.m., Tuesday, July 7, 2009
    Wichita City Hall, 455 N. Main, Wichita, Kansas 67202
    (Southwest corner Main and Central. For a Google map, click here.

    Then, lunch at Mike’s Steakhouse (Private Meeting Room)
    11:45 a.m. – 1:00 p.m.
    2131 S. Broadway, Wichita, Kansas 67211
    For a Google map, click here.
    Menu: Individual choices off the menu with individual tickets plus gratuity.

    Please RSVP to: either John Todd, Wichita AFP volunteer coordinator at john@johntodd.net, (316) 312-7335 cell, or Susan Estes, AFP Field Director, Kansas at sestes@afphq.org, (316) 269-4170.

    Attendees will participate in an interactive presentation of the inner workings of Wichita City Government. You will learn how to discover the secrets hidden in agendas, how to prepare for a meeting, how to foster constructive relationships with elected and non-elected officials and learn ways to influence public policy. Part One is an evening session at the Wichita office from 7:00-8:30 on Monday, July 6. In this class we will examine a typical Wichita City Council Agenda in conjunction with a video recording of the actual meeting.

    Part two’s session will begin at Wichita’s City Hall to observe a City Council meeting from 9:00 a.m. until 11:30 a.m., followed by a luncheon discussion on at Mile’s Steakhouse meeting room from 11:30 a.m. until 1:00 p.m.

    The Kansas Chapter of Americans for Prosperity (AFP-KS) is committed to advancing every Kansan’s right to economic freedom and opportunity. AFP-KS is an organization of grassroots citizen leaders who engage in spreading the message of fiscally responsible government, free market ideals and regulatory restraint to policymakers on the local and state levels.

  • In Wichita, special assessment financing gone wild

    At today’s meeting of the Wichita City Council, a privately-owned condominium association is seeking special assessment financing to make repairs to its building.

    Special assessment financing means that the cost of the repairs, $112,620 in this case, will be added to the building’s property taxes. Actually, in this case, to each of the condominium owners’ taxes. They’ll pay it off over the course of 15 years.

    So the city is not giving this money to the building’s owners. They’ll have to pay it back. The city is, however, setting new precedent in this action.

    First, special assessment financing has traditionally been used to fund infrastructure such as streets and sewers, and new infrastructure at that. The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if your building is located in one of the politically-favored areas of town. Not all buildings will qualify.

    By using special assessment financing in this way, the city seeks to direct investment towards parts of town that it feels doesn’t have enough investment. This form of centralized government planning is bad public policy. The city should stop doing this, and let people freely choose where to invest.

    This case, however, is an even more egregious example of the city’s desire to control where and how people invest.

    The agenda report for this item details two exceptions to the city’s facade improvement program that must be waived for this project to obtain special assessment financing.

    The first is the private investment match. Here, the city is proposing that since the building’s owners have made a past private investment in this property, there’s no need to require a concurrent investment.

    Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”

    So the city proposes to waive this requirement as well.

    What would happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”

    Isn’t that what private property owners do: fund the cost of repairs to their property?

    Today’s action, if approved, would set a public hearing on July 7.

    If the city council approves this project — and I suspect it will with no dissenting votes — we must now realize that Wichita has a mayor, city council, and city staff that are willing to throw any principle aside for political expediency.

    By the way, the developer of this building is Real Development. Its principles, particularly Michael Elzufon, are familiar to the mayor and some council members as campaign donors. Its public relations executive has been the campaign manager for the mayor and a city council member.

    In the past I’ve referred to Real Development as “crony capitalists,” defined in Investopedia this way: “A description of capitalist society as being based on the close relationships between businessmen and the state. Instead of success being determined by a free market and the rule of law, the success of a business is dependent on the favoritism that is shown to it by the ruling government in the form of tax breaks, government grants and other incentives.”

    Elzufon took exception to that characterization. After asking for this special assessment financing project and its waivers, it fits even better.

    (This is a Scribd document. Click on the rectangle at the right of the document’s title bar to get a full-screen view.)

    Petition to Renovate Building Facade in the Core Area 2009-06-23

  • Faust-Goudeau’s concern selective

    In today’s Wichita Eagle, Oletha Faust-Goudeau, a Democratic member of the Kansas Senate representing parts of north-central and northeast Wichita, writes this in a letter to the editor:

    I would like to commend Mayor Carl Brewer and the Wichita City Council for having the courage to vote down a rate increase for water and sewer charges for customers in our city (“Water rates to hold steady,” June 17 Local & State). As we continue to face economic down times, I am very concerned about our senior citizens and people with disabilities who are on fixed incomes and struggling to make ends meet. This increase would have certainly added an additional financial burden for them in paying utility bills.

    The proposed rate increase Faust-Goudeau refers to was in the amount of $2.00 per month.

    I suppose it’s admirable that she’s looking out for the interests of her constituents in this matter. But her concern is selective.

    The problem is that Faust-Goudeau voted against the expansion of the Holcomb Station coal-fired electricity generating plant. Her votes mean that Kansas would have to rely on wind power backed by natural gas, which is much more expensive than relying on electricity generated by coal.

    Wind power is very expensive, despite being heavily subsidized by the federal government through the production tax credit.

    It’s so expensive that Westar, the electrical utility that serves Wichita and Faust-Goudeau’s constituents, has had to ask for several rate increases recently. The cost of wind power was cited in some of the requests.

    One of these rate increases was estimated to add $10 per month to the cost of electricity for the average house.

    Part of the reason for the water department’s rate increase request is to fund capital improvements the department needs to make sure it can continue to deliver water now and well into the future.

    Paying much higher electric bills just so we can build more windmills to solve a problem that doesn’t exist, and even if it did exist, can’t be solved with windmills in Kansas: that’s a burden that no one should have to pay.

    Not even Faust-Goudeau herself, no matter how she votes in the Kansas Senate.

  • Wichita water economics

    This week the Wichita City Council declined to raise the fixed portion of customers water bills by $2.00 per month. Today, Wichita Eagle editorial writer Rhonda Holman praises the council for avoiding an illogical water-rate increase. Is she and the city council right on this matter?

    The problem Wichita faces lies in the cost structure of water treatment and delivery. One source estimated that 70 to 80 percent of the costs of a city’s water supply system were fixed, or quasi-fixed, costs.

    These fixed costs don’t vary with the amount of water demanded by customers, at least not in the short run. But the city charges for water based primarily on the amount that customers use. So when demand is low, revenue drops rapidly, but the water department’s costs decrease very little. That’s the source of the problem.

    There is a fixed component to customer’s water bills. One solution would be to increase that fixed charge and drop the cost of a gallon of water. That would make the water department’s revenue less variable. This pricing formula would more accurately reflect the department’s cost structure.

    In retrospect, it appears that the city’s campaign to get people to conserve water has been, to put it kindly, a waste of resources. We’ve conserved — although nature has been the primary force behind this — but we still have to pay. Just because the city council doesn’t want to raise water bills now, someone is still going to have to pay.

    The water department is in control of its fixed costs over the long term, however. The growing demand for water over the long term is what leads it to make capital investment in its plant. Paying for these projects (fixed costs) by relying on revenue from the usage of water (variable revenue), as we now see, is problematic. The solution is to realize that these capital investments are not driven by daily or even yearly usage. Customers should pay for these capital improvements, then, through a fixed charge.

    An alternative would be to charge new connections to the water system a fee that helps pay for the capital investment necessary to expand the water supply. As a matter of fact, the department charges a “Water Plant Equity Fee” just for this purpose. Currently this fee is $1,520. (This is in addition to a fee of $850 for tapping into a water main and installing a meter.) Perhaps the equity fee needs to be raised.

    It appears that it is the desire of the city council to pay for capital improvements to the water system through a way other than raising the fixed portion of water bills. The net effect, whatever the city does, will still be felt by citizens as an increase in the cost of providing water. It would be best if this cost was realized as close as possible to its source, which is the water bill.

    Hopefully the city council will do something to recognize this, regardless of whether Rhonda Holman will support them.

    Here are comments left to this post that were lost and then reconstructed:

    Charlotte: You don’t fully understand. The city water dept. needs this money coming in to pay for their ASR project–which is located up by Burrton along the Arkansas River. They did one part of the project and now they want to do more. ASR, Aquafier S—? Recovery is taking the dirty water out of the Arkansas River when it gets up after a rain, running it through a big above ground filter that creates sludge (which they sell) and then pumping that (supposedly clean water) down into the Halstead Equas Bed. I am not thoroughly convinced that the water they are putting into the clean Equas Bed is all that clean. They say we are drawing water out of the Equas Bed faster than this ASR is putting it back in. They say the city needs to do this for economic development.

    I replied that the aquifer recharge project is an example of the type of capital improvements to plant that I was referring to.