Tag Archives: Wichita city government

Sedgwick County trash franchising: on the road to economic perdition

I received this letter to Sedgwick County (Kansas) Commissioner David Unruh “over the transom” and I thought it merited reading by the general public. The author speaks of the “road to economic perdition.” I had to use the dictionary to refresh my memory of the exact meaning of the word “perdition.” While that term seems at first to be a little strong, I believe that trash franchising, like a ban on smoking, is just the first step in the plans of our local government officials. If politicians and newspaper editorialists can convince us that we require the force of government to take care of something as simple as picking up the trash — something that works very well already – it’s an easy jump to the next level of control. So perdition seems appropriate.

The May 21 Wichita Eagle reported that you and a number of other commissioners want to impose some sort of franchise on trash collection by cities operating in the area where Sedgwick County is responsible for trash disposal with state authorities. The Eagle quotes you as supporting a government franchise monopoly by haulers in specific areas as well as uniform terms for collection of residential refuse.

Before joining the commission I know that you were a businessman in the car repair business. Since government monopolies and uniformity in service is apparently preferable to free markets and open competition I hope that you will want to extend government into providing uniform monopoly in car repair as well as other private sector businesses. If the county’s goal is ending duplication of services and allegedly “wasteful” competition what basis do you have for only limiting franchising to trash hauling?

It is very clear to even the most casual consumer that there is significant variations in pricing among the folks repairing automobiles just like there are in the trash hauling business. There is a lack of uniformity in people getting their cars repaired too.

I must also note that an Unruh repair shop near 13th St. W. and Maize Rd. is only a short distance away from Westlink Auto Service. Having two firms competing for customers is obviously as duplicative and excessive as multiple trash firms going down the same street to collect refuse.

We have a similar situation nearby where two instances of two separate firms selling groceries are located on adjacent corners at 21st W and Maize Rd. (Walmart and Dillons) as well as Maize Rd. and W. Central (Aldi and Dillons).

Government monopolies have also a proven track record of performance. There is a name for this when university students study 20th century governments where these types of restrictions are commonplace.

Look how Wichita water and sewer rates have performed in the last few years and how it now appears likely that the city will be once again raising these rates significantly soon. Municipal power plants that dot many small Kansas towns also have a similar track record of costly performance for the citizens who have to pay the rates.

The City of Wichita got out of the trash hauling business in the late 1970’s for a reason. Establishing private/public franchise monopolies is a power that should be exercised very cautiously and carefully and has failed in the past. However, if you are going to expand local government’s roles in establishing ways of eliminating duplication of services and wasteful competition, you should fully understand where this road to economic perdition leads.

Trash Franchising in Wichita and Sedgwick County

Currently both Sedgwick County and Wichita are considering trash franchising.

On the surface, “franchising” sounds like a good thing. It sounds like someone’s opening a new Subway sandwich shop.

But what trash franchising does is to grant a monopoly to one (or sometimes a few) service providers for specific geographic areas. Under franchising, people living in an area will have either no choice, or perhaps limited choice, in choosing who picks up their trash. Rates will also be set by government.

The effect of this is that the profit motive for trash haulers is dramatically modified. Under franchising, trash companies have guaranteed customers paying mandated rates. What is the likely effect of this? I refer to Walter E. Williams, who said this: “Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest.”

The use of the term “franchising” glosses over the consequences of a government mandate of who customers may choose to do business with. Citizens need a better term that accurately describes what our government is considering. Unfortunately, I am having trouble coming up with such a term, so I am asking you for help.

So far I have these terms: “mandatory service provider selection,” “choice elimination,” “enforced selection,” and “trash service reduction program.”

As you see, none of these terms are very artful. So please help me. You may email your suggestions to [email protected], or leave them as a comment to this article. Comments may be anonymous.

Haze surrounds Wichita smoking ban

Remarks delivered to Wichita City Council, May 6, 2008. Listen here.

Smoking ban supporters claim that they have the right to go to bowling alleys, bars, and other such places without having to breath secondhand smoke. That’s false. No one has the right to be on someone else’s property on their own terms. The property owner controls those terms. If the bar owner lets the band play too loud (or maybe not loud enough), or the restaurant is too dimly lit, or the floor of the steakhouse covered with discarded peanut shells, do we want to regulate these things too?

Some have compared a smoking section in a restaurant to a urinating section in a swimming pool. This comparison is ridiculous. You can’t tell upon entering a swimming pool if someone peed in it. You can tell, however, upon entering a bar or restaurant if there is smoking going on.

Some make the argument that since we regulate businesses for health reasons already, why not regulate smoking? Without agreeing with the need for these regulations, the answer is this: First, these government regulations don’t necessarily accomplish their goal. People still become ill from food, for example. But there is some merit here. Just by entering a restaurant and inspecting the dining room and the menu, you can’t tell if the food is being stored at the proper temperature in the restaurant’s refrigerators. But you can easily tell if there’s smoking going on.

A system of absolute respect for private property rights is the best way to handle smoking. The owners of bars and restaurants have, and should continue to have, the absolute right to permit or deny smoking on their property. Markets -– that is, people freely making decisions for themselves -– will let property owners know whether they want smoking or clean air.

The problem with a smoking ban written into law rather than reliance on markets is that everyone has to live by the same rules. Living by the same rules is good when the purpose is to keep people and their property safe from harm. That’s why we have laws against theft and murder. But it’s different when we pass laws intended to keep people safe from harms that they themselves can easily avoid, just by staying out of those places where people are smoking. For the people who value being in the smoky place more than they dislike the negative effects of the smoke, they can make that decision.

This is not a middle-ground position, as there really isn’t a middle ground here. Instead, this is a position that respects the individual. It lets each person have what they individually prefer, rather than having a majority — no matter how lop-sided — make the same decision for everyone. Especially when that decision, as someone said, will “tick off everybody.” Who benefits from a law that does that?

How to pay for special tax treatment in Wichita

Remarks delivered to the Wichita City Council, April 15, 2008. Audio is available here.

The company that this warehouse is being built for is Cessna. In the end, it is that company that benefits from the property tax relief asked for today.

Mr. Mayor, members of the city council, I ask that you not vote to approve this request for a tax abatement, and that you cease this practice altogether. Alternatively, I ask that you adopt a practice that will help realize the costs of these actions.

It is no doubt difficult to compete with other states when they offer huge gifts to companies in order to lure them to their state. That’s a problem that needs to be addressed at a different level of government.

The matter before you now, however, is not the same. This company is not threatening, to my knowledge, to leave our area if the tax abatement is not granted. It appears they would build this facility even if the tax abatement is not granted.

The harmful effect of this tax abatement is this: When someone escapes paying taxes, someone else has to make up the difference. While the tax abatement being considered at this moment is relatively small, many are large, and when companies appear before this body week after week asking for tax favors, it adds up.

This same effect applies to the other governments that are affected: Sedgwick County, the Wichita public school district, and the State of Kansas. When one person does not pay, someone else has to pay more.

These special tax favors expose an inconsistency: business and government leaders tell us all the time that we must “build up the tax base.” Granting these tax favors destroys that base.

Now I don’t blame this company for asking for this tax favor. When councils, commissions, and legislatures indicate their willingness to grant these, businesses respond. So this company, of which I am a shareholder, by the way, is simply responding rationally to its environment.

But some of these companies that are asking for tax favors have problems with consistency. The president of this company has testified in favor of higher taxes to pay for building a facility that his company will benefit from. Now his company asks for relief from paying the taxes he wants others to pay.

As long as this body is willing to grant tax abatements and other special tax favors, I propose this simple pledge: that when the City of Wichita allows a company to escape paying taxes, that it reduce city spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.

Remarks to Wichita City Council, April 1, 2008

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

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

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

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

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

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

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

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

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

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

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

It’s not the same as pee in the swimming pool

In a column in the February 27, 2008 Wichita Eagle (“Smoking ban issue not one to negotiate”), columnist Mark McCormick quotes Charlie Claycomb, co-chair of Tobacco Free Wichita, as equating a smoking section in a restaurant with “a urinating section in a swimming pool.”

This is a ridiculous comparison. A person can’t tell upon entering a swimming pool if someone has urinated in it. But people can easily tell upon entering a restaurant or bar if people are smoking.

Besides this, Mr. McCormick’s article seeks to explain how markets aren’t able to solve the smoking problem, and that there is no negotiating room, no middle ground. There must be a smoking ban, he concludes.

As way of argument, McCormick claims, I think, that restaurants prepare food in sanitary kitchens only because of government regulation, not because of markets. We see, however, that food is still being prepared in unsanitary kitchens, and food recalls, even in meat processing plants where government inspectors are present every day, still manage to happen. So government regulation itself is not a failsafe measure.

Markets — that is, consumers — do exert powerful forces on businesses. If a restaurant like McDonald’s serves food that makes people ill, which do you think the restaurant management fears most: a government fine, or the negative publicity? Even small local restaurants live and die by word of mouth. Those that serve poor quality food or food that makes people ill will suffer losses, not as much from government regulation as from the workings of markets.

But I will grant that Mr. McCormick does have a small point here. Just by looking at food, you probably can’t tell if it’s going to make you ill to eat it. Someone’s probably going to need to get sick before the word gets out. But you easily can tell if someone’s smoking in the bar or restaurant you just entered. Or, if people are smoking but you can’t detect it, I would image that the danger to health from breathing secondhand smoke is either nonexistent or very small.

The problem with a smoking ban written into law rather than reliance on markets, is that everyone has to live by the same rules. Living by the same rules is good when the purpose is to keep people and their property safe from harm, as is the case with laws against theft and murder. But it’s different when we pass laws intended to keep people safe from harms that they themselves can easily avoid, just by staying out of those places where people are smoking. For the people who value being in the smoky place more than they dislike the negative effects of the smoke, they can make that decision.

This is not a middle-ground position. It is a position that respects the individual. It lets each person have what they individually prefer, rather than having a majority — no matter how lop-sided — make the same decision for everyone. Especially when that decision, as Mr. Claycomb stated in another Wichita Eagle article, will “tick off everybody.” Who benefits from a law that does that?

Other articles on this topic:

Property Rights Should Control Kansas Smoking Decisions

Testimony Opposing Kansas Smoking Ban

The harmful effects of Wichita’s special tax favors

In the past few weeks a handful of companies in Wichita have asked to be exempted from paying property taxes on investments they have made. This week Wichita may decide to grant special tax treatment to a large development in downtown Wichita.

Is it wise for the City of Wichita to grant these special tax favors?

Because capital for investment is in short supply, it is important that our economy allocate it where it does the most good, where it is valued most. Markets do a very good job of this when they operate free of government meddling. When government intervenes, however, decisions about how to allocate investment capital will be made for all sorts of non-economic reasons.

Here in Wichita, for example, there are some who believe that downtown Wichita suffers from underinvestment when compared to some of the city’s outlying areas. These people — many of them holding political office or a quasi-governmental position — seek to use government and its ability to tax (or not to tax) to achieve their goals. They have passed measures like the sales tax to fund the downtown Wichita arena. Downtown developers and businesses are given tax breaks, tax abatements, and they may obtain low-interest loans backed by the credit of the City of Wichita. A special tax district overlays downtown, with the proceeds being used to promote downtown’s interest in receiving more governmental largesse. Downtown is also filled with special tax increment financing or TIF districts, where property tax revenues that would normally be used to fund the general operations of government are instead diverted to enhance the profitability of the developer’s project.

All this favorable treatment means that projects that would not be feasible on their own merits are undertaken because they satisfy a political agenda. This results in misallocation of scare capital. It’s also not fair to those who risk their own capital without receiving special government favor, meaning that we may have less investment overall in Wichita because of reluctance to compete with tax-favored investors.

This interventionism is also harmful in that it creates a special class of firms: those firms who have asked for and received government favor. They gain a competitive advantage over their direct competitors. As Karl Peterjohn of the Kansas Taxpayers Network has taught me, these firms also have a competitive advantage over other firms of all types in Wichita. That’s because firms of all types that don’t receive special tax favors have higher overhead, and therefore may not be able to compete with the tax-favored firms in paying attractive wages to obtain employees.

This interventionism is harmful again because it creates a class of political entrepreneurs rather than market entrepreneurs. Instead of seeking to create products and services that please customers, they seek to please politicians and bureaucrats. This behavior, called rent-seeking, produces nothing of value to the economy as a whole.

Furthermore, if what those who seek special tax treatment say is true, that is, that the projects they propose would not be feasible if they had to pay their taxes, we have a serious problem: we have taxes that are so high that they inhibit private investment.

Finally, when government reduces someone’s tax and doesn’t reduce its own spending, the rest of the taxpayers have to make up the difference.

I propose a partial solution to this problem that will help our leaders become aware of the cost of this problem, and will also alleviate some of the inequity. When the City of Wichita (or any other taxing authority) grants special tax treatment, it must reduce its spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.

Testimony on the Wichita New Communities initiative

From John Todd.

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

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

Dear Mr. Mayor and City Council Members,

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

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

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

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

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

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

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

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

Sincerely,

John Todd

In Central-Northeast Wichita, government is cause of problem, not solution

An article in The Wichita Eagle “Plan offers hope for city’s troubled heart” (November 14, 2007) reports on the development of a plan named New Communities Initiative, its goal being the revitalizing of a depressed neighborhood in Wichita. The saddest thing in this article is the realization that there is consideration of a plan for large-scale government intervention to solve problems that are, to a large extent, caused by government itself.

The article laments low high school graduation rates and the low proficiency in math and reading. We should make sure we remember that almost all these children have gone to public schools, that is, schools owned and run by government. Plans to improve public schools almost always call for more spending. While education bureaucrats do not like to admit this, spending on government schools in Kansas has been increasing rapidly in recent years. The results of these huge spending increases are just being learned, but it is unlikely that it will produce the dramatic results that are needed.

There is a simple solution to improving schools that won’t cost more than what is already spent, and should cost even less: school choice. In parts of our country where there is school choice through vouchers — or better, through tax credits — it is low-income parents who are most appreciative of the chance for their children to escape the terrible public schools. Further, there is persuasive evidence that when faced with viable competition, the public schools themselves improve.

In Kansas, however, there is little hope that meaningful school choice will be implemented soon. Although Winston Brooks, superintendent of Wichita schools, says he is open to competition and accountability, it is a false bravado. The political climate in Kansas is such that it is nearly impossible to get even a charter school application approved, much less any form of school choice with real teeth. (See “What’s the Matter With Kansas,” January 3, 2007 Wall Street Journal.) As the government schools consume increasing resources, parents find it even harder to pay taxes and private school tuition. So the government schools, responsible for graduates who can’t read and calculate, extend their monopoly.

A continual problem in depressed areas of cities is low employment. Government again contributes to this problem by creating barriers to employment, most prominently through the minimum wage law. People have jobs because their employers value the work the employees perform more than what they pay them in wages and benefits. When government says you must pay a higher wage than what the potential employees can contribute through their labors, these low-productivity workers won’t be hired. As the minimum wage rises, which it is on the federal level, it becomes even more difficult for the least productive workers to find jobs.

The reason that some young people find it difficult to get jobs is that they don’t have the education, training, or experience to be very productive at a job. While no one likes to work for only, say $3 or $4 per hour, working for that wage is preferable to being unemployed when the minimum wage is $6 per hour. While working for $4 per hour the worker gains experience at a specific job, and experience at holding any job in general. Soon, as workers become more productive, their wages will rise. Sitting on the sidelines not working or wasting time in a government job-training program does the workers no good.

The article mentions the plight of children whose parents are in prison. More generally, this neighborhood is plagued by crime and gangs. While I do not know the proportion of these people that are in prison for crimes related to drugs, it most surely is high. Gangs exist almost solely because of the trade in illegal drugs. The government’s prohibition of drugs, then, plays a huge role in the problem of crime.

The solution is to legalize drugs. Legalize all drugs, without exception. This should not be interpreted as an endorsement of drug use, as drug abuse is a serious health problem for many people. The health problems that drug abuse causes might even increase after legalization. But the crime problem would cease to exist. No longer would people be in prison simply because they are drug addicts. With legalization, the price of drugs would rapidly decline to perhaps the cost of a pack of cigarettes or a few cocktails each day. No longer would drug addicts have to raise several hundred dollars per day through crime. No longer would gangs find selling drugs profitable, and they would likely disappear. Do the owners of liquor stores shoot each other over turf wars, and do their customers engage in crime each day to pay for their fix of cheap alcohol?

The alternative to legalization of drugs is more law enforcement aimed at decreasing the supply of illegal drugs. This government action, if successful, has this consequence: by reducing the supply of drugs, it increases their price, thereby making it even more lucrative to deal in illegal drugs.

Then there is the government’s war on poverty. The economist Walter Williams recently wrote this:

Since President Johnson’s War on Poverty, controlling for inflation, the nation has spent $9 trillion on about 80 anti-poverty programs. To put that figure in perspective, last year’s U.S. GDP was $11 trillion; $9 trillion exceeds the GDP of any nation except the U.S. Hurricanes Katrina and Rita uncovered the result of the War on Poverty — dependency and self-destructive behavior.

In the same article:

There’s one segment of the black population that suffers only a 9.9 percent poverty rate, and only 13.7 percent of its under-5-year-olds are poor. There’s another segment that suffers a 39.5 percent poverty rate, and 58.1 percent of its under-5-year-olds are poor. Among whites, one segment suffers a 6 percent poverty rate, and only 9.9 percent of its under-5-year-olds are poor. The other segment suffers a 26.4 percent poverty rate, and 52 percent of its under-5-year-olds are poor. What do you think distinguishes the high and low poverty populations among blacks? … The only distinction between both the black and white populations is marriage — lower poverty in married-couple families.

In 1960, only 28 percent of black females ages 15 to 44 were never married and illegitimacy among blacks was 22 percent. Today, the never-married rate is 56 percent and illegitimacy stands at 70 percent. If today’s black family structure were what it was in 1960, the overall black poverty rate would be in or near single digits. The weakening of the black family structure, and its devastating consequences, have nothing to do with the history of slavery or racial discrimination.

Williams and Thomas Sowell, who have studied the issue extensively, conclude that it is government anti-poverty programs that are the cause of a permanent underclass. These programs should be canceled.

We see that government — through its poor schools, the raising of barriers to employment through minimum wage laws, the prohibition of drugs, and the culture of dependency and family disintegration supported by welfare — has been a contributing factor, probably the most important factor, in the decline of this neighborhood. It is foolhardy to believe that more government programs can reverse the damage already done by past and present government programs. While I’m sure that the intent of the New Communities Initiative and its coordinating members is noble, the reality is that government intervention is dangerous to the future of Wichita and to this neighborhood.

Let property rights rule Wichita smoking decisions

A system of absolute respect for private property rights is the best way to handle smoking, as it is with all issues. The owners of bars and restaurants have, and should continue to have, the absolute right to permit or deny smoking on their property.

Not everyone agrees with this simple truth. Charlie Claycomb, co-chair of the Tobacco Free Wichita coalition, asks in The Wichita Eagle why clean air is not a right when smoking is a right. The answer is that both clean air and smoking are rights that people may enjoy, as they wish, on their own property. When on the property of others, you may enjoy the rights that the property owner has decided on.

It’s not like the supposed right to breathe clean air while dining or drinking on someone else’s property is being violated surreptitiously. Most people can quickly sense upon entering a bar or restaurant whether people are smoking. If you do not want to be around cigarette smoke, all you have to do is leave. That’s what I do. It is that simple. No government regulation is needed: just leave. If you wish, tell the manager or owner why you are leaving. That may persuade the owner of the property to make a decision in your favor.

Employees may make the same decision. There are plenty of smoke-free places for people to work if they don’t want to be around smoke.

Some think that if they leave a restaurant or bar because it is smoky, then they have lost their “right” to be in that establishment. But no one has an absolute right to be on someone else’s private property, much less to be on that property under conditions that they — not the property owner — dictate.

Property rights, then, are the way to solve disputes over smoking vs. clean air in a way that respects individual freedom and liberty. Under property rights, owners will decide to allow or prohibit smoking as they best see fit, to meet the needs of their current customers, or the customers they want to attract.

A property rights-based system is greatly preferable to government mandate. Without property rights, decisions are made for spurious reasons. For example, debate often includes statements such as “I’m a non-smoker and I think that …” or “I’m a smoker and …” These statements presuppose that the personal habits or preferences of the speaker make their argument persuasive.

Decision-making based on personal characteristics, preferences, or group-membership happens often in politics. Wichita City Council member Jim Skelton, evidently once a smoker and opposed to smoking bans, is now receptive to bans since he quit smoking. Mr. Skelton, I ask you for this courtesy: would you please publish a list of the things you now take pleasure in, so that if you decide to quit them in the future, I shall have time to prepare myself for their banning?

Lack of respect for property rights allows decisions to be made by people other than the owners of the property. In the case of a smoking ban, the decision can severely harm the value of property like bars or restaurants that caters to smokers. This matters little to smoking ban supporters like Wichita Vice Mayor Sharon Fearey. But we should not be surprised, as her record indicates she has little respect for private property.

By respecting property rights, we can have smoking and non-smoking establishments. Property owners will decide what is in their own and their customers’ interests. Both groups, smokers and nonsmokers, can have what they want. With a government mandate, one group wins at the expense of the rights of many others.

City of Wichita acknowledges taxes are not good for business

On November 6, 2007, the Wichita City Council considered and approved a request by Learjet for industrial revenue bonds. One of the benefits of IRBs such as these is that the property purchased with the proceeds is usually exempt from property tax. In this case, the period of tax abatement is ten years.

In the minutes of the meeting, under the heading “Economic Vitality and Affordable Living” we can read: “Granting an ad valorem property tax exemption and sales tax exemption will encourage the business to create new job opportunities and stimulate economic growth for the City of Wichita and Sedgwick County.”

Wow! Someone in city hall realizes that a reduction in taxes is good for business, and is reducing taxes in response to that revelation.

Now if all businesses and individuals could have lower taxes — instead of only those who lobby government for special favor — think how nice that would be. The economic benefit that this tax reduction will bring to Learjet could be felt across our entire city.

Consider the alternative to a public library in Wichita

Listen to this article in audio by clicking here.

As Wichita considers the need for a new public library, a more central and fundamental question goes unconsidered: what is the role of the public library today, and do we really want one?

Consider the difference between public and private institutions. The public institution has to satisfy only a small group of people, namely the politicians that fund it. Yes, once in a while voters get to select the politicians, but issues such as a library are usually far down the list of important topics, notwithstanding a recent Wichita Eagle editorial promoting a public library as “one of the most important cultural institutions in a community. It’s an investment in our future, a symbol of our values and aspirations.”

Private institutions, or businesses, on the other hand, are voted on every day by customers, who choose one over the other for their own personal reasons. This is the idea of “consumer sovereignty.”

Public institutions, open to all, appeal to few in the end. The problem caused by unwanted “customers” at the central library is well known, and must serve to decrease its usage by some large amount.

Reading the 2006 annual report of the library, it appears that 34% of the loans made at the central branch were art, music, and video. (Due to the way the library presented the figures, I couldn’t determine this number for the branches.) Disregarding the presumably small number of artworks loaned (in comparison to the number of DVDs), the library is competing with services provided by the free market, namely video rental stores.

Even the loaning of books competes with bookstores. The library reports tells us that the value of the books the library circulated — that is, what it would cost if each person who borrowed a book had bought the book instead — is $29,068,288. I am tempted to ask what the City of Wichita has against local bookstore owners. But the reality is that the library competes rather poorly with bookstores. It has been many years since I relied on the library for timely books in my field, computers and software engineering. I found the shelves filled with titles referring to software and computers long out of date.

Today, if you want to borrow a recently-released book, especially a bestseller, you are likely to find yourself waiting in line behind dozens of borrowers, each with up to two weeks to use the book. This makes buying the book an attractive alternative, which is often what I do.

If you want to read a classic, good luck to you. I wanted to read Capitalism and Freedom, one of Time Magazine’s 100 most important books published since World War II. But, the library didn’t own it.

Could a privately-owned library be what Wichita needs? Could it do a better job? How would such a library work?

As it turns out, I can’t find an example of a city with a private library. That alone doesn’t mean a private library couldn’t work. It is, I believe, more a symptom of our increasing reliance on government instead of private solutions.

There are many ways a private library could work. Patrons might be charged a small admission fee. Patrons might buy monthly or annual memberships for unlimited use. There might be a fee for checking out items, perhaps based on the newness or popularity of the item and the length of the loan period. Items might carry advertising. Meeting rooms and other services could carry rental fees.

The point is that the library would be directly accountable to its customers who use the library, instead of a governing board, the city council, and the “public,” whoever that is. The library, wishing to earn a profit for its owners, would have strong motivation to provide services that people are willing to actually pay for. It would be free to act on its own to raise capital and provide these services, instead of complaining about the lack of funding, which is the case with the current library, as with nearly all other cultural institutions, too.

Plans for new libraries call for coffee shops in the mode of Starbucks. Will the refreshments served be free? Of course not. So charging for some services is okay, it seems.

What about people who can’t afford even the small fees a private library might charge? We are all already paying these fees now in the form of taxes. We are already paying for a library, both those who use it and those who don’t. Spreading out the costs over everyone doesn’t make it more affordable for the town as a whole. As Thomas Sowell recently wrote: “This was all before politicians gave us the idea that the things we could not afford individually we could somehow afford collectively through the magic of government.”

I wish that the Wichta Eagle editorial board would consider the alternative to government provision of things like libraries, entertainment facilities, airports, arts and culture, schools, and many other aspects of life. Relying on coercive government action over individual and voluntary group initiative makes us less free as a country and city.

Wichita’s payday lenders

Payday loans are expensive, a recent Wichita Eagle articles tells us. If someone needs to borrow money and has access to a loan from almost any other source, they should avoid payday lenders. But the reality is that there are people who have poor credit and are not able to obtain credit through the usual channels such as banks, credit unions, credit cards, and family and friends. These people may have but one source for loans: the maligned payday lenders.

Why can’t these people borrow from traditional, “legitimate” lenders? The answer is that making small loans to people who have a history of credit problems is expensive. Wishing it weren’t so and imposing government regulation won’t change this fact.

Community activists call for existing banks and financial institutions to offer small loans at reasonable interest rates. One institution in Wichita, Communities United Credit Union, did just that. But earlier this year it failed after suffering losses from bad loans, providing more evidence that it is costly to offer small loans to credit-challenged customers.

If existing financial institutions are to make small loans to credit-challenged borrowers, they should do so only with the reasonable expectation of earning profits from these loans. To do otherwise is to abandon their responsibility to their investors, and, should I learn that my bank or a bank I had invested in was making risky loans without being compensated for the risk, I would withdraw my investment in that bank.

An irony is that existing government regulation may be a contributing factor as to why payday loans are so prevalent. In an Wichita Eagle article from earlier this year, we read “Some bankers are reluctant to offer them [small loans] because their industry is so tightly regulated …” These regulations either prohibit or add to the cost of making small loans, bankers say.

Furthermore, usury laws, which limit the interest that banks and other traditional lenders may charge, are perhaps too restrictive. If traditional banks and credit unions could charge, say 25%, 40%, or even 50% for small loans, they might find it profitable to do so. An interest rate of 50%, while high, is certainly preferable to the several hundred percent rates that payday loan borrowers who roll over their loans pay.

Those who call for a limit on the interest rate that payday lenders can charge may very well drive these lenders out of business. I suspect that is their unstated goal. If they are successful, where will credit-challenged borrowers go for loans? As shown above, traditional lenders are not serving these borrowers.

A group named Sunflower Community Action says that payday lenders prey on poor people who have few financial options. I believe this group is misinformed on two points. First, the transaction between the borrower and lender is voluntary. Neither party is coerced, so there is no “preying.” Second, it is true that poor people have few options. Eliminating payday loans removes one more option, an option that evidently some people use. To its credit, this group promotes financial education and literacy, which is the best weapon to fight the cycle of poverty that some find themselves stuck in.

Everyone’s Right in AirTran Affair

The Wichita Eagle reports that Mayor Carl Brewer and City Manager George Kolb received free upgrades to business class seats on a recent AirTran flight. The two are indignant over being questioned about the propriety of accepting the gift. The Eagle described Kolb as “peeved.” The Mayor was moved to write a letter to the Eagle describing its reporting as a “cheap shot” with its “lapse in basic journalistic standards” a risk to “harming reputations.”

The AirTran station manager who granted the free upgrade was quoted as saying “Do I expect something from those people? No!”

Wichita civic and business leaders who also traveled on the flight were bothered by the incident, according to Eagle reporting.

Who’s right in this story? The answer is: everyone!

The Eagle is right to report this story. It happened; therefore it’s news.

The AirTran station manager was correct in giving the upgrades to the politicians. She clearly knows who butters her bread. I presume she was being discreet when she denied expecting something from those people — something other than the up to $7 million annual subsidy provided by the City, Sedgwick County, and the State of Kansas, that is.

The Wichita civic and business leaders are right to be miffed, as they are the ones who buy a lot of AirTran tickets, and if anyone deserves to receive a free upgrade, it’s them.

The two politicians are right to be peeved about the reporting of the appearance of a conflict of interest. That’s because there is a conflict of interest, since the city and other local governments give up to $7 million of taxpayer money each year to AirTran. Any relations between the airline and these governments must be analyzed in the light of the subsidy. This is symptomatic of the problems that arise when government intervenes in areas properly left to markets.

When I receive the occasional free upgrade to first class, I say “Thank you, American Airlines!” and accept it gladly, with clean conscience, knowing that I have done nothing wrong. The fact that Mayor Carl Brewer and City Manager George Kolb weren’t able to do this, coupled with how their acceptance of a business courtesy caused such a stir, tells us a great deal about the problems of government interventionism.

More taxes for Wichitans

More Taxes For Wichitans
By Karl Peterjohn, Kansas Taxpayers Network

Expanding gambling in Sedgwick County will lower taxes and provide “…tax relief…,” according to casino advocates’ campaign flyer. This claim is preposterous in light of the soaring property tax hikes and spending expansion plans being generated by local government in our community.

Historically it is also ridiculous when taxes in general and property taxes in particular rose following the passage of the state lottery in the 1980s. Gambling proponents campaign does raise some key questions for this community’s tax status and overall fiscal climate.

In 2006 Sedgwick County commissioners unanimously raised their mill levy 2.55 mills despite a public outcry and uproar opposing this hike. Two commissioners were then removed from office in the 2006 elections because of the county’s property tax hike. This mill levy increase was on top of soaring property tax appraisals that provide additional taxes for the county’s proposed $386.5 million budget a 5.8 percent hike.

The City of Wichita’s 2008 proposed budget is $495.62 million and this is an increase of over $100 million from the 2006’s $390.1 million. City spending is soaring with a two-year increase of 27 percent and an increase over last year’s revised budget of slightly less than 15 percent. There are a large number of new spending proposals pending at city hall too including $24.5 million for the county’s arena project and $290 million to remodel Century II in a few years.

The Wichita public schools are now proposing a two mill property tax hike (many other Wichita area public school districts are also seeking more property taxes too). This is on top of the $24.6 million increase in state tax funds for USD 259. USD 259 plans to hire 163 new employees for a school district with a gradually declining enrollment.

Despite having an opportunity to place this issue before voters August 7, none of the districts decided to let voters have a say in deciding the fate of school tax hikes. Once again, Wichita area voters were disenfranchised. I don’t recall hearing any of the school board or Wichita municipal candidates running in last April’s election campaigning on a platform of raising property taxes in particular or backing tax hikes in general at our public forums.

Wichita public schools had massive spending growth over the last few years. The district’s first budget over $300 million was in 2000-01. The first $400 million budget was in 2005-06. The first official $1/2 billion school budget is this year (but if all tax funds were included this actually took place two years ago).

If additional tax funds from Washington and pension tax funds from Topeka are added these figures are much larger. The official USD 259 proposed budget is just under $516 million but if the “off budget” tax dollars are included this figure grows to $577 million.

If all tax funds are included and enrollment remains the same as last year, spending will be close to $13,000 per FTE pupil annually. If only the “official” spending figures are used the spending will be over $11,600 per FTE pupil annually in Wichita.

In our community government growth is on tax steroids while the private sector struggles with the same growing energy, health insurance, and utility costs that are the justifications being used to raise taxes. Big government in Wichita puts us at a competitive disadvantage compared to similar sized communities in our neighboring states where voters decide the fate of tax increases. This increases the risk and uncertainty for Wichita firms, while it limits economic growth in our community.

Economic fallacy supports arts in Wichita

Recently two editorials appeared in The Wichita Eagle promoting government spending on the arts because it does wonderful things for the local economy. The writers are Rhonda Holman and Joan Cole, who is chairwoman of the Arts Council.

I read the study that these local writers relied on. The single greatest defect in this study is that it selectively ignores the secondary effects of government spending on the arts.

As an example, the writers in the Eagle promote the study’s conclusion that the return on dollars spent on the arts is “a spectacular 7-to-1 that would even thrill Wall Street veterans.” It hardly merits mention that there aren’t legitimate investments that generate this type of return in any short timeframe.

So were do these fabulous returns come from? Here’s a passage from the study that the Eagle writers relied on:

A theater company purchases a gallon of paint from the local hardware store for $20, generating the direct economic impact of the expenditure. The hardware store then uses a portion of the aforementioned $20 to pay the sales clerk’s salary; the sales clerk respends some of the money for groceries; the grocery store uses some of the money to pay its cashier; the cashier then spends some for the utility bill; and so on. The subsequent rounds of spending are the indirect economic impacts.

Thus, the initial expenditure by the theater company was followed by four additional rounds of spending (by the hardware store, sales clerk, grocery store, and the cashier). The effect of the theater company’s initial expenditure is the direct economic impact. The subsequent rounds of spending are all of the indirect impacts. The total impact is the sum of the direct and indirect impacts.

Relying on this reasoning illustrates the problem with the Eagle editorials: they ignore the secondary effects of economic action, except when it suits their case. The fabulous returns erroneously attributed to spending on the arts derive from this chain of spending starting at the hardware store. But what the authors of this study and the Eagle editorial writers must fail to see is that anyone who buys a gallon of paint for any reason sets off the same chain of economic activity. There is no difference — except that a homeowner buying the paint is doing so voluntarily, while an arts organization using taxpayer-supplied money to buy the paint is using someone else’s money.

The study also pumps up the return on government investment in the arts by noting all the other spending that arts patrons do on things like dinner before and desert after arts events. But if people kept their own money instead of being taxed to support the arts, they would spend this money on other things, and those things might include restaurant meals, too.

The fact that these editorials have been printed might lead me to suspect that government-supported arts organizations and Eagle editorial writers might feel a little guilty about using taxpayer funds. They should. To take money from one group of people by government coercion and give it to other people, especially when that purpose is to stage arts events, is wrong. It’s even more so when the justification for doing this is so transparently incorrect.

Arts organizations need to survive on their own merits. They need to produce a product or service that satisfies their customers and patrons just as any other business must.

It may turn out that what people really want for arts and culture, as expressed by their own selections made freely, might be different from what government bureaucrats and commissions decide we should have. That freedom to choose, it seems to me, is something that our Wichita City Council, Arts Council, and Wichita Eagle editorial writers believe the public isn’t informed or responsible enough to enjoy.

Urban Renewal: A Flawed Idea That Failed 50 Years Ago

Thank you to Karl Peterjohn for this excellent, well-researched article.

Urban Renewal: A Flawed Idea That Failed 50 Years Ago
By Karl Peterjohn, Executive Director Kansas Taxpayers Network

EXECUTIVE SUMMARY

1) Urban renewal failed across the United States in the 20th century. The urban renewal efforts from the 20th century that are the foundation for the newly proposed redevelopment agency in Wichita rely upon these old Kansas laws that require an increase in local government’s powers. There are no clearly defined steps that will avoid repeating these past mistakes in the public hearing discussions so far.

2) The financing mechanism for this new redevelopment agency is not clear. Other communities might have agencies with this label and operate their Community Development Block Grants (CDBG) money through them, but integrating the current CDBG programs into this new agency have not been made clear. The revenue need to fund this agency is unspecified. The city has property, sales, and fee revenues that can be raised to provide the substantial funding needed for this proposed new agency.

3) No efforts have been clearly defined to avoid repeating the mistakes that occurred in the 20th century urban renewal redevelopment process. If the city is going to make mistakes, let’s not repeat the errors of the past.

4) Current city activities will be impacted by this redevelopment agency. This includes and is not limited to central inspection, zoning, and planning.

5) The city will need to restore the eminent domain powers that the 2006 legislature removed from state law for many of the proposed redevelopment efforts to work. While the eminent domain reform enacted in 2006 does not take effect until July 1, 2007, the city needs a plan that will fit within the boundaries of state law.

6) A disproportionate amount of the burden created by urban renewal fell upon low income and largely minority groups. Urban renewal programs provided disproportionate benefits to high income, developers, and citizens with close ties to these programs at city hall.

INTRODUCTION ON WICHITA

The Wichita City Manager is promoting a new city redevelopment agency and using the existing urban renewal statutes that exist in Kansas law for this community. Sedgwick County officials have joined both appointed and elected city officials in discussing this concept.

Urban renewal was an important post World War II program that tried to rehabilitate and improve cities all over the United States. Unfortunately, urban renewal and the government dominated and controlled redevelopment process that was the essence of urban renewal in the 20th century failed. It was also a very expensive failure.

Wichita has gone through two rounds of urban renewal. The first effort was in parallel with the national efforts that ran from 1949 to 1974.(1) Downtown Wichita changed significantly when urban renewal programs used their eminent domain powers to acquire large chunks of property in Wichita. The City of Wichita has been one of the largest property owners in this community since this program began. Century II was one of the major redevelopment projects in downtown Wichita during this period of time.

Fortunately, the troubled history of urban renewal is one that is readily available. This is particularly critical for a city like Wichita that went through a second stage that it has been following with a city directed special redevelopment program since the late 1980’s.

Developer Jack DeBoer issued his “DeBoer Plan” for downtown redevelopment in Wichita almost 20 years ago. DeBoer’s vision was for the construction and development of a large number of new and enhanced existing facilities in downtown Wichita. The focus would be in turning the downtown area into an entertainment/tourist destination with a variety of primarily enhanced public facilities. The DeBoer plan was largely implemented in stages with the “crown jewel” being the recently approved downtown arena. This private-public partnership was expected to transform and revitalize downtown Wichita. A large amount of public and private funds were expected to be spent to turn this vision into a reality.

The centerpiece for this revitalization proposal was three major projects downtown: a 500 foot keeper of the Plains that would be for Wichita what the space needle is for Seattle; a new downtown hotel; a new downtown arena. In addition a variety of other attractions would be built to attract people, particularly tourists, to downtown Wichita. The Wichita ice arena and Childrens Museum were two of the other significant attractions that were built.

The irony of the DeBoer proposal, was the fact that almost 20 years later, DeBoer is most prominently attached to the East Bank/Waterwalk development proposal and was NOT specifically part of his 1980’s era proposal. This redevelopment project, which included a large amount of city owned parcels, included land that had originally become city property back in the urban renewal era.

The DeBoer redevelopment proposal went well beyond the arena and a 500 foot Keeper of the Plains statue. Downtown Wichita was supposed to become an urban tourist destination location with a variety of attractions to get both residents and out-of-town tourists to flock to see. Naturally, accommodations like a new hotel would be needed to go with the recent expansion of the Bob Brown convention center complex attached to Century II.

The expansion of museums on and by the river, a new ice rink, remodeled Lawrence-Dumont stadium (roughly 20 years ago) and other improvements were all supposed to stimulate a new form of local development that went beyond the traditional businesses and industries existing in Wichita. The City of Wichita and Sedgwick County spent huge sums to build, expand, or remodel facilities in and around downtown. Meanwhile, the private sector that was already downtown quietly continued to shrink and diminish.

A new local bus station was built downtown in the 1990’s. Macy’s retail store disappeared to be replaced by the Finney State Office Building that the city helped arrange by providing a nearby parking facility.

The initial reaction to the DeBoer revitalization plan was mixed. The family of the late Black Bear Bosin quickly sank the idea of inflating his statue into a 500 foot city landmark. That was the only idea that was not substantially implemented, and by raising the base, a good argument can be made that the intent of the DeBoer plan to increase the height of the keeper has been partially met.

The city has just finished spending a large amount of tax funds raising the pedestal for the Keeper of the Plains statue so that the original statue is more visible to the public. However, it is not clear to what degree this statue is attracting either local or outside the Wichita area visitors into downtown. The city supported Indian Museum that is adjacent to the Keeper of the Plains statue has continued to struggle and this facility continues to have a variety of operational problems that continue to appear in the news from time-to-time.

Both the city’s ice arena as well as the Children’s Museum have struggled over financial operating costs and budget problems at several points since these facilities were opened. Downtown Wichita’s Old Towne area has seen an influx of restaurants and nightclubs. Many of the private projects have required a variety of taxpayer funded support that included but is not limited to parking. The high amount of turnover in the ownership and operation of many of these private facilities raised performance questions. Similar firms outside of the downtown area did not receive the same benefits that many of the downtown firms received. This situation raised equity issues for similar businesses. Is local government capable to step in? The sizable financial losses from the operations of the now city owned Hyatt Hotel during its first few years of operation raises questions about the effectiveness of the public-private redevelopment efforts that occurred in the last few years of the 20th century in Wichita.

Wichita has struggled both with the explicit urban renewal along with the rest of the country in the middle of the 20th century. Follow up redevelopment programs during the last 20 years have created a number of changes downtown but the growth in this community had largely eluded the downtown area. This Wichita history is important for city council and other local officials to keep in mind when examining the redevelopment agency proposal and resurrecting urban renewal.

I. NATIONAL URBAN RENEWAL: A BRIEF HISTORY

Urban renewal failed. Even before the federal urban renewal efforts ended in the 1970’s the academic critics were pointing out major problems. The goals were not being met and costs far exceeded initial projections.

In my September 6, 2006 letter to city leaders discussing urban renewal I pointed out the wide range of literature discussing urban renewal and redevelopment that dated back over 40 years ago. This history was wide ranging and featured prominent scholars from that era who included several who went on to national prominence in other public realms like the late Senator Patrick Moynihan who was also a White House staffer for several presidents, and White House staffer to former President Reagan, Martin Anderson. In addition, major urban scholars like Jane Jacobs, Harvard professors Edward Banfield, and Nathan Glazer who focused upon city improvements and trying to reduce and ameliorate the urban poverty problem had a major impact at looking at city issues.

Now a case can be made that urban renewal has never totally ended. That is a certainly a reasonable position in light of the existence in some states of the urban renewal statutes in state law that were enacted roughly 50 years ago. The late Ronald Reagan jokingly commented that there was nothing as eternal as a government program. The echoes of urban renewal and similar redevelopment efforts continue like a governmental version of the scientists “Big Bang” echoes detected by the Bell Laboratory scientists who won Nobel Prize in Physics for their effort.

As far back as 1963 then professors Glazer and Moynihan wrote in their classic “Beyond the Melting Pot” described urban renewal and its ethnic and sociological impact this way, “There have been difficult (sociological) problems, but not different from those in other great American cities. The major attempt to deal with these problems has been through urban renewal—the rebuilding of the area so as to reduce the low-income and increase the middle- and high-income population. This movement has been supported by all the middle-class groups and institutions in the area, who of course would like to see less crime and disorder and crowding and dirt around them.” (2)

Urban renewal had impacted the natural evolution of the neighborhoods that were in transition in New York City in the 1950’s as the Irish, Jews, and Germans moved out to be replaced back then what Glazer and Moynihan referred to as “Negroes” and Puerto Ricans. Glazer and Moynihan comment on the paucity of Puerto Rican community organizations and attribute this in part to the impact of urban renewal, “Aside from the storefront churches, organizational life is not strong among the Puerto Ricans….but Puerto Rico, just as the rest of Latin America, has always been weak in spontaneous grass-roots organization. Probably the rise of organization has been inhibited too by the factors that have dispersed the population and prevented the development of a great center for the Puerto Rican population—housing shortage, slum clearance, and the availability of public housing….The demolition of the houses that affront the neighborhood means precisely the demolition of those that house vast numbers of Puerto Ricans—families living in single rooms, families taking in migrant relatives, displaced children, and temporarily homeless friends. Ironically, ‘improving a neighborhood’ means moving out those who are most crowded, have the least room, and whose resettlement offers the most difficult problem for themselves and city agencies.”(3)

Slum clearance is just a synonym for urban renewal. Slum clearance is the argument being put forth by the advocates for new city redevelopment agency. Glazer and Moynihan identified over 40 years ago simply bulldozing buildings does not address the underlying problems. These are problems of crime that result in the dilapidation that is being used to justify a new city agency.

What will be done differently in 2006 than what was done in 1956? If local officials are going to make build a new city bureaucracy and expand the city’s role in controlling property within the city limits, Wichitans need to know why the local officials should repeat the same mistakes that were exposed over 40 years ago?

Aesthetically, urban renewal was a failure creating a monotonous diversity that the leading urban scholar of her day Jane Jacobs described, “Anything looks ugly if it is done badly. But this belief implies something else. It implies that city diversity of uses is inherently messy in appearance; and it also implies that places stamped with homogeneity of uses look better, or at any rate are more amenable to pleasant or orderly esthetic treatment. But homogeneity or close similarity among uses, in real life poses very puzzling esthetic problems. If the sameness of use is shown candidly for what it is—sameness—it looks monotonous.”(4)

In fact, the converse according to Jacob is true for cities, “Intricate minglings of different uses in cities are not a form of chaos. On the contrary, they represent a complex and highly developed form of order…Nevertheless, even though intricate mixtures of buildings, uses and scenes are necessary for successful city districts, does diversity carry, too, the disadvantages of ugliness, warring uses and congestion that are conventionally attributed to it by planning lore and literature? These supposed disadvantages are based on images of unsuccessful districts which have not too much, but too little diversity. They call up visions of garish, sprawling, unremitting commerce. None of these conditions, however, represent flourishing city diversity. On the contrary, these represent precisely the senility that befalls city neighborhoods in which exuberant diversity has either failed to grow or has died off with time…. Flourishing city diversity, of the kind that is catalyzed by the combination of mixed primary uses, frequent streets, mixture of building ages and overheads, and dense concentration of users does not carry with it the disadvantages of diversity conventionally assumed by planning pseudoscience.(5) Jacob then proceeds to criticize the urban planners and urban renewal advocates of her day for their failures to understand the intricacies or the spontaneous order created by the marketplace operating under a rule of law.

The problems outlined in a practical sense by Jacob are examined in much greater detail that extends well beyond urban renewal and municipal revitalization and into a broader discussion of the role of urban experts, government planners, city residents trying to live their lives and how this exists in an America where the role of the government has been expanding during the 20th century and the first decade of the 21st century.(6)(7)

The most recent national explosion of this issue is the eminent domain battles that lead up to the U.S. Supreme Court’s recent and highly controversial, Kelo decision ratifying forced land acquisition powers for private developers at the expense of current landowners when exercised by local units of government. That has led some Wichita city leaders to put this city behind an effort to have broad based powers to condemn private land using eminent domain and then be able to turn that property over to other private hands. This led the 2006 Kansas legislature to pass legislation that will limit municipal eminent domain powers for redevelopment beginning July 1, 2007.

These failures go far beyond the sociological analysis offered by Glazer, Jacob, Anderson, and Moynihan. Hoover Institute scholar Martin Anderson identified a number of problems with urban renewal.

In addition, liberty and control over property by citizens was diminished for all and in some cases eradicated for the people living in the targeted “redevelopment” areas. “Who wants urban renewal? Certainly not the lower income groups—they get displaced from their homes to make way for the modern apartments they cannot afford to rent. It is hard to know whether the middle class is much concerned with the changes that have occurred in the cities…Then who is behind the tremendous push for urban renewal? Raymond Vernon, former Director of the New York Metropolitan Region Study, has speculated that the main stimulus for urban renewal comes from two elite groups—the wealthy elite and the intellectual elite. Both groups have strong economic and social attachments to the central city.”(8)

In a book examining eminent domain abuse and its ties to urban renewal, Steven Greenhut looked at Anderson’s analysis and warned: “Nothing much has changed today.”(9)

Greenhut also pointed out, “Without eminent domain, very little of the destruction could have taken place. But once the government had the right to take whatever it pleased in the name of the ‘higher good’ then the sky was the limit.”(10)

Urban renewal did do massive amounts of damage. Let’s look at one well examined and very costly case: Pruitt-Igoe in St. Louis that was described: “Few people could have missed the demolition of St. Lous’ Pruitt-Igoe and other hideous housing projects that came to epitomize wht the urban-renewal program was all about: creating high-rise, crime-ridden slums that eventually had to be dynamited before any real urban progress could be made.”(11)(12)

Von Hoffman’s Harvard University study went on to describe this redevelopment tragedy this way, “St. Louis’s Pruitt-Igoe housing project is arguable the most infamous public-housing project ever built in the U.S. A product of the postwar federal public-housing program, this mammoth high-rise development was completed in 1956…Only a few years later, disrepair, vandalism, and crime plagued Pruitt-Igoe. The project’s recreational galleries and skip-stop elevators, once heralded as architectural innovations, had become nuisances and danger zones. Large number of vacancies indicated that even poor people preferred to live anywhere but Pruitt-Igoe. In 1972, after spending more than $5 million in vain to cure the problems at Pruitt-Igoe, the St. Louis Housing Authority, in a highly publicized event, demolished three of the high-rise buildings. A year later, in concert with the U.S. Dept. of Housing and Urban Development, it declared Pruitt-Igoe unsalvageable and razed the remaining buildings.”(13)

If the city of Wichita is going to resurrect the urban renewal that led in it worst cases to problems like the one listed above, a specific program is needed to make sure that these past mistakes are not repeated. In addition, it must be clear where the public funding sources will come from to provide for this redevelopment.

Avoiding the government redevelopment/urban renewal model is needed. This problem remains a national challenge for communities across the country. In Abuse of Power, Steven Greenhut describes the 21st century challenge this way: “For as bad as the old urban renewal was—and almost everyone from every political perspective has criticized the outcome of this massive federal program—at least it was done to remedy what its proponents saw a genuine urban problems of substandard housing and rundown neighborhoods. Since at least the early 1980s, urban renewal has morphed into something known mainly as redevelopment. Advocates of modern redevelopment projects often use the same language of blight to justify their efforts, but the purpose has changed dramatically.”

“Whereas the old urban renewal was designed largely to wipe away areas that unquestionably were down on their heels, the new urban renewal is basically about filling city coffers with money. It’s about building tax bases. It’s about luring new commercial retailers into older areas to bring in additional property and sales taxes. Just because these financial motives are sometimes (but not always) dressed up in the language of the New Urbanism or downtown revitalization or blight removal should not fool one into thinking that the new urban renewal is about anything more than money.”(14)

For local government to proceed, it must have eminent domain powers to remove the wrong people from the targeted property. This has led to condemnations of property across the country and destroyed the property rights for homeowners in many cases. Lakewood, Ohio is one example but books have been written outlining a large number of cases that cross the country.

“As there were no structural problems with the houses, the City (Lakewood, OH) relied upon terms like ‘economic and functional obsolescence’ to find blight. Translation: The houses lack two-car attached garages and second bathtubs and their yards are too small. No modern family could possibly want a historic, well maintained house without a two-car attached garage.”(15)

The author of this study “Public Power, Private Gain,” issued by the Institute for Justice in 2003 provided numerous abuses similar to Lakewood’s that are occurring throughout the country. Dana Berliner’s book is filled with outrages to individuals, a variety of businesses, churches, farmers, and others in the name of eradicating “blight” or “neglect” or “distressed” properties.

Many of these outrages occurred in Kansas. “Unfortunately, for the citizens of Kansas, their state is one of the worst abusers of eminent domain, especially in comparison to other states with similar population size.”(16) Problems with redevelopment in the context of eminent domain abuses were specifically cited in Kansas City, the infamous Gross case out of Merriam, and Topeka. Kansas was ranked second worst out of the 50 states behind only California in this national study.

In the Gross case a small businessman operating a used car lot lost his property because the city of Merriam condemned it so a neighboring BMW dealership could acquire the property.(17)

These abuses were part of the foundation for the effort to reform Kansas eminent domain laws in the wake of the Kelo decision on eminent domain by the U.S. Supreme Court. In addition, there is also a similar and even more anti-property owner case coming out of the Kansas Supreme Court recently. Unlike Kelo that has been extensively covered in the news media, the Kansas case has received almost no local news coverage.

“A good example is the Kansas Supreme Court’s 2003 decision in the case of General Building Contractors and Robert Tolberg v. Board of Shawnee County Commissioners. The justices not only affirm the county’s right to take virtually any property they chose in the name of economic development, but they also show open disdain for the property owners who are challenging the taking of their properties. Throughout the ruling, one sees an emphasis on process rather than on rights. As long as the government followed the letter of the law and the proper redevelopment process, then the court couldn’t see what the controversy was about. Yet, courts are supposed to serve as a check on the government’s edicts, holding them up to timeless constitutional principles rather than the planning ideologies of the day.”(18)

This was the perspective of a California eminent domain author in looking at the problems in Kansas recently. The Kansas events where eminent domain was used to favor private parties helped set the stage in 2006 for the legislature’s efforts to limit eminent domain takings for non public purposes. This is primarily for economic development efforts but in some other states even the traditional eminent domain powers for public purposes are now being questioned or even limited. In other states, the voters have been specifically asked to decide the proper role for eminent domain powers in the case of redevelopment.

November 7, 2006 the voters in Florida, Georgia, Michigan, Nevada, New Hampshire, North Dakota, Oregon, and South Carolina all passed initiatives that would restrain the government’s power to seize private property. If Kansas powers would receive a similar opportunity, a similar outcome by voters speaking out to defend their property rights is likely.

Naturally, for an elite few who are at the center of local government power, this is not an outcome that they approve of in their vision to improve their communities. The genius of the founders in providing a system where power was supposed to be spread widely among the people also puts a crimp in the utopian planners. “As in all utopias, the right to have plans of any significance belonged only to the planners in charge.”(19)

In the wake of the Berman, the U.S. Supreme Court decision in the 1950’s that provided the foundation for the expanded eminent domain powers for government became the foundation for the loss of private property rights and a sizable expansion in government’s ability to modify property ownership into the hands that the state prefers.(20)

Lower court decisions had problems with this concept but their argument, “One man’s land cannot be seized by the Governmnt and sold to another man merely in order that the purchaser may buildupon it a better house or a house which better meets the Government’s idea of what is appropriate or well designed.”(21)

II. CONCLUSION

Urban renewal failed nationally over 35 years ago across this country. Wichita’s effort to redevelopment within the national urban renewal and outside it have at best a record that is incomplete and continues to require significant public support even for nominally private, albeit many are not-for-profit entities.

The city should not proceed precipitously in once again proceeding down the “urban renewal/redevelopment” path. The experiences in the last 20 years should make city leaders sanguine in proceeding down the proposal coming out of the city manager’s office.

All possible avenues should be examined. “By the end of the federal urban-renewal program in 1974, cities that refused Title I funds and let the market hold sway over downtown redevelopment projects generally had more more impressive downtown revitalizations than those that relied so heavily on federal power and that abused property rights so egregiously.”(22)

Wichita needs to avoid repeating past mistakes. Providing a strong level of property rights actually enhances development. A stable system of government that is not excessively large and expensive is a stronger incentive to growth than a new governmental body promoting “redevelopment.”

Individual states are engaging in a number of experiments: on November 7, 2006, the voters in the city of Nashville, TN approved an ordinance requiring that the city get voter approval before any and all taxes could be raised. This question arose in light of that community’s high property tax rates.

FOOTNOTES

1) Abuse of Power, Greenhut, 2004, page 107
2) Beyond the Melting Pot, Glazer & Moynihan, page 179.
3) Ibid, page 107-8.
4) The Death and Life of Great American Cities, J. Jacobs, 1961, page 223.
5) Ibid, page 223.
6) Constitution of Liberty, F.A. Hayek.
7) Vision of the Anointed, T. Sowell.
8) The Federal Bulldozer: A Critical Analysis of Urban Renewal, 1949-1962, page 218.
9) Abuse of Power, Greenhut, page 111.
10) Ibid, page 110.
11) Ibid, page 111.
12) “Why They Built Pruitt-Igoe,” A. Von Hoffman, Joint Center for Housing Studies at Harvard U., 2000, http://www.soc.iastate.edu/sapp/PruittIgoe.html.
13) Ibid.
14) Abuse of Power, page 114.
15) Public Power, Private Gain, D. Berliner, Institute for Justice, Washington, D.C., 2003, page 166
16) Ibid, page 78.
17) “Condemnation Is Used to Hand One Business Property to Another,” D. Starkman, Wall Street Journal, Dec. 2, 1998, page A1.
18) Abuse of Power, page 150.
19) The Death and Life of Great American Cities, J. Jacobs, 1961, page 17.
20) Takings Private Property and the Power of Eminent Domain, R. Epstein, 1985, page 178.
21) Ibid, page 178-9.
22) “Urban Renewal and Its Aftermath,” J.C. Teaford, page 458 cited in Greenhut.

A downtown Wichita urban renewal success story … not

This history lesson from Karl Peterjohn of the Kansas Taxpayers Network tells the story of what might have been for downtown Wichita, and shows how close Wichita came to losing a company very important to our local economy, even if they’re not located downtown.

In the 1960’s the urban renewal redevelopment project that became Century II used eminent domain and forced a medium sized, private company in the petroleum business out of their office building and corporate headquarters on the south side of W. Douglas just east of the river.

This business was in transition with the founder handing off control to a young relative who had been living and working out-of-state. This firm’s two major business assets were outside of Kansas so the firm’s geographic ties to Wichita were not strong either. At that time, I’ve been told that this business had gross sales around $250 million a year and possessed their own multi-story office building downtown. That sales figure is understated and would be a lot more if measured in the inflated 2007 dollars.

Local leaders in Wichita had decided that they knew what was best for downtown and using the urban renewal redevelopment program’s eminent domain powers, acquired a large chunk of downtown (as well as many other parcels across this community — see Wichita Business Journal’s most recent list of biggest local taxpayers that still prominently includes the City of Wichita).

The medium sized petroleum company left Wichita after losing their building. This company relocated a couple of miles north of the Wichita city limits back then (they were eventually annexed back into the city many years later) but could have easily relocated elsewhere. Conversely, imagine what downtown Wichita would be like if this firm had remained there. You may have guessed that I’m referring to Koch Industries and their 1,800 local employees.

A roadblock to private investment in Wichita

As reported in The Wichita Business Journal:

The response from the Wichita Historic Preservation Board was positive. The six members liked the design and thought the project could be good for downtown.

They still voted no.

So for the moment, a developer’s plan for a downtown hotel and conference center is blocked by a law, the Kansas preservation statute. What is the problem with the proposed building? “[the problem] is that it incorporates too many materials and features inconsistent with the surrounding buildings. That includes glass, marble, stainless steel, redwood and balconies.”

This design is judged as “too modern” to be compatible with the “overall historic appearance of downtown.”

It is a sad day in Wichita when a law prevents an individual from making an investment in the improvement of his property, especially when private investment in downtown Wichita is desired and needed. This law needs to be repealed before it causes more harm.

Furthermore, it devalues private property rights when property owners or developers must subject themselves to the whims of groups such as the Wichita Historic Preservation Board. As John W. Sommer wrote in The Cato Journal:

With few exceptions, historic or landmark preservation illustrates the powerful force of cultural elites who impose their tastes on the landscape at the expense of the general public. City after city has been confronted by small groups of architectural aesthetes who are as highly organized as they are both righteous and wealthy. In city after city these groups have succeeded in stalling, or permanently freezing, the pace of physical and functional change. In the name of “heritage” or “culture” or “a livable city,” and invariably “in the public interest,” preservationists seek to legislate “charm” for others.

We would be much better off with out these two disruptive forces — the Kansas preservation statute and the Wichita Historic Preservation Board — acting against our economy and private property rights.

Tax increment financing in Wichita benefits few

Today the Wichita City Council votes on granting $4.5 million in tax increment financing to a developer. Here’s an article from August 17, 2006 that explains why the council should not approve this gift.

(Note to The Wichita Eagle: Why not report stories like this a little earlier than the day the council is voting?)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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