Charts of Wichita debt. Source of data is Wichita Comprehensive Annual Financial Reports for years 2000 through 2015. Click charts for larger versions.
The City of Wichita says it values open and transparent government, but the city lags far behind in providing information and records to citizens.
The City of Wichita is proud to be an open and transparent governmental agency, its officials say. Former Mayor Carl Brewer often spoke in favor of government transparency. For example, in his State of the City address for 2011, he listed as an important goal for the city this: “And we must provide transparency in all that we do.”
“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”
Current Mayor Jeff Longwell penned a column in which he said, “First off, we want City Hall to be open and transparent to everyone in the community.” (But he has wondered if the city could conduct business with fewer public hearings.)
But the reality of obtaining information and records from the City of Wichita is far different from the claims of its leaders. Two years ago the city expanded its staff by hiring a Strategic Communications Director. When the city announced the new position, it said: “The Strategic Communications Director is the City’s top communications position, charged with developing, managing, and evaluating innovative, strategic and proactive public communications plans that support the City’s mission, vision and goals.”
But there has been little, perhaps no, improvement in the data and information made available to citizens.
The city’s attitude
Despite the proclamations of mayors and manager, the city needs a change of attitude towards government transparency. Here’s perhaps the most glaring example of how the city goes out of its way to conduct public business in secret.
Citizen watchdogs need access to records and data. The City of Wichita, however, has created several not-for-profit organizations that are controlled by the city and largely funded by tax money. The three I am concerned with are the Wichita Downtown Development Corporation, Visit Wichita (the former Go Wichita Convention and Visitors Bureau), and Greater Wichita Economic Development Coalition, now the Greater Wichita Partnership. Each of these agencies refuses to comply with the Kansas Open Records Act, using the reasoning that they are not “public agencies” as defined in the Kansas law that’s designed to provide citizen access to records.
The city backs this interpretation. When legislation was introduced to bring these agencies under the umbrella of the Kansas Open Records Act, cities — including Wichita — protested vigorously, and the legislation went nowhere.
Recently the City of Wichita added a new tax to hotel bills that may generate $3 million per year for the convention and visitors bureau to spend. Unless the city changes its attitude towards citizens’ right to know, this money will be spent in secret.
Another example of the City of Wichita’s attitude towards citizens and open government took place at a Kansas Legislature committee hearing. I had asked for email to or from a certain official for a certain period of time. The response from the city was that my request would encompass some 19,000 email messages, and the city denied the request as too burdensome. Fair enough.
But Dale Goter, the city’s lobbyist at the time, told legislators that my request for 19,000 emails was an example of abuse of the Kansas Open Records Act, citing it as evidence as to why reform was not needed. But I did not request 19,000 email messages. I made a request for messages meeting a certain criteria, and I had no way of knowing in advance how many email messages this would entail. The City of Wichita denied this request as burdensome, so there was either no cost or very little cost to the city. No harm, no foul.
Still the City of Wichita used this incident — and a similar incident involving the Kansas Policy Institute — as reasons that the Kansas Open Records Act needs no reform. This illustrates a problem with the attitude of Wichita city government towards citizens’ right to know.
This attitude may be noticed by the citizenry at large. Survey respondents were asked to rate “the job Wichita does at welcoming citizen involvement.” The results are shown in the nearby chart created from data in the most recent version of the Wichita Performance Measure Report. The numbers are the percent of respondents giving “excellent” or “good” as their response to the question.
The report says this performance is “much below” a benchmark set by the National Research Center National Citizen Survey.
An important way governments communicate with their subjects is through their websites. Wichita moved to a new website early in 2013. With the launching of the new City of Wichita website, the city has actually taken a step backwards in providing information to citizens.
Something that had been very useful is missing and hasn’t been replaced: MyWichita.
As described here, MyWichita was a useful service. By using it, you could receive email notices of new press releases, city council agendas and minutes, district advisory board agenda and minutes, agendas and minutes of other boards, and other items. Using MyWichita was much easier than having to check multiple sections of the city’s website looking for newly-released agendas, minutes, etc.
This email reminder service was very valuable. It’s a basic customer service feature of many commercial and governmental websites. But MyWichita didn’t survive the conversion to the new website, and there’s nothing that replaces its function. When I asked about this missing functionality, the city said it was working on a replacement that should be available in a month or two. It’s been several years since I asked.
Many governmental agencies post their checkbooks on their websites. Sedgwick County does, and also the Wichita school district. Not so the City of Wichita.
Until a few years ago, Wichita could supply data of only limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult and beyond the capability of most citizens to translate the data to a useful format. Even if someone translated the reports to computer-readable format, I don’t think it would be very useful. This was a serious defect in the city’s transparency efforts.
Now, if you ask the city for this data, you’ll receive data in an Excel spreadsheet. This is an improvement. But: You must pay for this data. The city says that someday it will make check register data available. See Wichita check register for the data and details on the request.
Kansas law requires that local government agencies publish legal notices for a variety of topics. Presently these are published in the Wichita Eagle at great cost to taxpayers. These notices could also be published on the city’s website, where they could be searched and archived. This would increase the usability of these documents at very little cost to the city. See Towards government transparency in Wichita: Legal notices.
Publish fulfilled requests
When governmental agencies like the City of Wichita fulfill records requests, they could also publish the records on their websites. Most of the time the records are supplied electronically, so this is an additional simple (and low cost) step that would leverage the value of the city’s effort.
Leveraging our lobbyists
What do lobbyists, including taxpayer-funded lobbyists, do in Topeka? One thing they do is testify before committees, in both verbal and written form. Another thing they do is to prepare reports for the clients, advising them on upcoming legislation, analyzing how it affects them, and what the prospects for the bill might be. They also meet with legislators and their clients, which are your elected officials.
Here’s a proposal that will help citizens make best use of their taxpayer-funded lobbyists:
I see nothing in the Kansas Open Records Act that allows local governmental units in Kansas to refuse to disclose these documents: testimony, reports by lobbyists to their government clients, and the lobbyists’ calendars (or billing records for contract lobbyists). Instead of making citizens ask for these records, possibly paying fees to obtain what they’re already paying for, why don’t local governments post these documents immediately on their websites?
Citizens could then benefit from the activities of the lobbyists they’re paying for. They could learn more about legislation as it works its way through the process. Citizens could judge whether the positions taken by the government lobbyists they’re paying for are aligned with their policy preferences.
If the actions taken by taxpayer-funded lobbyists are truly in the public interest, you’d think that cities, counties, and school boards would already be making this information easily available. In any case, there should be no resistance to starting this program.
Economic development transparency
For several years, the Kansas city of Lawrence has published an economic development report letting citizens know about the activities of the city in this area. The most recent edition may be viewed here.
The Lawrence report contains enough detail and length that an executive summary is provided. This is the type of information that cities should be providing, but the City of Wichita does not do this.
It’s not like the City of Wichita does not realize the desirability of providing citizens with information. In fact, Wichitans have been teased with the promise of more information in order to induce them to vote for higher taxes. During the campaign for the one cent per dollar Wichita city sales tax in 2014, a city document promised this information regarding economic development spending if the tax passed: “The process will be transparent, with reports posted online outlining expenditures and expected outcomes.” (This is what Lawrence has been doing for several years.)
The “Yes Wichita” campaign promised, “Reports will be measured and reported publicly.” (But “Yes Wichita” was a campaign group and not an entity whose promises can be relied on, and can’t be held accountable for failure to perform.)
These are good ideas. The city should implement them even though the sales tax did not pass. If it’s good for citizens to have this type of information if the sales tax had passed, it’s good for them to know in any circumstance, because the city (and other overlapping governmental jurisdictions) still spends a lot on economic development.
Where are our documents?
Government promotes and promises transparency, but finds it difficult to actually provide.
During the campaign for the one cent per dollar Wichita city sales tax in 2014, a city document promised this if the tax passed: “The process will be transparent, with reports posted online outlining expenditures and expected outcomes.” The “Yes Wichita” campaign promised “Reports will be measured and reported publicly.”
Why is this information not available in any case? Is the city’s communications staff overwhelmed and have no time to provide this type of information? During the sales tax campaign Wichita city staff had time to prepare news releases with titles like “City to Compete in Chili Cook-off” and “Jerry Seinfeld Returns to Century II.”
Since then the city has hired additional communications staff, adding a Strategic Communications Director. Now, while the city’s Facebook page has some useful information, there is also time to promote Barry the Bison playing golf.
Now Wichitans have to wonder: Was transparency promised only to get people to vote for the sales tax? Or is it a governing principle of our city? I think I know the answer.
Here’s an example. A few years ago as Sedgwick County was preparing and debating its budget, I wanted to do some research on past budgets. But on the county’s website, the only budgets available were for this year and last year. There was nothing else.
So I asked for budgets and other financial documents. I received them on CD. Then I created a shared folder using Google Drive and uploaded the documents. Now, these documents are available to the world. They can be found using a Google search. Oh, and here’s something a little ironic. These old budgets had been on the Sedgwick County website at one time. Someone made the decision to remove them.
Creating this depository of budget documents cost nothing except a little bit of time. Well, if you have a lot of data to share, you might have to pay Google a little, like ten dollars per month for each agency or person. But it is so simple that there is no excuse for the failure of agencies like Wichita Transit to make documents like agendas and minutes available. You don’t need specialized personnel to do this work. All you need is the will and desire to make the documents available.
Here’s another example of how simple it can be to achieve transparency. These days live and archived video of governmental meetings is commonplace. Commonplace, that is, except for the Wichita public schools. If you want to see a meeting of the Wichita school board, you must either attend the meetings, or view delayed broadcasts on cable TV. There’s a simple and low-cost way to fix this. It’s called YouTube.
When the Sedgwick County Commission was faced with an aging web infrastructure for its archived broadcasts, it did the sensible thing. It created a YouTube channel and uploaded video of its meetings. Now citizens can view commission meetings at any time on desktop PCs, tablets, and smartphones. This was an improvement over the old system, which was difficult to use and required special browser plug-ins. I could never get the video to play on my Iphone.
The Wichita school district could do the same. In fact, the district already has a YouTube channel. Yes, it takes a long time to upload two or three hours of video to YouTube, but once started the process runs in the background without intervention. No one has to sit and watch the process.
I’ve asked why the district does not make video of its meetings available archived online. The district responded that it “has a long-standing commitment to the USD 259 community of showing unabridged recordings of regular Board of Education meetings on Cox Cable Channel 20 and more recently AT&T U-verse Channel 99.” The meetings are broadcast seven times starting the day after each meeting. Two of the broadcasts start at 1:00 am.
Showing meetings delayed on cable TV is okay. It was innovative at one time. But why aren’t meetings shown live? What if you can’t watch the meeting before it disappears from the broadcast schedule after a week? What if you don’t want to pay cable television bills? What if you want to watch meetings on your computer, tablet, or smartphone? I don’t think the fact that meetings are on cable TV means they can’t also be on YouTube.
There are two elements of irony here, if that is the correct term. One is that earlier this year the Wichita school district considered hiring a marketing firm to “gauge its reputation and suggest new branding strategies.” Here’s an idea: Act as though you care about people being able to view the district’s board meetings.
Recently the Wichita school district raised property taxes. The mill levy will rise by 2.86, an increase of about five percent from its present level. The projected cost is an additional $33 per year for a home worth $100.000. That is quite a large increase. That’s bad. What’s also bad is the district’s lack of respect for taxpayers. As I’ve just told you, it’s difficult to view a meeting of the school board, which is a sign that the district prefers to operate in the shadows as much as possible. The board will raise your taxes, and at the same time keep it difficult for you to see them do it.
Just for the sake of completeness, let’s not let the state of Kansas off the hook. Currently, the proceedings of the Kansas Senate and House of Representatives are not available on video. The audio is broadcast on the internet, but it’s live only. No archiving. You must listen live, or figure out some way to record it on your own.
But for eight dollars per month the legislature could make its audio proceedings available to listen to at any time. For eight dollars per month at least one podcast hosting company offers an unlimited plan. Unlimited storage, and unlimited bandwidth. That is just what is needed. And since the audio of the proceedings of the House and Senate is broadcast on the internet, it must pass through a computer somewhere. That computer could also be recording the audio. Once recorded, the process of uploading the audio to the podcast host is a trivial procedure.
But neither Kansas legislative chamber records their proceedings, according to the Secretary of the Senate and the Chief Clerk of the House. I asked. Recordings of sessions are not available because they are not made. It would be simple to record audio of the Kansas House and Senate and make it available for anyone to listen to at any time. It is almost without cost. It would have great benefit.
All these levels of government say they value open records and transparency. But let me ask you: Do you think they really mean it?
John Todd makes an appearance on The Voice of Reason with Andy Hooser to talk about proposed legislation in Kansas that would be harmful to private property rights. View below, or click here to view on YouTube. Recorded on March 16, 2017.
For more information on this important issue, see In Kansas, the war on blight continues: Kansas governments are trying — again — to expand their powers to take property to the detriment of one of the fundamental rights of citizens: private property rights.
An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation.
The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study, June 2016” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita.
In Kansas, residential property is assessed at 11.5 percent of its appraised value. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions in order to compute tax.) Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent.
This means that commercial property faces 2.180 times the property tax rate as residential property. The U.S. average is 1.683. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.
For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.29 percent, while the national average is 1.43 percent. The results for a $300,000 property were similar. Of note, however, is the property taxes on a median-valued home. In this case Wichita is a bargain, due to our lower housing prices. A home at the median value in Wichita pays $1,552 in taxes, while the nationwide average is $3,097.
Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,351 or 1.96 percent of the property value. For Wichita the corresponding values are $3,398 or 2.83 percent, ranking sixth from the top. Wichita property taxes for this scenario are 45 percent higher than the national average.
For industrial property taxes, the situation in Wichita is better, with Wichita ranking near the middle. For an industrial property worth $1,000,000, taxes in Wichita are $30,980. The national average is $32,445.
The City of Wichita says it hasn’t raised its property tax mill levy in many years. For this year, the city is correct.
In 1994 the City of Wichita mill levy rate — the rate at which property is taxed — was 31.290. In 2016 it was 32.685, based on the city’s Comprehensive Annual Financial Report and the Sedgwick County Clerk. That’s an increase of 1.395 mills, or 4.46 percent, since 1994. (These are for taxes levied by the City of Wichita only, and do not include any overlapping jurisdictions.)
In 2015 the mill levy was 32.686, so the mill levy dropped by .001 for 2016. That’s a refreshing change. While the city says the mill levy hasn’t increased, the nearby table and summary above indicate otherwise.
It is true that the Wichita City Council did not take explicit action to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.
While the city doesn’t have control over the assessed value of property, it does have control over the amount it decides to spend. As can be seen in the chart of changes in the mill levy, the council decides to spend more than the previous year’s mill levy generates in taxes. Therefore, tax rates rise.
Also, while some may argue that an increase of 4.46 percent over two decades is not very much, this is an increase in a rate of taxation, not actual tax revenue. As property values rise, and as the mill levy rises, property tax bills rise rapidly.
The total amount of property tax levied is the mill levy rate multiplied by the assessed value of taxable property. This amount has risen, due to these factors:
- Appreciation in the value of property
- An increase in the amount of property
- Spending decisions made by the Wichita City Council
Application of tax revenue has shifted
The allocation of city property tax revenue has shifted over the years. According to the 2010 City Manager’s Policy Message, page CM-2, “One mill of property tax revenue will be shifted from the Debt Service Fund to the General Fund. In 2011 and 2012, one mill of property tax will be shifted to the General Fund to provide supplemental financing. The shift will last two years, and in 2013, one mill will be shifted back to the Debt Service Fund. The additional millage will provide a combined $5 million for economic development opportunities.”
In 2005 the mill levy dedicated to debt service was 10.022. In 2016 it was 8.508. That’s a reduction of 1.514 mills (15.1 percent) of property tax revenue dedicated for paying off debt. Another interpretation of this is that in 2005, 31.4 percent of Wichita property tax revenue was dedicated to debt service. In 2016 it was 26.0 percent.
This shift has not caused the city to delay paying off debt. This city is making its scheduled payments. But we should recognize that property tax revenue that could have been used to retire debt has instead been shifted to support current spending. Instead of spending this money on current consumption — including economic development spending that has produced little result — we could have, for example, used that money to purchase some of our outstanding bonds.
What the city council says
Despite the data that is readily available in the city’s comprehensive annual financial reports, some choose to remain misinformed or uninformed. The following video from 2012 provides insight into the level of knowledge of some former elected officials and city staff. Based on recent discussions with city officials, things have not improved regarding present staff.
A research project by The Brookings Institution illustrates the poor performance of the Wichita-area economy.
For this year’s report, the news is not good. For the period 2010 to 2015, Wichita ranks 88th in growth, 69th in prosperity, and 44th in inclusion. (The 100 largest metro areas were ranked.)
Looking at just the most recent year, 2014 to 2015, Wichita ranks 73rd in growth, 42nd in prosperity, and 9th in inclusion.
So perhaps there is hope for progress, in that the rankings for the most recent year are better than the rankings for the past five years.
Brookings computed a measure called “Metro area competitive shift.” It’s described as “The difference between the actual job growth and the expected job growth. It indicates whether the metro area overperformed or underperformed given its industrial structure.”
For the period 2010 to 2015, Wichita scored -4.2 percent. For 2014 to 2015, the measure is -0.5 percent. Again, perhaps a good sign.
Looking at more recent data gathered from the Bureau of Labor Statistics through December 2016, we see that while total nonfarm employment rises, manufacturing employment has remained steady since 2010. But, after a sharp drop during the last recession, aerospace manufacturing employment has been on a downward trend since 2010. This is relevant because Wichita’s economic development practice provides much subsidy to companies in the aircraft manufacturing industry. These subsidies increase the cost of government for other business firms, including — especially — the young firms that are the fuel for a dynamic economy.
When comparing total nonfarm employment in Wichita to that of the nation, we see that while Wichita is growing, it is growing at a slower rate than the nation.
There’s been much investment in downtown Wichita, we’re told, but the assessed value of property isn’t rising.
Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base. Over the past ten years, we’re told that there has been one billion dollars in investment in downtown Wichita, including projects in progress.1
To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.
Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property, or for commercial property sometimes an income-based method is used. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.
With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little).
So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?
The answer is that after a period of increasing values, the assessed value of property in downtown has been declining. The peak was in 2008. The nearby table holds the figures.
This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.
Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars over the last ten years, we are told.
A few years ago the city said that the decline was due to the legislature exempting business equipment and machinery from the property tax rolls. Undoubtedly this was true when the law took effect, which was in 2006. It could also explain the some of the drop for a few years after that.
But for the last several years this factor is gone. At any rate, I believe its effect was small compared to the value of real property.
Also: How how does the assessed valuation in the SSMID compare to the city as a whole? Nearby is a chart of the percent change in assessed valuation for each year, comparing the SSMID with the city as a whole less the SSMID. In other words, Wichita minus downtown. The SSMID is underperforming the city.
So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?
I don’t have enough data to answer this question. But we need to know.
- Fluhr, Jeff. Downtown Wichita being transformed. Wichita Eagle, September 4, 2016. http://www.kansas.com/opinion/opn-columns-blogs/article99291922.html. ↩
An interactive visualization of Wichita-area employment by industry.
The Bureau of Labor Statistics, part of the United States Department of Labor, makes monthly employment statistics available. I’ve gathered them for the Wichita metropolitan area and present them in an interactive visualization.
This data comes from the Current Employment Statistics, which is a monthly survey of employers.1
The three tabs along the top of the visualization represent three different views of the data; one table and two charts. Employment figures are in thousands. All series except one are not seasonally adjusted.
- Bureau of Labor Statistics. Current Employment Statistics data and their contributions as key economic indicators. www.bls.gov/opub/mlr/2016/article/current-employment-statistics-data-and-their-contributions-as-key-economic-indicators.htm. ↩
In this episode of WichitaLiberty.TV: Co-host Karl Peterjohn joins Bob Weeks to discuss the Kansas congressional nominating conventions, taxing and spending in Topeka, and Wichita economic development and promotion. View below, or click here to view at YouTube. Episode 139, broadcast February 19, 2017.
- Spending and taxing in Kansas. Difficulty balancing the Kansas budget is different from, and has not caused, widespread spending cuts.
- The Wichita economy, according to Milken Institute. The performance of the Wichita-area economy, compared to other large cities, is on a downward trend.
- Greater Wichita Partnership. Greater Wichita Partnership features untruthful information on its website, which casts doubt on the reliability of the organization and the City of Wichita.
- Activate Wichita, an embarrassment. A communications initiative of the City of Wichita brings embarrassment to our city.
- ‘Activate Wichita’ illustrates city approach to citizen involvement. A City of Wichita outreach system is lightly used, and risks gathering only positive feedback.
In Wichita, we see another example of how once government starts a surveillance program, it probably won’t produce the promised results, yet will be expanded.
This week the Wichita City Council will consider adding more surveillance cameras to Old Town. City documents don’t specify how many video cameras will be installed as part of the $618,261 program (for one-time installation costs only), except that it may be “as many as 100.” The city is also asking council members to pass an ordinance with bonding authority of up to $750,000 to pay for this project. In other words, the city is borrowing to pay for this system.1
This proposed expansion of camera surveillance is another expansion of police powers in Wichita at the loss of civil liberties.2 In 2014 the city designated Old Town an “entertainment district,” giving the city increased powers to attempt to control crime.3 Critics are concerned that the extra enforcement measures granted to entertainment districts are discriminatory to certain minority groups.4
This proposed expansion of cameras is not likely to be the last. Wichita’s police chief is seeking to add more surveillance and cameras.5
Across the county, those concerned with the loss of civil liberties and privacy are concerned about the expansion of the surveillance state. Adding irony to this debate are the remarks of Wichita City Council Member Janet Miller (district 6, north central Wichita). She called the addition of the new cameras “huge” and “exciting,” adding that she is “very, very happy” at their addition.6 The irony is that she would insist that she is a protector of civil rights.
What are civil rights important in this matter? Discussing this matter on Facebook, one local political activist wondered, “How long before someone is being blackmailed with footage from a police surveillance cam, for stumbling down the road, or some other harmless but embarrassing scenario?”
In response, I added, “Or blackmailed for marital infidelity, or entering a gay bar, a marijuana dispensary, a church, an STD clinic, an abortion doctor’s office, or maybe being spotted dropping off an anonymous tip to the newspaper.” (Well, we don’t have marijuana dispensaries, but we do have complimentary stores.) (There are two newspapers in Old Town. Well, one is across the street from Old Town, but is moving into Old Town.)
We have to wonder whether the cameras work as advertised. The website You Are Being Watched, a project of the American Civil Liberties Union, comes to this conclusion: “An increasing number of American cities and towns are investing millions of taxpayer dollars in surveillance camera systems. But few are closely examining the costs and benefits of those investments, or creating mechanisms for measuring those costs and benefits over time. There is extensive academic literature on the subject — studies carried out over many years — and that research demonstrates that video surveillance has no statistically significant effect on crime rates. Several studies on video surveillance have been conducted in the UK, where surveillance cameras are pervasive. The two main meta-analyses conducted for the British Home Office (equivalent to the US departments of Justice and Homeland Security) show that video surveillance has no impact on crime whatsoever. If it did, then there would be little crime in London, a city estimated to have about 500,000 cameras.”
An irony is that law enforcement likes recording citizens, but not the other way around. As John Stossel has noted, police don’t like to be recorded. In some states its a crime to tape a police officer making an arrest. A video excerpt from Stossel’s television shows the attitudes of police towards being recorded. At Reason Radley Balko details the problem, writing “As citizens increase their scrutiny of law enforcement officials through technologies such as cell phones, miniature cameras, and devices that wirelessly connect to video-sharing sites such as YouTube and LiveLeak, the cops are increasingly fighting back with force and even jail time—and not just in Illinois. Police across the country are using decades-old wiretapping statutes that did not anticipate iPhones or Droids, combined with broadly written laws against obstructing or interfering with law enforcement, to arrest people who point microphones or video cameras at them. Even in the wake of gross injustices, state legislatures have largely neglected the issue.”
Writing for Cato Institute, Julian Sanchez noted:
It is also unlikely that cameras will be especially helpful in deterring such attacks. Even when it comes to ordinary crime — where the perpetrators are generally motivated by the desire to make a quick buck without getting caught — studies have been mixed and inconclusive about the value of CCTV cameras as a crime deterrent.
Some show significant declines in crime in some regions of cities with camera networks, which may be attributable to the cameras — but many show no discernible effect at all.
Of note, one country with a government that really likes surveillance cameras is China.
- Wichita City Council agenda for February 14, 2017. ↩
- Weeks, Bob. Surveillance state arrives in Wichita. https://wichitaliberty.org/liberty/surveillance-state-arrives-in-wichita/. ↩
- Weeks, Bob. Wichita seeks to form entertainment district. https://wichitaliberty.org/wichita-government/wichita-seeks-form-entertainment-district/. ↩
- Class-action lawsuit alleges racial discrimination at Power & Light. Kansas City Star, March 10, 2014. http://www.kansascity.com/news/local/article341880/Class-action-lawsuit-alleges-racial-discrimination-at-Power–Light.html. ↩
- Finger, stan. Police seek answers, reversal as aggravated assaults surge. Wichita Eagle, February 10, 2017. http://www.kansas.com/news/local/crime/article132071799.html. ↩
- Lefler, Dion. Wichita working to bring Old Town under camera surveillance. Wichita Eagle, February 10, 2017. http://www.kansas.com/news/politics-government/article131952109.html. ↩
Greater Wichita Partnership features untruthful information on its website, which casts doubt on the reliability of the organization and the City of Wichita.
Greater Wichita Partnership uses the url of its predecessor, the Greater Wichita Economic Development Coalition, or GWEDC. GWP is in charge of efforts to develop the economy in the greater Wichita area. It describes itself as “a driving force in building a remarkable city and region.”1
But there is a problem. Based on the information GWP makes available on the front page of its website, I don’t have much confidence in the organization’s efforts. And that’s too bad.
In the past I’ve observed how GWEDC — that’s the predecessor to GWP — was derelict in keeping its information current. In 2014, I noticed that GWEDC credited itself with recruiting a company named InfoNXX to Wichita.2 But GWEDC did not update its website to reflect current conditions. When I looked at GWEDC’s website in October 2013, I found this on a page titled Office Operations:
Wichita hosts over a dozen customer service and processing centers — including a USPS Remote Encoding Center (985 employees), InfoNXX (950), T-Mobile (900), Royal Caribbean (700), Convergys (600), Protection One (540), Bank of America (315) and Cox Communications (230.)
The problem was this: At the time I looked at the GWEDC website in October 2013, InfoNXX had closed its Wichita operations in 2012.3 Still, the official Wichita-area economic development agency touted the existence of a company that no longer existed in Wichita, and claimed a job count that the company never achieved. (Also, at that time the USPS facility was in the process of closing and eliminating all Wichita jobs.)
Now, the Greater Wichita Partnership website trumpets — on its front page — the expansion of a company that has actually contracted its operations in Wichita.
The company is NetApp, a maker of computer server storage systems. It’s the type of high tech company all cities are recruiting, and for which cities and states will open the economic development incentives pocketbook. Locally, Wichita and the State of Kansas announced expansion plans for NetApp operations in Wichita in 2012. But by the end of 2015, NetApp was not meeting its job goals in Wichita, according to information from Sedgwick County. Since then, NetApp announced two rounds of job cuts, with the cuts in Wichita unspecified.4 5
NetApp has not met the lofty expectations Wichita and Kansas officials promoted. That’s unfortunate, and perhaps the situation will improve and NetApp will grow.
Relevant to public policy is that NetApp was slated to receive a lot of incentives from many levels of government, up to $35 million.6 It is likely impossible to determine how much of these incentives were actually paid to NetApp. We do know that both the City of Wichita and Sedgwick County stopped paying incentives to NetApp, as these incentives were predicated on achieving certain levels of job counts, and NetApp has not met them.
But the lesson to learn today is that the Greater Wichita Partnership, the agency in charge of economic development in the area, still advertises NetApp as a success.
The problem is not only the blatant lie that GWP promotes prominently: “NetApp doubles its Wichita footprint.” It’s a serious problem that GWP has not updated its website to reflect reality. What if a company considering Wichita for expansion or location checks the NetApp story? How would such a company reconcile reality with what GWP promotes? What does this say about the reputation and reliability of GWP?
I don’t expect GWP to highlight its failures. But we ought to expect GWP to care enough about the truth to remove false information from such a prominent presentation.
In September 2015 James Chung delivered several lectures on the Wichita-area economy and its outlook.7 In the event I attended, Chung showed examples of web pages from the Des Moines and Omaha chambers, and contrasted them to a similar page from the Wichita chamber. Chung got it wrong, as the page he showed to illustrate the Wichita chamber was a print version of the page, which — intentionally — is a simplified version of the page designed for viewing in a web browser.8 The print version of the page, however, is what appears in Google, and most people will not investigate beyond that.
Still, the Wichita chamber page was stale compared to the others. And Chung’s point was, and is, relevant: First impressions matter.
The Wichita chamber’s site is better now. But someone at the Greater Wichita Partnership didn’t get the message. Content — reliable content — counts.
- Greater Wichita Partnership. About us. http://www.gwedc.org/about_us/about_us. ↩
- Weeks, Bob. Wichita economic development not being managed. https://wichitaliberty.org/wichita-government/wichita-economic-development-managed/. ↩
- Siebenmark, Jerry. KGB to close Wichita call center by end of January. Wichita Eagle. Decenber 7, 2011. http://www.kansas.com/news/business/article1081923.html. ↩
- Horwath, Bryan. NetApp cuts employees in Wichita. Wichita Eagle. March 2, 2016. http://www.kansas.com/news/business/article63559417.html. ↩
- Rengers, Carrie. NetApp restructures, announces layoffs. Wichita Eagle. November 3, 2016. http://www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article112339362.html. ↩
- Weeks, Bob. NetApp economic development incentives: all of them. https://wichitaliberty.org/wichita-government/netapp-economic-development-incentives-all-of-them/. ↩
- Wenzl, Roy. Analyst presents sobering view of Wichita economy, community. Wichita Eagle, September 22, 2015. http://www.kansas.com/news/business/article36236142.html. ↩
- For a view of the page as it looked on April 5, 2015, see http://web.archive.org/web/20150405131957/http://wichitachamber.org/news_room-wichita_accolades.php. ↩
A communications initiative of the City of Wichita brings embarrassment to our city.
At one time Activate Wichita was touted by Wichita city officials as an “online conversation about the future of the Greater Wichita metropolitan area.”
It’s described on its companion Facebook page as: “Activate Wichita is an innovative new way to be heard on the issues you’re passionate about. Whether your passion is local arts, the environment, or employment creation, you can log on and voice your opinion and local leaders will respond. Together communities come up with solutions and vote on the best course.”
For a system designed to be an interactive conversation, there aren’t many people talking. And maybe I didn’t look diligently enough, but I didn’t see local leaders responding.
At one time Activate Wichita had some activity. Then it changed. There was a different design. All the old content was gone. There was very little new content.
In December 2015 I inquired to the city and was told that My Sidewalk, the company that provides the software that runs Activate Wichita, made changes to improve the system. I was also told: “While the City has not used Activate Wichita as extensively in 2015 as in previous years, our staff has been working with the My Sidewalk support team to learn how to best make effective use of the new design as part of City engagement initiatives. The Library has a series of engagement conversations in planning for 2016. We expect increased use from several other departments as well.”
Whatever plans the city had for Activate Wichita in 2016, it doesn’t look like they materialized. As of today, there is only one active item on Activate Wichita, from March 2016. Or it could be March 2015; it doesn’t say. The companion Facebook page for Activate Wichita has only three posts since the middle of 2016, with the most recent from August.
The harm of Activate Wichita
This lack of attention to these communication initiatives might not be very important except that the city prominently features Activate Wichita. An inviting graphic appears prominently on nearly every page at wichita.gov, the city’s website.
If someone using the wichita.gov city website happens to click on the Activate Wichita logo, they would see something that can be described — charitably — as pathetic. Think of someone considering moving to Wichita, or a company planning to locate or expand in Wichita. Think of people already in Wichita. Is Activate Wichita the impression the city wants to make?
Remember, Activate Wichita is prominent on the city’s website. The city devotes precious web space to promoting it. I can understand that reviving Activate Wichita into something useful is time-consuming.
But minimizing the damage should be a snap. Just remove the Activate Wichita link from the city’s website. When Activate Wichita is revived, restore the link.
By the way, did you know the city increased the size of its communication staff by hiring a Strategic Communications Director? He’s been at work almost two years.
A records request to the City of Wichita results in data as well as insight into the city’s attitude towards empowering citizens with data.
As part of an ongoing transparency project, I asked the City of Wichita for check register data. I’ve made the data available in a visualization using Tableau Public. Click here to access the visualization.
Analyzing this data requires a bit of local knowledge. For example, there is a vendor named “Visit Wichita” that started to receive monthly payments in March 2015. What about payments for January and February? Those were made to a vendor named “Go Wichita,” which changed its name to “Visit Wichita.”
Similarly, there are payments made to both “Westar Energy” and “Westar Energy — EDI.” These are the same entities, just as “Visit Wichita” and “Go Wichita” are the same entity. To the city’s credit, the matching pairs have the same vendor number, which is good. But resolving this requires a different level of analysis.
There are interesting entries. For example, the city had been spending a few hundred dollars per month to the Kansas Turnpike Authority. Then in July 2015, the city paid $3.7 million to KTA. A quick search of city council agenda packets didn’t reveal any reason for this.
Of note, it looks like there were 1,475 checks issued in amounts $20 or less over a period of nearly two years. Bank of America has estimated that the total cost of sending a business check ranges from $4 to $20.
The records request
The city supplied this data in an Excel spreadsheet, in an arrangement that can easily be analyzed in Excel or loaded into other programs. This is a step forward. Three years ago, Wichita could supply data of limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult to translate the image data into machine-readable text, and even more difficult to reorganize it to a useful arrangement or format for analysis.
In 2015 had to pay $24.00 to the city for this data. That’s a problem. It is by now routine for governmental agencies to post spending data like this, but not at the City of Wichita. Upon inquiry, city officials told me that the present financial management system “does not include many modern system features such as an ‘open checkbook.’” An “open checkbook” refers to a modern web interface where citizens can query for specific data and perhaps perform other analysis. An example is Denver’s open checkbook.
While the next-generation Wichita financial system will probably have such a feature, there’s no reason why citizens can’t experience some of the benefits now. The spreadsheet of spending data like that I paid for could easily be posted on the city’s website on a monthly basis. People like myself will take that data and make it more useful, as I did. There is no reason why this should not be happening.
When I learned of the fee for these records in 2015, I asked for a waiver, sending this to the city’s records official:
I’d like to ask for a waiver of the requested fee. I ask this because check register data is an example of records that many governmental agencies make freely available on their websites. The Wichita Public School District and Sedgwick County are two local examples.
I’d like to also call attention to the U.S. Freedom of Information Act, which allows for fee waivers in some circumstances: “…fee waivers are limited to situations in which a requester can show that the disclosure of the requested information is in the public interest because it is likely to contribute significantly to public understanding of the operations and activities of the government and is not primarily in the commercial interest of the requester.”
I suggest that the records I am requesting will indeed “contribute significantly to public understanding of the operations and activities of the government,” and that it is in the public interest of the people of Wichita that these records be freely available.
I received an answer:
Your request for waiver of fees is denied. KORA allows fees to be collected prior to finding and producing the document you seek. KSA 45-218(f). The extensive statute setting out how fees are to be determined, KSA 45-219, does not contain any provision for waiver in the manner you suggest.
The City will provide the document to you upon payment as invoiced.
Jay C. Hinkel,
Deputy City Attorney
Mr. Hinkel is absolutely correct. Governmental agencies in Kansas have the right to charge for records, and the Kansas statutes do not mention the waiving of fees as do the federal statutes. But the Kansas Open Records Act does not require cities to charge for providing records, especially for records that the city should already be providing. Especially when citizens are willing to take that data and make it better, at no charge to the city.
(For the most recent records request, the city waived its intended fee of $24.00, noting this waiver is for the current request only. The city acknowledges that it temporarily misplaced my request, and as a result, was late in responding. I believe that is the reason for the fee waiver.)
Wichita’s attitutude, from top down
Hinkel provided a lawyer’s answer. Here, however, is the public policy the city promotes, from a Wichita city news release from 2013:
“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”
The importance of transparency. The city wants to empower and engage citizens by providing information. Well. I offered to “contribute significantly to public understanding of the operations and activities of the government,” but had to pay to do so.
When I asked city officials for clarification of why I had to pay to receive these records, communications staff told me: “I should note that the City has won multiple awards for openness and citizen participation, but City leaders recognize this work is never done. They strive each and every day to become more open and transparent and will continue to do so.”
I must disagree. This is not “open and transparent.” This is not how to “empower and engage” the people of Wichita. Not even close.
The city lags far behind comparable agencies in providing access to data. It’s been almost two years since the city expanded its staff by adding a Strategic Communications Director. It doesn’t seem that this has helped to provide information to citizens.
An interactive visualization of employment in metropolitan areas.
Employment data from the Bureau of Economic Analysis, an agency of the United States Department of Commerce, is available for all metropolitan areas and major industries. I present this data in an interactive visualization using Tableau Public. In this visualization you may access several different presentations of the data. You may filter for specific areas, industries, and time periods. The data is available in a table of employment numbers, or in series presented as the percentage change since the first value. This illustrates relative growth, rather than magnitude, of employment. This is annual data from BEA table CA25N1 through 2015, the last year available at this time.
In the nearby example from the visualization we can see that Wichita has performed poorly compared to some peers of interest.
You may use the visualization yourself by clicking here.
Of note, the definitions of MSAs change from time to time.2
- Bureau of Economic Analysis. Regional Economic Accounts. https://www.bea.gov/regional/. ↩
- Broomfield County, CO, was created from parts of Adams, Boulder, Jefferson, and Weld counties effective November 15, 2001. Estimates for Broomfield county begin with 2002.
Estimates from 2008 forward separate Skagway-Hoonah-Angoon Census Area into Skagway Municipality and Hoonah-Angoon Census Area. Estimates from 2009 forward separate Wrangell-Petersburg Census Area into Petersburg Census Area and Wrangell City and Borough. In addition, a part of the Prince of Wales-Outer Ketchikan Census Area was annexed by Ketchikan Gateway Borough and part (Meyers Chuck Area) was included in the new Wrangell City and Borough. The remainder of the Prince of Wales-Outer Ketchikan Census Area was renamed Prince of Wales-Hyder Census Area. Petersburg Borough was created from part of former Petersburg Census Area and part of Hoonah-Angoon Census Area for 2013 forward. Prince of Wales-Hyder Census Area added part of the former Petersburg Census Area beginning in 2013. For years 2009-2012, Petersburg Borough reflects the geographic boundaries of the former Petersburg Census Area. Wade Hampton Census Area was renamed Kusilvak Census Area on July 1, 2015.
Virginia combination areas consist of one or two independent cities with 1980 populations of less than 100,000 combined with an adjacent county. The county name appears first, followed by the city name(s). Separate estimates for the jurisdictions making up the combination area are not available. Bedford County, VA includes the independent city of Bedford for all years.
Shannon County, SD was renamed to Oglala Lakota County, SD on May 1, 2015.
Nonmetropolitan portion includes micropolitan counties. ↩
In Wichita, it turns out we have to sell a hotel in order to fix our streets.
Update: The Council approved these projects.
In September the Wichita City Council decided to sell the Hyatt Regency hotel in downtown Wichita for $20 million. Now the council will consider two proposals for spending this money.
One proposal is to spend $10 million on street repair, called “one-time pavement maintenance projects” in city documents.1
A second proposal is to spend $4 million on transit over the next four years. This is pitched as sort of a “bridge to sustainability.” That is, if the Wichita transit system can make it through the next four years, it can — somehow — become sustainable. The plan contains idea like this: “Extensive public education will be used to build ridership. Transit information will be available to a wider audience. Potential users will be engaged in more one-on-one manner.”2
Whatever the merits of these spending programs, Wichita is taking a capital asset and using it to fund current spending. In particular, street maintenance needs to be performed continuously. Here, the city has not been taking care of streets that taxpayers paid for and entrusted to the city for care. It turns out we have to sell a hotel in order to fix our streets. But street maintenance is something that needs to be performed — and paid for — every year. We shouldn’t have to rely on a sale of a capital asset to fund daily needs.
Following, from October, what the city should do with the Hyatt proceeds.
Wichita, give back the Hyatt proceeds
Instead of spending the proceeds of the Hyatt hotel sale, the city should honor those who paid for the hotel — the city’s taxpayers.
The City of Wichita has sold the Hyatt Regency Hotel for $20 million. Now, what should the city do with these funds? In a workshop this week, the city manager and council recognized that these funds should not be used for operating purposes. This is important. The Hyatt Hotel was paid for with long-term debt, which the city says has been retired. The proceeds from this sale should be used in a similar way: For long-term capital investment, not day-to-day operating expenses. But the council heard two proposals that are decidedly more like operating expenses rather than capital investment.
One proposal, presented by Public Works Director Alan King, is to spend $10 million on street repair over two years. Part of that expense is to purchase a new truck, which is a capital, not operating, expense. But King later revealed that the truck could be purchased out of the existing capital budget.
Street maintenance, however, is an operating expense.
A second proposal, from the Wichita Transit System, would use about $4 million to sustain and improve current bus service. It was presented to the council as a “bridge to a long term solution.”
This, too, is an operating expense.
As these proposals were presented in a workshop, no decision was made.
These two proposed uses of the $20 million Hyatt sales proceeds are contrary to the goal of not using the funds for operating purposes. If the city decides to use the sales proceeds in this way, a capital investment will have been sold in order to pay for day-to-day expenses.
Instead of spending on these two projects, the city should simply return the money to those who paid for the Hyatt in the first place. Those people are, of course, the taxpayers of Wichita. It would be difficult to give back the funds to individual taxpayers in proportion to the amount they supplied. So what the city should do is retire $20 million of the city’s long-term debt.
If not that, then the city should use the Hyatt proceeds to pay for another long-lived asset, perhaps the new downtown library. Either of these alternatives respects the principles of sound financial practice, and also respects the taxpayers.
The performance of the Wichita-area economy, compared to other large cities, is on a downward trend.
While good news for the Wichita metropolitan area economy is becoming more frequent, it’s important to compare how Wichita is doing relative to other cities. The Milken Institute produces ranking of cities based on their economic performance in its Best-Performing Cities project.
The ranking are composed of a number of factors such as short-term and long-term job growth, short-term and long-term wage and salary growth, growth of high-tech industry, and high-tech location quotient.1 Milken also notes: “Best-Performing Cities is solely an outcomes-based index. It does not incorporate input measures (business costs, cost-of-living components, and quality-of-life conditions, such as commute times or crime rates). These measures, although important, are prone to wide variations and can be highly subjective.”2
I’ve gathered data from the Milken project for Wichita. The data starts in 2003, the first year for which data is available. The data in the table is the rank for Wichita among 200 large metropolitan areas. The best rank is 1, while the worst is 200. In the line chart for each data series, I’ve inverted the data so that the best performance is at the top.
As the charts show, for overall ranking, Wichita has been declining for some time.
This does not mean the Wichita-area economy is on the decline. But it means the relative performance of Wichita has not kept up with other cities. As can be seen in the chart of Wichita, Kansas, and U.S. non-farm employment, Wichita employment is rising. But it isn’t rising as fast as the nation, as can be seen in the widening gap between Wichita and the nation since 2010.
- “High-tech location quotients (LQs), which measure the industry’s concentration in a particular metro relative to the national average, are included to gauge an area’s participation in the knowledge-based economy. We also measure the number of specific high-tech fields (out of a possible 19) whose concentrations in an MSA or MD are higher than the national average.” Milken Institute. 2015 Milken Institute Best-Performing Cities. http://www.best-cities.org/2015/best-performing-cities-report-2015.pdf. ↩
- ibid. ↩
- Greater Wichita Partnership. In Wichita, you will find the knowledge & skill base to get the job done well. http://www.gwedc.org/site_selectors/labor_data. ↩
- Greater Wichita Partnership. Air Capital of the World. http://www.gwedc.org/key_industries/aerospace_aviation. ↩
The evaluation of economic development incentives in Wichita and Kansas requires thinking at the margin, not the entirety.
When considering the effect of economic development incentives, cities like Wichita use a benefit-cost analysis to determine whether the incentive is in the best interests of the city. The analysis usually also considers the county, state, and school districts (although these jurisdictions have no say over whether the incentive is granted, with a few exceptions). The idea is that by paying money now or forgiving future taxes, the city gains even more in increased tax collections. This is then pitched as a good deal for taxpayers: The city gets more jobs (usually) and a “profit,” too.
Economic activity usually generates tax revenue that flows to governmental agencies. When people work, they pay income taxes. When they make purchases, they pay sales taxes. When they buy existing property or create new property, they pay property taxes. This happens whether or not the economic activity is a result of government incentives. This is a key point that deserves more exploration.
Government often claims that without an incentive provided by government, a company would not have located in Wichita. Or, without the incentive, it would not have expanded in Wichita. Now, the city says incentives are necessary to persuade companies to consider remaining in Wichita rather than moving somewhere else.1
But there are a few problems with the arguments that cities, states, and their economic development agencies promote. One is that the increase in tax revenue happens regardless of whether the company has received incentives. Therefore, the benefit-cost ratio calculations are valid only if incentives were absolutely necessary. Otherwise, government claims credit for something that was going to happen anyway. This is a big question that deserves exploration.
For example, what about all the companies that locate to Wichita, or expand in Wichita, or simply remain in Wichita without receiving incentives? How do we calculate the benefit-cost ratio when a company receives no incentives? The answer is it can’t be calculated, as there is no government cost, so the divisor in the equation is zero. Instead, there is only benefit.
Then, we don’t often ask why some companies need incentives, and others do not. Do the companies that receive incentives really need them? Is it really true that a business investment is not feasible without subsidy? Why do some companies receive incentives multiple times while others thrive without incentives?
We may never know
We may never know the answer to these questions. Here’s why. Suppose fictional company XYZ Enterprises, Inc. dangles the idea of moving from Wichita to some other city. XYZ cites incentive packages offered by other cities. Wichita and the state then come up with millions in incentives, and XYZ decides to remain in Wichita. Question: Were the incentives necessary? Was the threat to move genuine? If XYZ admits the threat was not real, then it has falsely held Wichita and Kansas hostage for incentives. If the city or state admits the threat was not real, then citizens wonder why government gave away so much.2
So we’ll never really know. Everyone involved has incentive to maintain the fiction and avoid letting the truth leak out.
A small lever moves big boulders, they say
Related is that jurisdictions may grant relatively small incentives and then take credit for the entire deal. I’ve been told that when economic development agencies learn of a company moving to an area or expanding their Wichita operations, they swoop in with small incentives and take credit for the entire deal. The agency is then able to point to a small incentive and take credit for the entire deal. As you can imagine, it’s difficult to get the involved parties to speak on the record about this.
Further, governments may not credit the contribution of other governments. In the past when the Wichita economic development office presented information about an incentive it proposed to offer to a company, it would sometimes list the incentives the company is receiving from other governments. As an example, when the city offered incentives to NetApp in 2012, the city’s contribution was given as a maximum of $418,000. The agenda material mentioned — obliquely — that the State of Kansas was involved in the incentive package. Inquiry to the Kansas Department of Commerce revealed that the state had promoted incentives worth $35,160,017 to NetApp.3 Wichita’s incentive contribution is just 1.2 percent of what the state offered, which makes us wonder if the Wichita incentive was truly needed. Nonetheless, Wichita city officials spoke as though the city alone was responsible for NetApp’s decision.
The importance of marginal thinking
When evaluating economic development incentives, we often fail to properly evaluate the marginal gains. Here’s an example of the importance of looking at marginal gains rather than the whole. In 2012, the City of Wichita developed a program called New HOME (New Home Ownership Made Easy). The crux of the program is to rebate Wichita city property taxes for five years to those who buy newly-built homes in certain neighborhoods under certain conditions.
The important question is how much new activity this program will induce. Often government takes credit for all economic activity that takes place. This ignores the economic activity that was going to take place naturally — in this case, new homes that are going to be built even without this subsidy program. According to data compiled by Wichita Area Builders Association and the WSU Center for Economic Development and Business Research — this is the data that was current at the time the Wichita city council made its decision to authorize the program — in 2011 462 new homes were started in the City of Wichita. The HOME program contemplated subsidizing 1,000 homes in a period of 22 months. That’s a rate of 545 homes per year — not much more than the present rate of 462 per year. But, the city has to give up collecting property tax on all these homes — even the ones that would be built anyway.
What we’re talking about is possibly inducing a small amount of additional activity over what would happen naturally and organically. But we have to subsidize a very large number of houses in order to achieve that. The lesson is that we need to evaluate the costs of this program based on the marginal activity it may induce, not all activity.
For more, see Wichita new home tax rebate program: The analysis.
- “But the Hawker Beechcraft deal is different, focused on saving existing jobs, not creating new jobs, and the result diverts millions in limited taxpayer funds, primarily state income tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.” Flentje, Edward. Brinkmanship with jobs. https://wichitaliberty.org/economics/brinkmanship-with-jobs/. ↩
- For more on this, see LeRoy, Greg. The Great American Jobs Scam. Especially chapter two, titled Site Location 101: How Companies Decide Where to Expand or Relocate. The entire book may be read online at http://www.greatamericanjobsscam.com/pages/preview-book.html. A relevant excerpt: “These prisoners’ dilemma games also enable companies to create fictions about cause and effect. These fictions can be used to create public versions of how deals happened that no one can credibly contradict, because the company’s real decision-making process will never be revealed. The most important fiction to maintain, of course, is that subsidies matter in deciding where a company expands or relocates. For example, being able to send secret signals to competing cities means companies can tell contradictory stories to different cities and have no fear of being exposed. If a company really has its heart set on City A, it can tell that city that it is in the hunt, but needs to do better. Meanwhile, it can send less urgent signals to Cities B and C, even if they offered bigger packages at first. Eventually, City A offers the biggest package, and the company announces its decision to go there.” ↩
- Weeks, Bob. NetApp economic development incentives: all of them. https://wichitaliberty.org/wichita-government/netapp-economic-development-incentives-all-of-them/. ↩
Several large employers in Wichita ask to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through.
This week the Wichita City Council will hold public hearings concerning the issuance of Industrial Revenue Bonds to Spirit AeroSystems, Inc and other companies.1 In the IRB program, government is not lending money, and Wichita taxpayers are not at risk if the bonds are not repaid. In fact, in the case of Spirit, the applicant company plans to purchase the bonds itself, according to city documents. Instead, the purpose of the IRB process is to allow Spirit to escape paying property taxes and, often, sales taxes.
These bonds will allow Spirit to avoid paying property taxes on taxable property purchased with bond proceeds for a period of five years. The abatement may then be extended for another five years. Usually these IRB issues also carry a sales tax exemption, but the agenda packet for this item does not mention such
City documents state that the property tax abatement will be shared among the taxing jurisdictions in these estimated amounts:
USD 259: $731,614
The listing of USD 259, the Wichita public school district, is likely a mistake by the city, as the Spirit properties lie in the Derby school district. This is evident below.
The forgiveness of taxes is justified by the city because it believes it will receive a return that is greater than the foregone taxes. This benefit-cost ratio is calculated by the Center for Economic Development and Business Research (CEDBR) at Wichita State University based on data supplied by the applicant company and the city. The rationale behind these calculations is a matter of debate. Even if valid, calculating the ratio with any degree of precision is folly, reminding us of the old saw “Economists use a decimal point to remind us they have a sense of humor.”
City of Wichita: 5.38 to 1
City General Fund: 2.60 to 1
City Debt Service Fund: NA to 1
Sedgwick County: 2.69 to 1
U.S.D. 260: 1.16 to 1
State of Kansas: 5.51 to 1
These figures reveal that the City of Wichita is forcing a decision on a neighboring jurisdiction that it would not accept for itself, unless it uses one of many exceptions or loopholes. This adverse decision is forced upon the Derby School District. It faces a benefit-cost ratio of 1.16 to 1, which is below the city’s standard of 1.30 to 1, unless an exception is cited. 2 The Derby School District is not involved in this action and has no ability to influence the issuance of these bonds, should it desire to.
We have to wonder why the City of Wichita imposes upon the Derby school district an economic development incentive that costs the Derby schools $731,614 per year, with a substandard payoff?
Of note, the Derby school district extends into Wichita, including parts of city council districts 2 and 3. These districts are represented by Pete Meitzner and James Clendenin, respectively.
In a second agenda item, the city will consider IRBs for a building being developed by Air Capital Flight Line. The beneficiary, however, is Spirit, as city documents state: “The requested sales tax exemption and property tax abatement will be passed on as a benefit to Spirit.”
The annual benefit in tax savings is given by the city as:
USD 259: $506,502
These values are offset by a Payment-In-Lieu-Of-Taxes (PILOT) estimated at $13,251 annually.
For benefit-cost ratios, the city supplies these:
City of Wichita: 3.65 to 1
City of Wichita Gen Fund: 1.83 to 1
City of Wichita Debt Serv: NA to 1
Sedgwick County: 2.09 to 1
USD 260: 1.00 to 1
State of Kansas 2.48: to 1
Here we see the same mistake with the Wichita and Derby school districts. We also see the Derby school district giving up $506,502 in tax revenue, with no positive return.
Spirit is not the only company asking for tax relief through IRBs this week. Three other companies are making similar requests. In none of these cases is economic necessity cited as a reason for escaping taxes. None are threatening to leave Wichita if the relief is not granted.
The problem with these actions
Part of the cost of these companies’ investment, along with the accompanying risk, is spread to a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. But we can’t identify which firms will be successful. So we need an economic development strategy that creates an environment where these young entrepreneurial firms have the greatest chance to survive. The action the Wichita city council is considering this week works against entrepreneurial firms. (See Kansas economic growth policy should embrace dynamism and How to grow the Kansas economy.)
A major reason why these tax abatements are harmful to the Wichita economy is its strangling effect on entrepreneurship and young companies. As these companies and others escape paying taxes, others have to pay. This increases the burden of the cost of government on everyone else — in particular on the companies we need to nurture.
There’s plenty of evidence that entrepreneurship, in particular young business firms, are the key to economic growth. But Wichita’s economic development policies, as evidenced by these actions, are definitely stacked against the entrepreneur. As Wichita props up its established industries, it makes it more difficult for young firms to thrive. Wichita relies on targeted investment in our future. Our elected officials and bureaucrats believe they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by government that shapes the future direction of the Wichita economy.
These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies receiving grants or escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form. Young entrepreneurial companies are particularly vulnerable.
Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”
In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”
In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.'”
(For a summary of the peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view, see Research on economic development incentives. A sample finding is “General fiscal policy found to be mildly effective, while targeted incentives reduced economic performance (as measured by per capita income).”)
There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates for everyone is an example of such a policy. Abating taxes for specific companies through programs like the Wichita city council is considering this week is an example of precisely the wrong policy.
In explaining the importance of dynamism, Hall wrote: “Generally speaking, dynamism represents persistent, annual change in about one-third of Kansas jobs. Job creation may be a key goal of economic development policy but job creation is a residual economic outcome of business dynamism. The policy challenge centers on promoting dynamism by establishing a business environment that induces business birth and expansion without bias related to the size or type of business.”
We need to move away from economic development based on this active investor approach, especially the policies that prop up our established companies to the detriment of dynamism. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.
This year American City Business Journals presented the results of a study of small business vitality in cities. 3 Wichita ranked at number 104 out of 106 cities studied. Awarding incentives to large companies places small business at a disadvantage. Not only must small business pay for the cost of government that incentivized companies avoid, small companies must also compete with subsidized companies for inputs such as capital and labor.
Pursuing large companies
Research has found that the pursuit of large companies doesn’t produce the desired growth: “The results show that large firms fail to produce significant net benefits for their host communities, calling into question the high-stakes bidding war over jobs and investment.” 4
This finding is counterintuitive. People can easily see the large companies. They are likely to know someone that works there. But it is the unseen effects that must be considered too, and that is rarely done.
- City of Wichita. City Council agenda packet for December 6, 2016. ↩
- Sedgwick County/City of Wichita Economic Development Policy. Available at www.wichita.gov/Government/Departments/Economic/EconomicDevelopmentDocuments/City%20of%20Wichita%20Economic%20Development%20Policy.pdf. ↩
- Wichita Business Journal. The State of Small Business: Wichita scores low in small biz vitality. Available at www.bizjournals.com/wichita/print-edition/2016/04/29/the-state-of-small-business-wichita-scores-low-in.html. ↩
- William F. Fox and Matthew N. Murray, “Do Economic Effects Justify the Use of Fiscal Incentives?” Southern Economic Journal, Vol. 71, No. 1, 2004, p. 79. ↩
Drivers — like me — on East Twenty-First Street in Wichita are happy that the work on a small bridge is complete, but may not be pleased with one aspect of the project.
It’s a small bridge, on East Twenty-First Street between Mosely and New York Streets. At 49 feet long it is designated a bridge by the Federal Highway Administration. And we’re glad it’s there.
But with city lane width guidelines for arterial streets at 11 feet, this four-lane bridge may not be not much longer than it is wide.1
Does it warrant the full commemorative treatment of a bronze plaque memorializing the elected officials and bureaucrats who happened to be in office at the time taxpayers paid for this bridge?
A city official told me that the plaque cost around $2500, and noted that the City Council approves them for each project.2
Why does the city spend so much on plaques for bridges that, in some cases, may not be much longer than wide? It’s a small matter, but these issues are symbolic of government’s attitude towards costs, and of some officials’ view of their own self-importance.
It’s presumptuous, that such a mundane accomplishment would be decorated so at the expense of taxpayers. More than this, it’s preposterous.
The City of Wichita is not alone. As I reported in The bridges of Sedgwick County are well marked, Sedgwick County does this, too. And doubly so. The bridge in Twenty-First Street in Wichita has one plaque, but even small bridges in Sedgwick County have two, one on each side.
- City of Wichita. *Street Design Guidelines, Approved by the City Council, December 2014. http://www.wichita.gov/Government/Departments/Planning/PlanningDocument/Street%20Design%20Guidelines-Final.pdf ↩
- Email correspondence with Gary Janzen, Wichita City Engineer and Assistant Director Public Works & Utilities, November 28, 2016. ↩