Tag Archives: Wichita city government

Why Wichita may not have the workforce

If Wichita-area companies can’t fill jobs, the declining labor force may be the reason. Who is responsible?

The Chung Report has a recent article noting the low unemployment rate in Wichita. That may make it difficult to fill jobs: “Wichita also has a low unemployment rate, which has seen steep decline in the past five years and now sets at 3.9 percent, below the national average of 4.1 percent. So even if companies are dead set on hiring, do we have the available workforce?” 1

It’s a useful article. But where it could be better, especially when discussing how Wichita companies will find workers to fill anticipated new jobs, is to note the shrinking Wichita labor force.

Here is a table of data for the Wichita MSA from the Bureau of Labor Statistics Local Area Unemployment Statistics (LAUS) program. 2 It is part of the Bureau’s Current Population Survey (CPS), which is a “monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics.” 3

I chose the year ending January 2011 as a comparison point, as it is near the low point of the great recession. Since then, the unemployment rate has fallen greatly, and is just half the rate of 2010.

But that isn’t the total story. It isn’t even the most important part of the story. Since the unemployment rate is a ratio, it has two moving parts, specifically the number of unemployed people and the number of people in the labor force. (The labor force, broadly, is the number of persons working plus those actively looking for work.)

It is possible that the unemployment rate falls while the number of people employed falls or rises slowly. This is the general trend in Wichita for the past seven years or so. The nearby table illustrates this. The labor force has fallen, and by a lot, while employment growth has been modest.

In fact, of the changes, we can say that 35.2 percent of the change in the unemployment rate is due to new jobs, while 67.8 percent of the change is due to a smaller labor force.

So when Wichita leaders ask “Do we have the workforce?” the answer might be no. The next question ought to be “Why not?”

Our leaders are quick and eager to take credit for economic development gains. But what about the shrinking labor force caused by the many of the same leaders and their policies?

As the proverb says, “Success has many fathers, while failure is an orphan.”


Notes

  1. The Chung Report. Predicting Future Jobs. Available at https://thechungreport.com/where-are-all-the-new-jobs/.
  2. Bureau of Labor Statistics. Local Area Unemployment Statistics (LAUS) program. Available at https://www.bls.gov/lau/.
  3. Bureau of Labor Statistics. Current Population Survey. Available at https://www.bls.gov/cps/.

Project Wichita, remember Visioneering Wichita

As Project Wichita gets ready to gather information and set goals, let’s be aware that we’ve done this before, and not long ago.

Project Wichita is a new initiative to do something about the future of Wichita. I hope it works. But we’ve been down this road before, and I don’t know of anything created that has been of lasting value.

That past effort was Visioneering Wichita. I’d supply a link to its website, but the site went stale from lack of updates. Eventually it was abandoned, although its remnants may be found at archive.org. (Visioneering Wichita does have a Facebook page, although it hasn’t been updated for eight years.)

Here’s one of the goals that Visioneering Wichita created for the city:

Income Growth: The Wichita MSA must increase its focus on those non-manufacturing job sectors that generate higher pay. Since 2002, the Wichita per capita income as a percent of the United States per capita income has slowly increased, and in 2006 and 2007, the value exceeded 100%, for the first time since 1987.16 In spite of the recent uptick in Wichita’s per capita income as a percentage of the United States, it is expected that it will continue the longer term decline c until: a) the decline in manufacturing jobs stops b) the gap between the United States and Wichita in non-manufacturing earnings per job begins to decrease and c) the gap in minority income is decreased. 1

Charts from Visioneering Wichita, May 2009. Click for larger.

Per Capita Personal Income, Wichita and Visioneering Peers. Click for larger.
I’ve gathered data on per capita personal income through 2016, the latest year for a full year of data, and prepared charts similar to those Visioneering used. Wichita per capita personal income continues to be lower than the cities identified as Visioneering peers, except for Oklahoma City. In fact, Wichita per capita personal income was lower in 2016 than in 2014.

Wichita and United States Per Capita Personal Income. Click for larger.
Comparing Wichita to the nation, we see that Wichita took a downturn the past few years.

Personal Income, Wichita and Visioneering Peers. Click for larger.
Per capita measures, while useful, are not without caveats that need to be understood and considered. For example, if half the people of Wichita moved to other cities, the per capita income would not change if the income of those who left was evenly distributed compared to the original distribution.

Staff of the Visioneering Wichita project used to provide updates on these statistics from time to time. The last update provided to officials that I can recall was in 2013.

Wichita civilian labor force through January 2018. Click for larger.
Speaking of moving from Wichita, one of the things our region needs to address is the shrinking labor force. Data from the Bureau of Labor Statistics shows that the Wichita labor force is on the decline, while it is rising for the nation.

Of the declining labor force, Wichita government and civic leaders use this in two different, and conflicting, ways. First, the declining labor force means that even though job growth is very low, the unemployment rate has dropped, and by a lot. This improved unemployment rate is trumpeted by politicians and bureaucrats. Second, we see concern that Wichita may not have the workers necessary to fill jobs in expanding companies like Spirit Aerosystems. This is used to promote increasing spending on incentives and training infrastructure.

Wichita manufacturing jobs, through January 2018. Click for larger.
By the way, the Visioneering report mentioned the decline in manufacturing jobs. The data shows that since the end of the Great Recession, the number of manufacturing jobs in the Wichita area is slowly declining, while rising for the nation at the same time.

Perhaps the best thing Project Wichita could do is to reveal the truth about the Wichita economy and the economic development infrastructure we’ve built. The Chung Report has done a bit of this. But I don’t think our civic leaders act as through they know and understand. It is against their self-interest to admit that what they’ve done hasn’t been working.


Notes

  1. Visioneering Wichita Revised Vision Document, May 2009.

Free standing emergency department about to open in Wichita

A project in Wichita received substantial subsidy from taxpayers. How have public policy issues been reported?

Free standing emergency rooms are a recent trend in medical care. This is a facility that has equipment, personnel, and capability like a traditional hospital emergency room, but is not connected to a hospital. The first in Wichita is nearly ready to open, on Twenty-first Street east of Webb Road.

Regarding the Wichita facility, the Wichita Business Journal quoted Malik Idbeis, chief information officer for Kansas Medical Center: “We see a lot of patients from the northeast side of Wichita. We thought it’d be nice to bring our style of care closer to them. There are a lot of neighborhoods and families in that area.” 1

Here, the spokesman is promoting that facility is located convenient to (affluent) families in northeast Wichita. That wasn’t the argument made to the Wichita City Council last year when the facility applied for tax relief through the Industrial Revenue Bonds program. At that time, the facility was pitched as an attraction that would serve many out-of-town customers. City documents reported: “The current Economic Development Policy requires medical facilities to attract at least 30% of patients from outside the Wichita MSA. Kansas Medical Center reviewed the location of patients utilizing the emergency room in Andover, which revealed that 37% come from outside the Wichita MSA.” 2

It seems a stretch to assume that the demographic characteristics of a hospital in Andover would also apply to an emergency room in Wichita, but the city council accepted this reasoning.

Aside from this, the Wichita Business Journal article contains problems in its reporting of public policy issues. The reporter wrote: “Last summer, the Wichita City Council authorized issuing industrial revenue bonds for the project to help finance land and construction costs. With IRBs, the city serves as a pass-through entity for developers to obtain a lower interest rate on projects. IRBs require no taxpayer commitment.” (For background on IRBs in Kansas, see Industrial revenue bonds in Kansas.)

It’s not likely the facility will save on interest costs with IRBs. It might save if the bonds were non-taxable, but these bonds are taxable, according to the agenda packet for this item. The article is correct in that IRBs require no taxpayer commitment — at least superficially. Here, I believe the reporter is letting readers know that the city makes no guarantee as to the bond repayment. If the city guaranteed repayment, that would help the borrower obtain a lower interest rate. But there is no guarantee.

Instead, the benefit of the IRB program is lower taxes. The city estimates the first-year property tax savings to be $61,882, allocated this way: City of Wichita: $17,226. State of Kansas: $792. Sedgwick County: $5,520. USD 259 (Wichita public school district): $28,345. Savings like this would be realized for five years, plus another five years if employment commitments are met.

This property tax forgiveness is, in many ways, a “taxpayer commitment.” If we don’t recognize that, then we must reconsider the foundation of local tax policy.

In Wichita, as in most cities, the largest consumers of property tax dollars are the city, county, and school district. All justify their tax collections by citing the services they provide: Law enforcement, fire protection, education, etc. It is for providing these services that we pay local taxes.

But through the Industrial Revenue Bond program, properties don’t pay property tax. (In the case of this facility, the property tax abatement is limited to 88 percent of the full tax burden.)

Yet, this new facility will undoubtedly demand and consume the services local government provides — law enforcement, fire protection, and education. But it won’t be paying property tax to support these services (except for the 12 percent not abated). Others will have to pay this cost.

We’re left with an uncomfortable and awkward circumstance. City officials tell us that we must pay property tax so the city can provide services. (In fact, last year the Wichita city manager recommended increasing property taxes to pay for more police officers.)

At the same time, however, the city creates special classes of people who use services but don’t pay for them.

Often the justification for economic development incentives is economic necessity, that is, the project could not be built without the incentive. That argument was not made for this project.

Free standing emergency rooms

Free standing emergency departments are controversial. The notes to this article hold references to news articles and academic studies looking at the costs and usage of these facilities. 3 4 5 6 7 8 9 10

Researchers note that the emergency rooms are much more expensive than traditional doctor offices or urgent care facilities, yet many of the diagnoses made at the ERs are the same as made at non-emergency facilities.


Notes

  1. Heck, Josh. Medical group sets opening date for free-standing ER. Wichita Business Journal. Available at https://www.bizjournals.com/wichita/news/2018/04/06/medical-group-sets-opening-date-for-free-standing.html.
  2. City of Wichita. Request for Letter of Intent for Industrial Revenue Bonds (E Wichita Properties, LLC/Kansas Medical Center, LLC). City Council agenda packet for June 6, 2017.
  3. NBC News. You Thought It Was An Urgent Care Center, Until You Got the Bill. Available at https://www.nbcnews.com/health/health-care/you-thought-it-was-urgent-care-center-until-you-got-n750906.
  4. Carolyn Y. Johnson. Free-standing ERs offer care without the wait. But patients can still pay $6,800 to treat a cut. Washington Post, May 7, 2017. Available at http://wapo.st/2pUCskD?tid=ss_tw&utm_term=.21bb76a447aa.
  5. Rice, Sabriya.Texans overpaid for some medical services by thousands, study says. Dallas Morning News. Available at https://www.dallasnews.com/business/health-care/2017/03/23/texans-overpaid-medical-services-thousands-study-said.
  6. Blue Cross Blue Shield of Texas. Rice U. Study: Freestanding Emergency Departments In Texas Deliver Costly Care, ‘Sticker Shock’. Available at https://www.bcbstx.com/company-info/news/news?lid=j0s5sm9d.
  7. Alan A. Ayers, MBA, MAcc. Dissecting the Cost of a Freestanding Emergency Department Visit. Available at https://c.ymcdn.com/sites/ucaoa.site-ym.com/resource/resmgr/Alan_Ayers_Blog/UCAOA_Ayers_Blog_FSED_Pricin.pdf.
  8. Michael L. Callaham. Editor in Chief Overview: A Controversy About Freestanding Emergency Departments. Annals of Emergency Medicine, Volume 70, Issue 6, 2017, pp. 843-845. Available at http://www.annemergmed.com/article/S0196-0644(17)31505-6/fulltext.
  9. Ho, Vivian et al. Comparing Utilization and Costs of Care in Freestanding Emergency Departments, Hospital Emergency Departments, and Urgent Care Centers. Annals of Emergency Medicine, Volume 70 , Issue 6 , 846 – 857.e3. Available at http://www.annemergmed.com/article/S0196-0644(16)31522-0/fulltext.
  10. Jeremiah D. Schuur, Donald M. Yealy, Michael L. Callaham. Comparing Freestanding Emergency Departments, Hospital-Based Emergency Departments, and Urgent Care in Texas: Apples, Oranges, or Lemons? Annals of Emergency Medicine, Volume 70, Issue 6, 2017, pp. 858-861. Available at http://www.annemergmed.com/article/S0196-0644(17)30473-0/fulltext.

Wichita baseball consulting contract extension may have no discussion

The City of Wichita proposes to extend a baseball consulting contract without public explanation or discussion.

Wichita city leaders want a better baseball team, not to mention a new stadium. To help find a minor league baseball team, the city engaged a consultant last October. 1 That contract called for a spending limit of $50,000. 2

You may have noticed that there has not been an announcement of a team. It also appears that the $50,000 spending cap of the October contract has been reached (or nearly so). So next Tuesday the city council will consider spending (up to) another $50,000 with the same consultant. 3

Why the need for a contract extension? City documents explain: “Over the course of the past six months, Beacon has made successful inroads into the affiliated baseball community presenting the opportunities for MiLB and its teams. Due to the success in attracting the interest of affiliated baseball, staff believes it is imperative to further pursue affiliated baseball discussions with the assistance and expertise of Beacon Sports Capital Partners, LLC.”

I’m afraid I just don’t understand. The consultant’s effort has been successful, says the city, but yet there is no team. It’s really puzzling because last August Wichita Mayor Jeff Longwell was confident there would be an announcement before the end of 2017:

“By the end of this calendar year, we feel confident that we will be able to announce a team, who the team is, all of the above,” Longwell told The Eagle Tuesday afternoon. “We hope that we can complete all of those conversations by the end of this year and be able to announce a contract in place.” 4

That confidence was expressed before the engagement of the consultant in October.

Consent agenda, again

The city council will deal with this matter on its consent agenda. A consent agenda is a group of items — perhaps as many as two dozen or so — that are voted on in bulk with a single vote. An item on a consent agenda will be explained and discussed only if a council member requests the item to be “pulled.” If that is done, there will be discussion. Then the item might be withdrawn, delayed, voted on by itself, or folded back into the consent agenda with the other items.

“Pulling” an item is uncommon, as items on consent agendas are not controversial, at least according to the city’s reasoning. I suppose that applies to this item, as the first contract with this consultant was also handled on the consent agenda. And on March 27 the council authorized the spending of over $7 million on a consent agenda item. 5


Notes

  1. Weeks, Bob. A consultant to help Wichita’s confidence factor. Available at https://wichitaliberty.org/wichita-government/consultant-help-wichita-confidence-factor/.
  2. “MiLB Baseball Consultant Contract.” Wichita City Council Agenda packet for October 24, 2017. Available at http://www.wichita.gov/Council/Agendas/10-24-2017%20City%20Council%20Agenda%20Packet.pdf.
  3. “MiLB Baseball Consultant Contract Amendment.” Wichita City Council Agenda packet for April 10, 2018. Agenda Report No. II-15. Available at <a href=”http://www.wichita.gov/Council/Agendas/04-10-2018%20City%20Council%20Agenda%20Packet.pdf.
  4. Salazar, Daniel. Expect affiliated baseball team announcement by end of 2017, Wichita mayor says. Wichita Eagle, August 29, 2017. Available at http://www.kansas.com/news/local/article170095417.html.
  5. Weeks, Bob. In Wichita, spending semi-secret. Available at https://wichitaliberty.org/wichita-government/wichita-spending-semi-secret/.

Project Wichita right to look ahead at city’s future

We can understand self-serving politicians and bureaucrats. It’s what they do. But a city’s newspaper editorial board ought to be concerned with the truth.

In February the Wichita Eagle editorialized about Project Wichita, a ramping-up effort to do something about the future of Wichita. 1 It’s worthwhile to take a look at the op-ed, if only to learn something about the quality of Wichita Eagle editorial writing.

I understand civic boosterism; the desire to paint a positive image of the future. But this rosy outlook has to be based, at least loosely, on facts. Following, a look at a few claims made in the editorial.

“Our downtown is becoming more of a destination and place to live.”
The problem is this: Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates. Downtown Wichita, the city’s economic development agency responsible for downtown, says the population of downtown is 2,138, which is far — really far — outside the range the Census Bureau gives. For more about this, see Living in downtown Wichita.

As far as a destination for business, the U.S. Census Bureau tracks business trends by zip code. For zip code 67202, which is downtown Wichita, results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower. For more about this, see Downtown Wichita business trends.

Further, Wichita leaders have exaggerated the number of people working in downtown. For years our leaders told us there were 26,000 daytime workers in downtown Wichita. But this claim is based on misuse of data so blatant it can be described only as malpractice. In fact, this figure is now omitted from the state of downtown reports. No one will accept responsibility for this mistake. See Downtown Wichita jobs, sort of and Downtown Wichita report omits formerly prominent data.

“But Wichita feels pretty good about itself, which suggests the community is at the perfect time to think about its future.”
I have to say, we’ve been hoodwinked, and by our top leaders. Recently both the mayor of Wichita and chair of the county commission penned upbeat editorials praising our economy. See Mayor Longwell’s pep talk and Sedgwick County’s David Dennis on economic development.

But the reality is quite different. See:

Given this, why do the mayor, county commission chair, and our newspaper’s editorial board say what they do? The first two are politicians, but we ought to ask that our newspaper seek the truth, not personal political gain.

“It will get more serious in March, when students and volunteers from Wichita State University’s Public Policy and Management Center …”
This is the same organization on which the city relies for many services, including the gathering of public input in past campaigns like the 2014 sales tax election. The city seemed sure that tax would pass, but voters rejected it by a wide margin. 2

“Public Policy director Misty Bruckner and her group will deliver feedback and conclusions to Project Wichita’s four co-chairs.”
A few years ago Bruckner co-authored a paper titled “Citizen Attachment: Building Sustainable Communities.” 3 My reporting on it was titled Wichita needs more, and willing, taxpayers. An excerpt: “Increasingly, citizens are retreating from their responsibilities to community and demanding more from government than they are willing to pay for. But changes in local government behavior can be instrumental in reversing this trend, by strengthening citizens’ commitment to the well-being of their communities. Citizens who are committed to community are more willing to accept responsibility for the well-being of their fellow citizens and are also more likely to join with government and other parties to improve their communities. Citizens who are committed to community are also more willing taxpayers — that is, when government demonstrates that it can be trusted to invest public resources in ways that strengthen the community. The central thrust of this model is getting citizens and governments to work together, but realistically, many communities will require new revenue — including additional tax dollars — if they are to assemble the critical mass of resources necessary for meaningful change. Accordingly, citizens who are willing to pay increased taxes are an important component of building sustainable communities.” (emphasis added)

Please don’t fault me for being cynical when I suspect that this entire operation is designed to prepare Wichitans (or the region) for a tax increase.

“Community input will be as wide as the city limits.”
Wait a moment. I thought we were supposed to think regionally.

“Project Wichita seems similar to Visioneering Wichita …”
I wonder if anyone remembers anything positive that resulted from Visioneering Wichita. After a few years, the organization’s website went stale, and staff discontinued making presentation to the city council and county commission See Visioneering asks for money. Let’s ask these questions.

“Unlike Visioneering, Project Wichita isn’t headed by city or county government.”
Visioneering Wichita was led by the Chamber of Commerce, not government. Local governments made financial contributions to Visioneering, just as they are also contributing to Project Wichita. 4


Notes

  1. Wichita Eagle Editorial Board. Project Wichita right to look ahead at city’s future. Available at http://www.kansas.com/opinion/editorials/article198178899.html.
  2. Ryan, Kelsey. Voters soundly defeat Wichita sales tax proposal. Available at http://www.kansas.com/news/politics-government/election/article3567045.html.
  3. See http://www.gfoa.org/sites/default/files/GFR_OCT_10_24.pdf.
  4. Wichita Business Journal. Sedgwick County Commission approves Visioneering Wichita funding. Available at https://www.bizjournals.com/wichita/blog/2012/12/sedgwick-county-commission-approves.html.

Wichita employment down, year-over-year

At a time Wichita leaders promote forward momentum in the Wichita economy, year-over-year employment has fallen.

Today the Bureau of Labor Statistics released employment statistics through February 2018. 1

One of the tables released is “Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted,” which shows changes in jobs from February 2017 to February 2018. 2 For this time period for the Wichita metropolitan area, the number of nonfarm jobs fell from 294.7 thousand to 292.3 thousand, a decline of 2,400 jobs or 0.8 percent.

In February, 313 metropolitan areas had over-the-year increases in nonfarm payroll employment, 69 had decreases, and 6 had no change.

Over the same period, the unemployment rate in the Wichita MSA fell from 4.6 percent to 4.1 percent. The labor force fell from 309,336 to 304,886.


Notes

  1. Bureau of Labor Statistics. Metropolitan Area Employment and Unemployment Summary. Available at https://www.bls.gov/news.release/metro.nr0.htm.
  2. Bureau of Labor Statistics. Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted. Available at https://www.bls.gov/web/metro/metro_oty_change.htm.

Wichita property tax rate: Down

The City of Wichita property tax mill levy declined for the second year in a row.

Wichita mill levy rates. This table holds only the taxes levied by the City of Wichita and not any overlapping jurisdictions.
In 1994 the City of Wichita mill levy rate — the rate at which property is taxed — was 31.290. In 2017 it was 32.667, based on the city’s Comprehensive Annual Financial Report and the Sedgwick County Clerk. That’s an increase of 1.377 mills, or 4.40 percent, since 1994. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)

In 2016 the mill levy was 32.685, so the mill levy dropped by .018 for 2017. That’s a drop of 0.06 percent, and while small, it’s a refreshing change. It’s also the second year in a row for a decrease in the mill levy.

Wichita mill levy rates. Click for larger version.
The Wichita City Council does not take explicit action to set the mill levy rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.

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

Change in Wichita mill levy rates, year-to-year and cumulative. Click for larger version.
It’s more common for the mill levy to rise rather than to fall. In those years, the council does not take responsibility to the rise. It will be interesting to see if council members take credit for the falling mill levy this year.

An increase of 4.40 percent over two decades may not seem like much of an increase. But this is an increase in a rate of taxation, not tax revenue. As property values rise, property tax bills rise, even if the mill levy rate is unchanged.

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

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

Application of tax revenue has shifted

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

In 2005 the mill levy dedicated to debt service was 10.022. In 2017 it was 8.511. That’s a reduction of 1.511 mills (15.1 percent) of property tax revenue dedicated for paying off debt. Another interpretation of this is that in 2005, 31.4 percent of Wichita property tax revenue was dedicated to debt service. In 2017 it was 26.0 percent.

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

In Wichita, spending semi-secret

The Wichita City Council authorized the spending of a lot of money without discussion.

At its March 27, 2018 meeting, the Wichita City Council passed a resolution authorizing the spending of funds for the River Vista development on the west bank of the Arkansas River in downtown.

The agenda packet for the meeting gave the details: “The overall project budget is $7,862,999 with STAR Bonds financing $4,750,000 of the costs and the City financing $1,050,000. The balance of the project costs will be assessed against the Improvement District.”

(STAR bonds are a mechanism whereby future sales tax revenue is routed to the project developer, rather than paying for the cost of state and Sedgwick County government. The “Improvement District” is the development itself, and the “City” is, of course, the taxpayers of Wichita.)

All this was approved by the city council at its meeting on July 21, 2015, under the item “Amendment to Amended and Restated Development Agreement – River Vista, L.L.C. (West Bank Apartments) and issuance of Sales Tax Special Obligation Revenue (STAR) Bonds (District VI).” It appeared on the March 27, 2018 agenda so that a resolution formalizing the arrangement could be passed.

Was the council’s action of public business and interest? The city council didn’t think so. The item was passed as part of the meeting’s consent agenda. This is a bundle of agenda items that are voted on in bulk, with one single vote, unless a council member requests an item be “pulled” for discussion and possibly a separate vote. If no council member asks to pull an item, there is no discussion.

No one asked to “pull” this agenda item for a discussion and vote.

Generally, items on consent agendas are not controversial, at least according to the city’s reasoning. I suppose that applies to this item, as the spending was approved in the past.

It might have been useful, however, to remind Wichitans of the taxpayer-supplied subsidy going to this project. Just so we’re reminded now and then of where our money is going.

But: The principals of the apartment project are frequent seekers of taxpayer subsidy, and likely plan to ask for more — much more — in the future. Some are also big funders of campaigns, in particular that of Wichita Mayor Jeff Longwell. We call this cronyism.

So the consent agenda provides a handy place to pass laws without discussing them, hoping that no one will notice. Semi-secret.

As it turns out, the Wichita Business Journal noticed this item and wrote the article West bank Arkansas River upgrades on City Council agenda. The article starts with “Wichita’s City Council on Tuesday is scheduled to discuss …” But because of the consent agenda and no council member believing the spending deserved attention, that discussion never happened.

Naftzger Park private use plans unsettled

An important detail regarding Naftzger Park in downtown Wichita is unsettled, and Wichitans have reason to be wary.

In the developer agreement regarding Naftzger Park passed on December 19, 2017, there was this: “The City and the Board will cooperate with Developers, upon Developers’ request, to create an Annual Master Calendar of private and public events for the Park, with the expectation that the Developers will have the use of the Park for certain private events.” 1 (In this agreement, “Board” refers to the Board of Park Commissioners of the City of Wichita, Kansas.)

Recently I asked the city if this master calendar had been created, or if there was a framework for determining how many private events can be held. According to the city, decisions are ongoing, and “According to Park & Recreation officials, what can be shared now is that the City will create and maintain a master calendar of events and programming. The developer will share in the programming responsibility and host several events throughout the year. Collaborating will ensure that the park is programmed well and active.”

Wichitans should not take comfort in learning this. We can easily imagine where the developer will want to have private events often, especially if homeless people continue using the park as a gathering spot, as is their right. “TGIF kickoff, tonight at Naftzger Park! Drinks and hot hors d’oeuvre! $15 to enter, free to residents of Lofts at Spaghetti Works and partners at Martin Pringle.”

Could this happen? How often could this happen? These are open questions, and we’re being asked to trust that city bureaucrats will negotiate a good deal for the entire city.

A panoramic view of Naftzger Park at winter’s end. Click for larger.

We shouldn’t trust the city to get a good deal for the average Wichitan. Even if the city strikes a deal that looks good, we should not trust the city to enforce the deal. Here’s an example to illustrate why.

In 2012 the city negotiated a deal with a private developer regarding an apartment development. As part of the deal, the city negotiated a provision that requires the apartment developer to pay “Additional Annual Rent” if certain conditions were met. To the casual observer, that might seem like a magnanimous gesture by the apartment developer. It made it look like the city was been a tough negotiator, hammering out a good deal for the city, letting citizens profit along with the apartment developer.

But the list of costs the developer could deduct before determining “additional annual rent” was broad, including the ability to contribute to reserve funds that would be owned by the developer. At the time, I observed, “We can be sure that if this project was ever in the position where it looked like it might have to remit ‘Additional Annual Rent’ to the city, contributions to these reserve funds would rise. Then, no funds paid to the city.” 2

As it turns out, the city did not enforce this agreement. It didn’t even ask for the information needed. Last year I became aware that the city did not ask for, and the developers did not produce, annual reports. 3

So might it happen that the private developments adjacent to Naftzger Park treat the park as their own? Recall that these developers have taken advantage of nearly every available program to fund their private developments. 4 Included in the list of benefits is a new benefit the city has offered only once before, to my knowledge: The city is paying the developer for parking spaces, on the theory they will be available to the public when the development does not need them.

Many of these benefits to the developer appeared only after the Wichita city manager said the development would not proceed, as the Wichita Eagle reported: “Plans to tear up and rebuild Naftzger Park downtown have been shelved indefinitely, after developers who own neighboring property pulled out of working with the city, Wichita City Manager Robert Layton said Friday [November 17, 2017].” 5 Somehow the deal was quickly revived, with even more taxpayer-funded benefits to the developer.

Should Wichitans trust the city to negotiate a good deal, and if it does, to enforce it? In my experience, the answer is no.


Notes

  1. DEVELOPMENT AGREEMENT between the CITY OF WICHITA, KANSAS, BOARD OF PARK COMMISSIONERS OF THE CITY OF WICHITA, KANSAS, SENECA PROPERTY, LLC, and SUNFLOWER WICHITA, LLC Dated as of January 19, 2018. Section 3.12. In the agenda packet for the December 19, 2017 Wichita city council meeting.
  2. Weeks, Bob. Wichita WaterWalk apartment deal not good for citizens. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-apartment-deal-not-good-for-citizens/.
  3. Weeks, Bob. Wichita WaterWalk contract not followed, again. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-contract-not-followed/.
  4. Weeks, Bob. Naftzger Park project details. Available at https://wichitaliberty.org/wichita-government/naftzger-park-project-details/.
  5. Lefler, Dion. Naftzger Park won’t be torn down, rebuilt after Spaghetti Works developer pulls out. Wichita Eagle, november 17, 2017. Available at http://www.kansas.com/news/politics-government/article185304103.html.

Wichita city council public agenda needs reform

Recent use of the Wichita City Council public agenda has highlighted the need for reform.

At meetings of the Wichita city council, non-council members generally have two opportunities to address the council members. One is as each agenda item is considered. There is (usually) an opportunity to speak only on that topic. If you want to speak about something else, there is also an opportunity near the start of the meeting called the public agenda.

The council has policies regarding the public agenda, particularly the need to sign up before the meeting, and far in advance: “Members of the public desiring to present matters to the council on the public agenda must submit a request in writing to the office of the city manager prior to twelve noon on the Tuesday preceding the council meeting.” 1

The practical problem is this: If the council takes action on Tuesday that inspires someone to address the council on the public agenda, that probably can’t happen at the next council meeting, if the policy is followed as stated. For one thing, the council might not take action until after noon, so the deadline for speaking at the next meeting has passed by then. But more likely and most importantly, many people are not able to watch the council meeting live. Instead, they may view a delayed broadcast on cable television, watch the meeting through the city’s website, or read news reporting. By the time any of these happen, the deadline for the next meeting’s public agenda has passed.

Why is this important? In Kansas cities of the first class, a law is not “officially passed” until it has passed on “second reading.” 2 This is a procedure whereby an ordinance that has passed “first reading” is voted upon again, and if it passes, it then may become law. Often second reading happens at the next council meeting, one week later. (“First reading” is what people see in meetings and is reported in news stories. A proposed ordinance is explained, usually by city staff. Then there may be discussion from the public and among council members, and then a vote.)

So if a person has a problem with an ordinance that passed first reading and wants to speak to the council before the second reading of the ordinance, that probably won’t be possible, for timing reasons explained above.

There’s the related issue that the second reading is placed on the consent agenda. A consent agenda is a group of items — perhaps as many as two dozen or so — that are voted on in bulk with a single vote. An item on a consent agenda will be discussed only if a council member requests the item to be “pulled.” If that is done, the item will be discussed. Then it might be withdrawn, voted on by itself, or folded back into the consent agenda with the other items. Generally, consent agenda items are considered by the city to be routine and non-controversial, but that is not always the case.

It is very rare for the second reading of an ordinance to be “pulled” from a consent agenda for discussion and separate vote. It may have happened, and if so, I can’t recall when. So even if you spoke on the public agenda regarding an ordinance at the meeting where that same ordinance appears on second reading, your speech might not mean much unless a council member “pulls” the item from the consent agenda for discussion and possibly, an individual vote.

By the way, one speaker said that the council’s policies meant there could be only 20 speakers per month. I think the arithmetic behind this comes from the council’s policy of five speakers per meeting and four meetings per month. It’s actually less than that. As explained on the council’s web site, the fourth meeting of a month is a “workshop” meeting. At these meetings the council considers consent agenda items only, along with information presentations (the workshop). There is no public agenda at these fourth Tuesday meetings, and the council doesn’t meet on fifth Tuesdays.

(You may be wondering: Does second reading ever happen in the fourth Tuesday meetings where there is no public agenda? Yes. It happened on January 23, 2018, for example.)

Would reform of the council’s public agenda make a difference? Do council members listen to and consider the opinions of speakers on the public agenda?

That’s a good question!


Notes

  1. Wichita City Council. INSTRUCTIONS FOR PUBLIC AGENDA REQUEST FORMS. Accessed March 20, 2018. Available at http://www.wichita.gov/Council/CityCouncilDocument/PUBLIC%20AGENDA%20REQUEST%20FORM.pdf.
  2. Myers, Bob. Drafting of City Ordinances and Resolutions In Kansas. Available at http://webs.wichita.edu/depttools/depttoolsmemberfiles/hugowall/Outline%20-%20Res%20and%20Ord%20Drafting.pdf.

Employment in metropolitan areas

An interactive visualization of labor force, employment, and unemployment rate for all metropolitan areas in the United States.

The example from the visualization shown below shows the Wichita Metropolitan Statistical Area and All Metro Areas. Data is through January 2018. Of note regarding Wichita:

  • Since the Great Recession ended, the unemployment rate in Wichita has fallen, as it has nationwide.
  • At the same time, employment (the number of people working) in Wichita, has been steady or rising slightly. Nationwide, employment has been growing.
  • At the same time, the civilian labor force in Wichita has been mostly falling, while rising nationwide.

When using the visualization you can adjust the date range to focus on recent years, or any other time period.

To learn about the data included and to use the visualization, click on Civilian labor force and unemployment by metropolitan area.

Example from the visualization., showing Wichita and All metro areas Click for larger.

WichitaLiberty.TV: John Todd and the fight against blight

In this episode of WichitaLiberty.TV: John Todd explains how cities in Kansas are seeking additional power to seize property, and tells us why we should oppose this legislation. View below, or click here to view at YouTube. Episode 188, broadcast March 17, 2018.

Shownotes

Wichita employment down, year-over-year

At a time Wichita leaders promote forward momentum in the Wichita economy, year-over-year employment has fallen.

Today the Bureau of Labor Statistics released employment statistics through January 2018. 1

One of the tables released is “Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted,” which shows changes in jobs from January 2017 to January 2018. 2 For this time period for the Wichita metropolitan area, the number of nonfarm jobs fell from 292.1 thousand to 291.1 thousand, a decline of 1,000 jobs or 0.3 percent.

Of 382 metropolitan areas, 57 performed worse than did Wichita. For these metro areas, the average growth in jobs was 1.15 percent.

Over the same period the unemployment rate in the Wichita MSA fell from 4.6 percent to 3.7 percent.


Notes

  1. Bureau of Labor Statistics. Metropolitan Area Employment and Unemployment Summary. Available at https://www.bls.gov/news.release/metro.nr0.htm.
  2. Bureau of Labor Statistics. Over-the-year change in total nonfarm employment for metropolitan areas, not seasonally adjusted. Available at https://www.bls.gov/web/metro/metro_oty_change.htm.

Mayor Longwell’s pep talk

A column written by Wichita Mayor Jeff Longwell ignores the reality of Wichita’s economy.

This week Wichita Mayor Jeff Longwell contributed a column to the Wichita Eagle that seems to defy economic reality. 1

For example, he wrote how Wichita is a “thriving city in a brand new age of possibility.” Construction and change is everywhere, he said.

The problem is this: Even though there seems to be a lot of construction and change, Wichita isn’t thriving.

There are several ways to gauge the economic health of a city. Jobs are probably most important, especially to politicians, and jobs data is available on a frequent and timely basis. And when we look at Wichita’s growth in nonfarm jobs, we see Wichita lagging far behind the nation.

Wichita and national nonfarm employment. Click for larger.
Wichita and national nonfarm employment, ratio. Click for larger.
It wasn’t always that way. Nearby charts show the ratio of Wichita job growth to the nation. When the line is above the value one, it means Wichita was outpacing the nation.

Wichita has done that many times — growing faster than the nation. But that hasn’t been the case recently. In fact, as the charts show, the ratio of Wichita to the nation is sinking. Wichita is falling farther behind.

But despite this evidence, that mayor wrote, “In the coming years, we’re going to continue our growth pattern, and we need passionate individuals supporting and expanding upon our efforts.”

I sincerely hope the mayor is not aware of the poor performance of the Wichita-area economy. Because if he is aware, and he promises to “continue our growth pattern,” we’re in for continued trouble. Did you know that the Wichita-area economy shrank from 2015 to 2016? That is, we produced fewer goods and services in 2016 than in 2015, after accounting for inflation. 2 Is this the growth pattern the mayor promises to continue?

Finally, the mayor issued this plea: “We can’t be complacent in our comfort. We must reconcile our vibrant history with a limitless future. Let’s shed the stigma of what we have been and embrace the vibrant mantle of what we’re becoming.”

First, anyone who’s complacently comfortable is uninformed or unbelieving of the statistics regarding the Wichita economy.

Second, “what we’re becoming” is a low-growth area, falling behind the rest of the country, with the gap growing. The opposite of “vibrant.”

Then, the “stigma of what we have been” describes Mayor Longwell and other long-time officeholders and bureaucrats. It is they who have taken responsibility for the development of the Wichita-area economy. It is their decisions and policies that have led to our slow growth. They are eager to take credit for the successes we do have. But as the mayor’s ill-informed article shows, they are not willing to accept responsibility for failure, much less to even acknowledge the truth.

For other measures of the Wichita economy, see:


Notes

  1. Longwell, Jeff. All Wichitans have a part in pushing forward. Wichita Eagle, March 4, 2018. Available at http://www.kansas.com/opinion/opn-columns-blogs/article203559924.html.
  2. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/.

Property under attack in Kansas

Local governments in Kansas are again seeking expanded power to seize property.

In Kansas, officials of many city governments feel they don’t have enough power to deal with blight. This year, as in years past, there is legislation to expand the power of cities to seize property. 1 2

John Todd, along with Paul Soutar, made a video to explain the bill and the surrounding issues. It’s just five minutes in length. View it below, or click here to view at YouTube. Todd’s written testimony to the Kansas Legisalture has photographs and examples. It may be viewed here.

Background

Presently, tools are in place. Cities already have much power to deal with blight and related problems. Last year Todd and I, along with others, had a luncheon meeting with a Kansas Senator who voted in favor of expanding cities’ powers. When we told him of our opposition, he asked questions like, “Well, don’t you want to fight blight? What will cities do to fight blight without this bill?” When we listed and explained the many tools cities already have, he said that he hadn’t been told of these. This is evidence that this bill is not needed. It’s also evidence of the ways cities try to increase their powers at the expense of the rights of people. 3

The Governor’s veto. A similar bill passed the legislature in 2016. Governor Brownback vetoed that bill, explaining, “The right to private property serves as a central pillar of the American constitutional tradition.” 4

The Governor’s veto provoked a response from Wichita government officials. It let us know that they are not as respectful of fundamental rights as was Brownback. 5

For example, in remarks from the bench, Wichita City Council Member Pete Meitzner (district 2, east Wichita) said there is no intent to be “aggressive in taking people’s property.” 6 But expanding the power of government — aggression, in other word — is what the bill does. Otherwise, why the need for the bill with its new methods and powers of taking property?

And once government is granted new powers, government nearly always finds ways to expand the power and put it to new uses. Even if we believe Meitzner — and we should not — he will not always be in office. Others will follow him who may not claim to be so wise and restrained in the use of government power.

Government expands and liberty recedes. Government continuously seeks new ways to expand its powers through enabling concepts like blight. Did you know the entire suburban town of Andover is blighted? 7 Across the country, when governments find they can take property with novel and creative interpretations of blight, they do so. 8

It’s easy to sense the frustration of government officials like Wichita Mayor Jeff Longwell. In his remarks, he asked opponents of SB 338 “what they would do” when confronted with blight. That is a weak argument, but is advanced nonetheless. Everyone has the right — the duty — to oppose bad legislation even if they do not have an alternate solution. Just because someone doesn’t have a solution, that doesn’t mean their criticism is not valid. This is especially true in this matter, as cities already have many tools to deal with blight.


Notes

  1. Kansas Legislature. HB 2506. Rehabilitation of abandoned property by cities. Available at http://kslegislature.org/li/b2017_18/measures/hb2506/.
  2. Weeks, Bob. Power of Kansas cities to take property may be expanded. Available at https://wichitaliberty.org/kansas-government/power-kansas-cities-take-property-may-expanded/.
  3. Weeks, Bob. In Kansas, the war on blight continues. Available at https://wichitaliberty.org/kansas-government/kansas-war-blight-continues/.
  4. Weeks, Bob. Governor Brownback steps up for property rights. Available at https://wichitaliberty.org/kansas-government/governor-brownback-steps-property-rights/.
  5. Weeks, Bob. In Wichita, revealing discussion of property rights. Available at https://wichitaliberty.org/kansas-government/wichita-revealing-discussion-property-rights/.
  6. Video. Wichita City Council speaks on blight. Available at wichitaliberty.org/wichita-government/wichita-city-council-speaks-blight/.
  7. Weeks, B. (2012). Andover, a Kansas city overtaken by blight. Voice For Liberty in Wichita. Available at wichitaliberty.org/economics/andover-a-kansas-city-overtaken-by-blight/.
  8. Nicole Gelinas, Eminent Domain as Central Planning. (2015). City Journal. Available at www.city-journal.org/html/eminent-domain-central-planning-13253.html.

Growing the Wichita economy

Wichita leaders are proud of our region’s economic growth. Here are the numbers.

Greater Wichita Partnership is our region’s primary agency responsible for economic development. On its website, it tells us, “We are an organization built upon teamwork and the idea that, when everyone is advancing in the same direction, we can create a powerful force to effect change — and, thanks to our numerous investors and partners, we are.” One of the things GWP says we are doing is “Growing primary jobs.” 1

Recently Greater Wichita Partnership president Jeff Fluhr told a group of young people this:

From the innovation campus at Wichita State University and development along the Arkansas River in downtown, including a new baseball stadium, to the conversations happening now about a new convention center and performing arts facility, Fluhr said the momentum is pushing to keep Wichita on par with the development of other communities around the country.

That development, which has in recent years expanded to incorporate the entire region, is a critical component to attracting and retaining talent — the exact kind of talent in the ICT Millennial Summit crowd. 2

In January Wichita Mayor Jeff Longwell said, “It’s hard to find a time when we’ve had more momentum.” 3

In announcing his candidacy for Sedgwick County Commission, Wichita city council member Wichita City Council Member Pete Meitzner (district 2, east Wichita) said, “We have enjoyed great progress and growth during my two terms as a City Council member and I plan to do my part to assure Sedgwick County is part of this continued success.” 4

Given all this, it ought to be easy to find economic data supporting momentum, progress, and growth. Let’s look at some indicators.

Personal income. For the Wichita metropolitan statistical area, personal income in 2016 rose slightly from the 2015 level, but is still below the 2014 level. In real (inflation-adjusted) dollars, personal income fell in 2016. 5

Personal Income Summary, Wichita, through 2016. Click for larger.

Population. In 1990 Wichita was the 80th largest metropolitan area. In 2016 its ranking had fallen to 87.

Trends of business activity in downtown Wichita. Click for larger.
Downtown Wichita. There’s been a lot of investment in downtown Wichita, both public and private. But since 2008 the trend is fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. Almost every year these numbers are lower than the year before. This is movement in the wrong direction, the opposite of progress. There may be good news in that the number of people living downtown may be rising, but business activity is declining. 6

Employment. While officials promote the low Wichita-area unemployment rate, there is an alternative interpretation: The September 2017 unemployment rate declined to just about half the January 2011 rate. The number of employed persons rose by 1.2 percent, but the labor force fell by 3.1 percent. If we consider only the unemployment rate, it looks like the Wichita area is prospering. But the unemployment rate hides bad news: The number of jobs increased only slightly, and the labor force fell by a lot. While it’s good that there are more people working, the decline in the labor force is a problem. (More about employment below.) 7

Wichita MSA unemployment through September 2017. Click for larger.

Growth in output. The worst news, however, is that the Wichita-area economy shrank from 2015 to 2016. In real (inflation-adjusted) dollars, the Wichita metropolitan area gross domestic product fell by 1.4 percent. For all metropolitan areas, GDP grew by 1.7 percent. Since 2001, GDP for all metropolitan areas grew by 29.3 percent, while Wichita had 12.3 percent growth. 8

Wichita MSA employment, annual change. Click for larger.
The GDP figures are for 2016, and figures for 2017 won’t be available until September. So what happened in 2017? Could 2017 be the genesis of momentum to drive our economy forward?

While GDP figures aren’t available, jobs numbers are. For the year 2016, total nonfarm employment in the Wichita metropolitan area grew by 0.62 percent. For 2017, the growth rate was 0.56 percent — a slowdown in the rate of job growth.

These job growth figures are far below the rate for the nation, which were 1.79 and 1.58 percent respectively.

Annual change in job growth, Wichita and USA through 2017. Click for larger.

Furthermore, Wichita’s job growth rate in 2016 was lower than 2015’s rate of 1.07 percent. This is momentum in the wrong direction. Nearby charts illustrate. 9

What to do?

You can’t change what you don’t acknowledge.
— Phillip C. McGraw

The failure of the Wichita-area economy to thrive is a tragedy. This is compounded by Wichita leaders failing — at least publicly — to acknowledge this. While we expect people like the mayor, council members, and the chamber of commerce to be cheerleaders for our city, we must wonder: Do these people know the economic statistics, or do they choose to ignore or disbelieve them?

From private conversations with some of these leaders and others, I think it’s a mix of both. Some are simply uninformed, while others are deliberately distorting the truth about the Wichita economy for political or personal gain. The people who are uninformed or misinformed can be educated, but the liars are beyond rehabilitation and should be replaced.


Notes

  1. Greater Wichita Partnership. Available at http://www.greaterwichitapartnership.org/about_us/about_us.
  2. Daniel McCoy. ICT Millennial Summit: Wichita is having a moment. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2017/11/30/ict-millennial-summit-wichita-is-having-a-moment.html.
  3. Heck, Josh. Emerging Leaders panel offers insight into eco-devo strategies. Available at https://www.bizjournals.com/wichita/news/2018/01/11/emerging-leaders-panel-offers-insight-into-eco.html.
  4. Bill Wilson. Wichita council member unveils bid for county commission. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2018/02/13/wichita-council-member-unveils-bid-for-county.html.
  5. Weeks, Bob. Wichita personal income up, a little. Available at https://wichitaliberty.org/wichita-government/wichita-personal-income-up-2016/.
  6. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/.
  7. Weeks, Bob. Wichita employment up. Available at https://wichitaliberty.org/wichita-government/wichita-employment-up/.
  8. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/.
  9. In some presentations these figures may differ slightly due to data revisions and methods of aggregation. These differences are small and not material.

Metro Monitor evaluates the Wichita economy

Metro Monitor from Brookings Institution ranks metropolitan areas on economic performance. How does Wichita fare?

Each year Brookings Institution creates an index of major metropolitan areas called Metro Monitor. The index for 2018 is at https://www.brookings.edu/research/metro-monitor-2018/. The 2018 edition, discussed below, provides rankings based on changes from the year 2015 to 2016. Comparisons over other time periods are also available.

In the area of growth, Wichita ranked 91 out of 100 metropolitan areas. For jobs, the ranking was 89. In the charts, you can see that since the last recession, the Wichita area is falling behind the country, with the gap growing each year. The good news in growth is that Wichita ranks higher in jobs at young firms (67 of 100). Young firms — which are different from small business — are vitally important to economic growth. 1

Example from Metro Monitor for Wichita. Click for larger.

In the two other major categories that Brookings looks at, Wichita is 91 out of 100 in prosperity, and 94 out of 100 in inclusion.

These rankings are based on values through 2016 and represent change from 2015. The index also has data for two other time periods of longer duration.

Looking forward

As the Brookings data end in 2016, what might we find if the data was based on 2017 values? Some of the data Brookings uses is not available until after a lengthy delay, such GDP for metropolitan areas. That data, which is an important indicator of a region’s economic health, is scheduled to be released in September 2018 for complete year 2017 data.

Employment data is available fairly quickly, although it is often revised each year in March. The nearby chart, displaying data from the Bureau of Labor Statistics, shows changes in the average annual employment for Wichita and the nation. For the year 2016, total nonfarm employment in Wichita rose by 0.61 percent. For 2017, the growth rate was 0.54 percent — a slowdown in job growth. An interactive version of the chart is available here. 2

These growth figures are far below the rate for the nation, which were 1.79 and 1.58 percent respectively.

Wichita leaders are talking about success in developing the Wichita economy; that there is momentum for the future. Based on the data we have available, the rate of growth of employment slowed down in 2017 from what was already anemic growth. What is the basis for optimism if we continue our present policies and leadership?

Annual change in job growth, Wichita and USA through 2017. Click for larger.


Notes

  1. Jason Wiens and Chris Jackson. The Importance of Young Firms for Economic Growth. Available at https://www.kauffman.org/what-we-do/resources/entrepreneurship-policy-digest/the-importance-of-young-firms-for-economic-growth.
  2. FRED, from the Federal Reserve Bank of St. Louis, is a resource for examining economic data and creating charts and tables. Most of the available data is data gathered from other sources, in this case the Bureau of Labor Statistics. FRED provides a consistent interactive interface to the data, and provides several ways to share the data. Start at https://fred.stlouisfed.org/.

Greater Wichita Partnership asks for help

Wichita’s economic development agency asks for assistance in developing its focus and strategies.

At the meeting of the Sedgwick County Commission this week, commissioners will consider funding a consultant to assist the Greater Wichita Partnership.

Here is information provided to commissioners:

Greater Wichita Partnership (GWP) has requested $45,000 from Sedgwick County to engage the services of a consultant to direct an initiative to bring more focus to GWP’s regional economic development efforts. This one-time request, if provided, is intended to be leveraged with $45,000 from the City of Wichita and another $45,000 from GWP. Sedgwick County’s committment would represent one-third of the consultant’s work.

The proposed consulting engagement would be designed with two primary goals:

1. Develop a strategic plan for GWP that establishes an organizational structure to optimize and coordinate regional economic development efforts that grow opportunities, help create and maintain jobs, and promote the region as an attractive place to locate and/or grow a business.

2. Bring clarity and innovative ways for the Blueprint for Regional Economic Growth (BREG) to expand. We need to develop strategies to work together as a region to maintain and grow the Aerospace clusters for which we are known globally; while working to attract and grow businesses in other industries that will strengthen and diversify the regional economy.

There are a few ways to look at this request. One is that presently, GWP is working well and providing positive results, so there’s no need to spend money on the organization’s improvement. Local leaders seem pleased with GWP and its work. In January Wichita Mayor Jeff Longwell said “It’s hard to find a time when we’ve had more momentum.” 1 There are many other example of praise heaped on GWP and its leaders.

Or: We might argue that even though GWP is performing well, an overhaul could really boost its efforts.

Or: We might wonder how this organization is just getting started doing things like working on its focus and strategies. (While GWP is relatively new, it is a successor to a previous economic development group, with many of the same leaders and employees.)

What has GWP been doing? How effective is its stewardship of the Wichita-area economy? Here are some numbers on the Wichita-area economy.

Click for larger.
Personal income. For the Wichita metropolitan statistical area, personal income in 2016 rose slightly from 2015 level, but is still below the 2014 level. In real (inflation-adjusted) dollars, personal income fell in 2016. 2

Wichita metro employment and unemployment. Click for larger.
Employment. While officials promote the low Wichita-area unemployment rate, there is an alternative interpretation: The May 2017 unemployment rate declined to just about half the January 2011 rate. The number of employed persons rose by 1.1 percent, but the labor force fell by 3.7 percent. If we consider only unemployment rate, it looks like the Wichita area is prospering. But the unemployment rate hides bad news: The number of jobs increased only slightly, and the labor force fell by a lot. While it’s good that there are more people working, the decline in the labor force is a problem. 3

Population. In 1990 Wichita was the 80th largest SMA. In 2016 its ranking had fallen to 87.

Growth of GDP by Metro Area and Industries. Click for larger.
Growth in output. The worst news, however, is that the Wichita-area economy shrank from 2015 to 2016. In real (inflation-adjusted) dollars, the Wichita metropolitan area gross domestic product fell by 1.4 percent. For all metropolitan areas, GDP grew by 1.7 percent. Since 2001, GDP for all metropolitan areas grew by 29.3 percent, while Wichita had 12.3 percent growth. 4

With these points in mind, we ought to wonder if GWP and its leadership ought to be replaced with something else.

This item will be handled on the commission’s consent agenda, meaning that there will be no discussion or individual vote unless a commissioner decides to “pull” the item.


Notes

  1. Heck, Josh. Emerging Leaders panel offers insight into eco-devo strategies. Available at https://www.bizjournals.com/wichita/news/2018/01/11/emerging-leaders-panel-offers-insight-into-eco.html.
  2. Weeks, Bob. Wichita personal income up, a little. Available at https://wichitaliberty.org/wichita-government/wichita-personal-income-up-2016/.
  3. Weeks, Bob. Wichita employment trends. Available at https://wichitaliberty.org/wichita-government/wichita-employment-trends/.
  4. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/.

In Wichita, three Community Improvement Districts to be considered

In Community Improvement Districts (CID), merchants charge additional sales tax for the benefit of the property owners, instead of the general public. Wichita may have an additional three, contributing to the problem of CID sprawl.

This week the Wichita City Council will hold public hearings considering the formation of three Community Improvement Districts. In Kansas Community Improvement Districts, merchants charge additional sales tax for the benefit of the property owners, instead of the general public. 1

Each of these CIDs will charge customers additional sales tax, with a cap on the amount that may be raised, and a separate cap on the length of the CID. For the three projects this week, here are the details: 2

Delano Catalyst CID: 2% additional tax, raising up to $3,000,000, up to 22 years
Spaghetti Works CID: 2% additional tax, raising up to $3,118,504, up to 22 years
Chicken N Pickle CID: 1.5% additional tax, raising up to $2,300,000, up to 15 years

All these CIDs are of the pay-as-you-go type, which means the city is not borrowing money that would be repaid by the CID tax proceeds. Instead, the CID tax proceeds are periodically sent to the landowners as they are collected. The city retains a 5% administrative fee.

Additionally, two of these CIDs earmark 10% of the CID tax collections for public benefits, which are extra park maintenance for the Spaghetti Works CID, and street improvements for the Chicken N Pickle CID. While these earmarks may seem magnanimous gestures, they directly work to the developers’ benefit. For Spaghetti Works, Naftzger Park is, in effect, becoming the front yard to a development. It will be of great benefit for it to be maintained well, especially considering that the developers will be able to close the park for private events. For the Chicken N Pickle CID, the street improvements the CID will fund are usually paid for by special tax assessments on the nearby landowners, which in this case is the Chicken N Pickle. This is a large savings.

By the way, none of the applications for these economic development incentives pleads economic necessity. They simply want more money, and are willing to let government take the blame when customers notice they’re paying 9% or 9.5% sales tax in these districts.

Of additional note: The Delano and Spaghetti Works developments are receiving many millions of taxpayer-provided subsidy from other economic development incentive programs. 3 4

It will be interesting to see how the council’s two new members, Brandon Johnson (district 1, northeast Wichita) and Cindy Claycomb (district 6, north central Wichita), will vote in these matters. As Progressives, we might expect them to be opposed to higher sales taxes, which affect low-income households disproportionally. We also might expect them to be opposed to targeted tax incentives for the “wealthy,” such as the now-defunct exemption on pass-through business income in Kansas. Here, they are asked to vote on a highly targeted tax incentive that will benefit identifiable wealthy parties.

Issues regarding CID

Perhaps the most important public policy issue regarding CIDs is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? But the premise of this question is not accurate, as it is not the merchants who receive CID funds. The more accurate question is why don’t landlords raise their rents? That puts them at a competitive disadvantage with property owners that are not within CIDs. Better for us, they rationalize, that unwitting customers pay higher sales taxes for our benefit.

Consumer protection
Customers of merchants in CIDS ought to know in advance that an extra CID tax is charged. Some have recommended warning signage that protects customers from unknowingly shopping in stores, restaurants, and hotels that will be adding extra sales tax to purchases. Developers who want to benefit from CID money say that merchants object to signage, fearing it will drive away customers.

State law is silent on this. The City of Wichita requires a sign indicating that CID financing made the project possible, with no hint that customers will pay additional tax, or how much extra tax. The city also maintains a website showing CIDs. This form of notification is so weak as to be meaningless. See Wichita community improvement districts should have warning signs and In Wichita, two large community improvement districts proposed. In the latter, future Wichita Mayor Jeff Longwell argued that signs showing different tax rates for different merchants would be confusing. Council Member Sue Schlapp said she supported transparency in government, but informing consumers of extra taxes would make the program “useless.”

Eligible costs
One of the follies in government economic development policy is the categorization of costs into eligible and non-eligible costs. The proceeds from programs like CIDs and tax increment financing may be used only for costs in the “eligible” category. I suggest that we stop arbitrarily distinguishing between “eligible costs” and other costs. When city bureaucrats and politicians use a term like “eligible costs” it makes this process seem benign. It makes it seem as though we’re not really supplying corporate welfare and subsidy.

As long as the developer has to spend money on what we call “eligible costs,” the fact that the city subsidy is restricted to these costs has no economic meaning. Suppose I gave you $10 with the stipulation that you could spend it only on next Monday. Would you deny that I had enriched you by $10? Of course not. As long as you were planning to spend $10 next Monday, or could shift your spending from some other day to Monday, this restriction has no economic meaning.

Notification and withdrawal
If a merchant moves into an existing CID, how might they know beforehand that they will have to charge the extra sales tax? It’s a simple matter to learn the property taxes a piece of property must pay. But if a retail store moves into a vacant storefront in a CID, how would this store know that it will have to charge the extra CID sales tax? This is an important matter, as the extra tax could place the store at a competitive disadvantage, and the prospective retailer needs to know of the district’s existence and its terms.

Then, if a business tires of being in a CID — perhaps because it realizes it has put itself at a competitive disadvantage — how can the district be dissolved?

The nature of taxation
CIDs allow property owners to establish their own private taxing district for their exclusive benefit. This goes against the grain of the way taxes are usually thought of. Generally, we use taxation as a way to pay for services that everyone benefits from, and from which we can’t exclude people. An example would be police protection. Everyone benefits from being safe, and we can’t exclude people from participating in — and benefiting from — police protection.

But CIDs allow taxes to be collected for the benefit of one specific entity. This goes against the principle of broad-based taxation to pay for an array of services for everyone. But in this case, the people who benefit from the CID are quite easy to identify: the property owners in the district.


Notes

  1. Weeks, Bob. Community improvement districts in Kansas. Available at https://wichitaliberty.org/kansas-government/community-improvement-districts-kansas/.
  2. Wichita City Council Agenda Packet for January 9, 2018. Agenda items IV-1, IV-2, and IV-3.
  3. Weeks, Bob. Naftzger Park project details. Available at https://wichitaliberty.org/wichita-government/naftzger-park-project-details/.
  4. Weeks, Bob. Delano catalyst site. https://wichitaliberty.org/wichita-government/delano-catalyst-site/.