Tag Archives: Wichita city government

Wichita Old Town Theater’s Bill Warren: No Ideas?

Recently the Wichita City Council approved a no-interest and low-interest loan to Old Town Wichita theater owner Bill Warren and his partners. Citizen opinion in Wichita seems to be mostly outrage at this giveaway, and rightly so. See Wichita Old Town Warren Theater Public Hearing Remarks and Wichita and the Old Town Warren Theater Loan.

Now, a post by Randy Scholfield on The Wichita Eagle Editorial Blog (Bill Warren wants your ideas!) comments on how Bill Warren wants Wichitans to send him ideas. According to the Wichita Eagle news story Warren wants filmgoers’ ideas, “Warren, who typically plans his theaters and renovations down to the detail, plans to turn much of the planning for the Old Town Warren remake over to the downtown moviegoing public.” (I guess that’s only fitting, as he asked the citizens of Wichita for a subsidy to help pay for it.)

Wrote Mr. Scholfield in the blog post: “You’d think he and his partners in the Old Town Warren might have a revival plan worked out already, as a condition of the loan, right?”

Now, when it’s too late, Scholfield asks the question. Perhaps he can recall his editorializing in favor of the Warren theater loan.

Reverend Kevass Harding and His Wichita TIF District

Remarks to be delivered to the Wichita City Council, July 8, 2008.

Mr. Mayor and members of the council, today I will not discuss the desirability of tax increment financing (TIF) districts in general, or the merits of this one in particular. I’ll leave that for the August 12 public hearing. Instead, I wish to express my concerns about a thorny situation involving the applicant and overlapping governmental jurisdictions.

In Wichita, Reverend Kevass Harding, a member of the USD 259 (Wichita public school district) board is also a real estate developer. His development group is asking the City of Wichita for the creation of a tax increment financing district (New life for Ken-Mar Shopping Center: Harding plans to revitalize 13th Street mall, March 14, 2008 Wichita Business Journal).

In Kansas, when a city creates a TIF district, the affected county and school district have 30 days to veto its creation. When Wichita creates TIF districts, the county and school district usually agree. To my knowledge, there has been no veto by either. These overlapping taxing jurisdictions don’t have to pass a resolution to agree to the TIF district. All they have to do is not pass a resolution that vetoes it.

In this case, Reverend Harding is asking Wichita for relief from paying some of the property tax for his real estate development. (Some might disagree that the TIF district provides relief from paying taxes, but that’s not important for now. It is undoubtedly a benefit of some type, and that’s what matters.) Then the Wichita public school board, Reverend Harding being a member of that, has to give its agreement for the TIF district to proceed.

The problem is that the way the school board indicates its agreement to the establishment of the TIF district is by doing nothing. Only passive agreement is required. Negative action is what is required. If the school board was required to pass a resolution agreeing to the TIF district, Reverend Harding could declare a conflict of interest and sit out the vote. That’s positive action. That happened last week in this very chamber.

But since no vote is required by Reverend Harding or his board — only passive assent — how can we ask him to recuse himself? Can we insist that he cease to do nothing? That’s the problem with requiring someone to take negative action.

So what do we do?

The best solution is for Reverend Harding to withdraw his request for the creation of the TIF district that benefits his development. Then there is no problem with conflicts of interest. This is also congruent with Reverend Harding’s votes to increase taxes while a member of the school board. His business would pay the same taxes he demands others pay.

Failing that, one way we could handle this situation is that the city could ask the school board to agree to pass a resolution agreeing to the TIF, even through they aren’t required to do this. Then Reverend Harding could publicly acknowledge his conflict of interest and step aside.

But should the City of Wichita even care about this? Is it the city’s responsibility to ensure that other governmental entities act ethically and transparently?

In the end, it may not matter, as to my knowledge, neither Sedgwick County nor the Wichita public school district has vetoed the creation of a TIF district passed by the City of Wichita. But I think the citizens of Wichita and USD 259 would appreciate this situation resolved in a way that avoids all conflicts of interest.

Wichita Eagle Voter Guide Responses

I am running for Republican precinct committeeman. The Wichita Eagle sent me a request to answer some questions to appear in a voter’s guide. These are the questions asked (to the best of my recollection; I didn’t record the text of the questions and now I can no longer log in to the system to see them) and my responses.

1. What do you believe should be in the party’s platform?

I believe the Republican party has strayed from its commitment to individual liberty, limited government, and free markets. The party should commit itself to nurturing economic prosperity by reducing government control of the economy. We should allow people to decide how to best spend and invest their time, money, and talents. By reducing the intrusiveness of government, we can create a laboratory of economic freedom in Wichita that would restore Wichita’s tradition of entrepreneurship.

2. What is your position on social issues?

Government should relinquish its monopoly on the financing of education by allowing school choice through tax credits. Parents would then have more control over the education of their children. Government’s ability to take private property through eminent domain should be severely restricted. All elected officials should be subject to term limits. Governments should respond to citizen requests for records in a reasonable way.

3. What is your position on fiscal issues?

Voter approval should be required for all tax increases. Governments should pledge to limit their increases in spending to the inflation rate plus population growth. The use of tax increment financing (TIF) districts and tax abatements should be eliminated. Giveaways such as the interest-free loan to the Old Town Warren Theater must be stopped. We should be careful that trading a higher sales tax rate for property tax relief doesn’t lead to more taxes overall.

Wichita Council Member Jeff Longwell: We Can, and Do, Read

Wichita City Council Member Jeff Longwell, in the news article Little time to review Warren loan terms (July 1, 2008 Wichita Eagle), was reported as remarking “It’s unlikely many residents would read the full contract even if it had been made public earlier.”

Mr. Longwell, many people in Wichita do read documents such as these. I think a better question is whether city council members read and understand these documents. This is from before Mr. Longwell’s time on the council, but in the article The Real Scandal at City Hall, I report how city council members are sometimes not aware of even the most basic facts about city affairs:

… council members were described as being surprised upon learning that the industrial revenue bonds and property tax abatement awarded to a local business also included a sales tax break. How could they be surprised? The City of Wichita website contains a nicely-done page titled “Industrial Revenue Bonds” (located at http://www.wichitagov.org/Business/EconomicDevelopment/IRB) (This is the first result that appears when you use the wildly popular Google search engine and search for “Wichita IRB.”) The first link on this page is titled “IRB Overview: Industrial Revenue Bond Issuance in the State of Kansas,” and you don’t have to read very far before you come to the sentence reading “Generally, property and services acquired with the proceeds of IRBs are eligible for sales tax exemption.”

(The city’s website has been rearranged a little since then. The new location for this page is http://www.wichita.gov/CityOffices/CityManager/Urban/EconomicDevelopment/IRB/.)

Besides being wrong on whether people read documents like these, I think Mr. Longwell’s statement reveals an unfortunate attitude towards the people of Wichita. I don’t think he always felt this way, as earlier this year it was reported he “strongly believes in transparency in government.” (Rule seeks to stop leaks after private city council meetings)

Mr. Longwell is correct in that the Old Town Warren Theater loan documents should have been released to the city council and the public earlier. Mr. Longwell could have shown us evidence of his belief in transparency by moving to delay yesterday’s council action until these documents could be read, digested, and debated.

In Wichita, is Economic Development Proven Public Policy?

In a statement read by Wichita Mayor Carl Brewer and released on the city’s website at Mayor Brewer Warren Theatre [sic] Statement, the mayor states “Economic development is proven public policy.” The word “proven” was used several other times in the statement.

(I don’t know who wrote the title to the statement, but it combines the mayor’s name with theater developer Bill Warren’s name in a way that is, I am sure, unintentionally humorous. Mayor Brewer Warren? Who is he?)

The Warren Theater economic development project is one example of economic development that has proven not to work, despite the mayor’s claims.

But that is only my opinion. The definition of success, I realize, could mean different things to different people. To me, I would expect that once a development is given a huge head start with millions of dollars in subsidy provided through tax increment financing, that after a few years it would at least be breaking even. Certainly, I would hope — and I think the people of Wichita agree — that the project does not become a continual drain on the resources of the people of Wichita, as the Old Town Warren Theater has become.

But it appears that Mayor Brewer and council member Sharon Fearey have a different definition of success. To them, tax increment financing is not a subsidy to a developer. It’s an investment by the city. All it’s used for, according to Fearey, is to pay bonds: “Under a TIF, the additional property taxes generated by new development are used to repay bonds. No dollars go to private developers.” (Sharon Fearey: Warren loan is an investment in future, July 1, 2008 Wichita Eagle)

Ms. Fearey, may I ask this question: the proceeds from the bonds that were issued: how are they spent?

An interest-free or reduced-interest loan is not a subsidy according to the mayor, it’s “targeted economic development.” It’s a “public-private partnership.” Without it, our taxpayer dollars would not be protected.

John Todd tells me that there is a groundswell of resentment building in Wichita over this loan. I hope that in the coming months this increased interest in the economic development activities of the Wichita city government leads to more discussion of what path we want to pursue in Wichita. Do we want more private initiative and entrepreneurship, or do we want more politicians and bureaucrats?

Wichita Old Town Warren Theater Public Hearing Remarks

From John Todd.

Testimony I presented before the Wichita City Council on July 1, 2008 in opposition to the proposed Old Town Warren Theater LLC loan.

The question before the council today relates to the proper role of government.

I believe the role of government is that of acting as a non-partial judge from the sidelines, protecting the rights and property of all citizens, through the rule of law, and not acting as a participant in any activity, particularly economic, that places it in a partnership role with one group of citizens to the exclusion of all others. When government becomes an active participant in economic activity or acts as an agent for one party to the exclusion of other citizens, it abdicates its proper role of providing the legal framework and physical security needed for private economic activity.

The dilemma our city faces today is a result of its participation in an economic activity that it should never have been involved in, in the first place. For starters, our city government needs to divorce itself from further involvement with the Old Town Warren Theater project for a number of reasons.

Our city is not a bank, and the proposed loan being discussed today is an inappropriate role for city government.

If the Old Town Theater group is facing financial problems, they need solve those problems without help from the public treasury. Based on what I have read about the principals in this group, I believe they possess the management talent and skills to succeed without public assistance.

The beautiful thing about the free-market is the freedom for a business enterprise to succeed and enjoy the fruits of that success. By the same token, a business should be allowed the freedom to fail, and suffer whatever consequences that brings. Thousands of other businesses across our city play by those same rules every day without the government parachute or the backing of the public treasury that is being proposed for this private group. The Old Town Theater project owners should be no exception to these rules.

I talk daily to other people in our city and have found no public support for the Old Town Theater loan, and, in fact, I have been surprised at the high level of outrage people are expressing towards this proposal.

I request that you vote NO for this project. I believe, by voting NO, you will be exercising the will of your constituents and the public, and will be exercising the stewardship they expect from you as their elected officials.

P.S. After a strong lecture from Mayor Carl Brewer about the economic advantages of public/private partnerships like Old Town, the council voted 6-0 to grant the Old Town Warren Theater loan with Council Member Jim Skelton abstaining from the vote.

NOTE: I had the following material ready for presentation, but decided not to be too philosophical with the council so I did not present either.

I believe a quote by 18th Century French economist Frederic Bastiat, is appropriate for today’s discussion when he was describing the socialism that permeated his native France when he said, and I quote: “The state is that great fiction by which everyone tries to live at the expense of everyone else.” I believe Bastiat would describe the work of today’s city council as legal plunder or the use of political power to redistribute wealth from others what they are unwilling to obtain through the voluntary exchange in the marketplace.

To paraphrase a statement made by President Cleveland prior to 1900 when he was called upon to save a struggling orphanage in New York City during a severe economic crises. He said something to the effect, that “I cannot be a party to taking money (from the public treasury) from one group of citizens and give it to another group of citizens, no matter how worthy the cause, it is the responsibility of citizens to support their government, it is not governments responsibility to support its citizens.”

Wichita and the Old Town Warren Theater Loan

Remarks to be delivered to the Wichita City Council, July 1, 2008.

Mr. Mayor and members of the Council, we are potentially beginning a journey down a road where there are two classes of businesses in Wichita.

There are business owners who seek to earn their profit through market entrepreneurship, that is, by meeting the demands of their customers and the marketplace. That’s a difficult thing to do. An entrepreneur must sense customer demand and desires, and then commit resources to satisfying customers. If entrepreneurs are correct in their judgments and successful in their execution, they earn profits.

There are other business owners who, through TIF districts, tax abatements, and outright subsidy as in the case of the proposed loan agreement before you today, earn their profits by pleasing politicians such as the members of this council. They practice political entrepreneurship. The people they must please are a majority of this council. Investments — to the extent that government spending can be called that — will be made based on political, rather than marketplace, considerations.

We have a proud history of market entrepreneurs in Wichita; men whose names are known not only in Wichita, but across the world. There are many other men and women in Wichita who, although their names are not famous, successfully meet customers’ demands in the marketplace and have built successful businesses.

Mr. Warren is, by all accounts, a talented entrepreneur who earns profits by pleasing customers at his theaters located on Wichita’s west and east sides and in other cities.

The fact that this theater — operated by a person with great experience in running successful theaters — is not profitable tells us all we need to know about the wisdom of investment in this business. If Mr. Warren and his partners wish to run it as a hobby, let them do so with their own money. The citizens of Wichita, however, need to be able to make their own investments in ways that they believe will earn a profit — that profitability being the one sure test of the success of an investment. When government makes “investments” based on political calculation, the people of Wichita are less able to make their own private investments.

The council made an unwise decision some years ago when it established the TIF district for this theater. While the city is bound to pay to retire the bonds that were issued, that is the only obligation we have. The fact that a bad decision was made in the past should have no bearing on the decision to be made today. This is especially true as a decision to make this loan steers Wichita firmly towards the path of less private entrepreneurship and more government control of investment in Wichita.

Warren Old Town Wichita Theater: Good Money After Bad?

This letter is from my friend Darrell Leffew. Not everyone seems to understand the folly of throwing good money after bad. “Taxpayers are already on the hook” is Wichita city council member Jeff Longwell’s opinion as expressed in a Wichita Eagle article. Mr. Longwell, I realize you weren’t a member of the council when we taxpayers were placed on the hook, but don’t help us on another, please.

Let us not throw more good money after bad. The Wichita City Council has approved a business loan to the Limited Liability Company that owns the Old Town Warren Theater.

That same company was quoted in an Eagle article earlier this month as saying the remodel paid for by the loan would cut the losses. No mention of ending the losses, just reducing. What are the exact estimates? Taxpayers should be fully informed.

An Eagle article of November 2004 talked about revenues related to the TIF, which funded Old Town development, being woefully short. How many millions of taxpayer dollars are already at risk? And if the business goes into foreclosure before the loan is repaid, we the taxpayers have first claim on a failed, debt ridden property.  Our interim City Manager advised against the loan.

Our elected officials are not just offering commercial banking now but BAD commercial banking. And the “Open for Business” sign is bright neon.

Has our City Council overstepped its authority? Voters will decide at the polls.

Wichita Tax Swap Has Dangers

The City of Wichita is thinking about raising its sales tax and using the proceeds to lower property taxes (“City starts talks on 1-cent hike in sales tax”, May 14, 2008 Wichita Eagle).

While some debate the relative merits of sales taxes vs. property taxes, there is one thing I am certain of: if Wichita reduces its property taxes, politicians in overlapping jurisdictions will see this as an opportunity to raise the property taxes they levy.

Wichita city council member and vice-mayor Sue Schlapp recognizes this threat, as evidenced by reporting in the Wichita Eagle article: “But council member Sue Schlapp said the city must consider that other taxing entities, such as Sedgwick County and the Wichita school district, could see the reduction of the city’s share of taxes as an opening to raise property taxes, which would mean an overall increase for residents.”

If Wichita goes through with this plan, I would urge all other local governmental bodies to adopt resolutions requiring voter approval of tax increases. As it is, many of the taxes we pay have a built-in escalator. This is the case with sales and property taxes. As prices rise, people spend more, and sales tax receipts rise. As the tax assessor raises the valuations in property, people and businesses pay more property tax.

Wichita city manager’s warning is too late

On Tuesday June 16, 2008, the Wichita City Council agreed to lend the Old Town Warren Theatre’s owners $6 million so they could keep the theater open. (City agrees to loan Warren $6 million June 18, Wichita Eagle).

Wichita Interim City Manager Ed Flentje issued this warning to the council: “There are in this community much larger businesses with much larger employment who may see this opening as something that will open a door for those businesses to come and say, ‘You’ve done it before, you can do it for us.'”

Dr. Flentje, I hate to break the news to you, but the door is already wide open. Not so much for loans directly from the city to business entities, but for all sorts of TIF districts and tax abatements. These arrangements generally let developers use the property taxes they pay — taxes that would normally go to fund the operations of the city and other governments — to pay for the development itself. Developers who don’t receive tax favors have to pay property taxes, and also must pay for the types of things that TIF districts funds pay for.

These special tax favors are now dispensed freely by the Wichita City Council. As I stated at a public hearing before that body not long ago: “It is now apparent that TIF districts and tax abatements are entitlements that developers in politically-favored areas of town can count on receiving, while everyone else pays.” See Tax Abatements in Wichita.

Whether a developer receives a low-interest loan, or an outright gift, or the privilege of having your property taxes returned right back to you, these special favors serve to distort the free allocation of capital according to what people really want. Instead, capital, in the form of tax dollars, is allocated according to the desires of politicians.

Bill Warren and the theater’s other owners know very well the benefits that TIF districts can bring to a development. The theater in question benefited from a TIF district established in 1999. That district is, according to the article, the only tax district in Wichita that doesn’t generate enough tax revenue to pay for the bonds issued for it.

The problems with this TIF district benefiting the Warren Theater are not new. The Wichita Eagle reported on November 14, 2004 (“Old Town tax district misses goals: Plaza falls short”) that “A special tax district set up to pay for millions of dollars of public spending in the Old Town Cinema Plaza is generating less than half the revenue it’s supposed to — and taxpayers citywide will have to pick up the tab.”

Also see Warren bailout poses dilemma.

Wichita School District Economic Impact

In February 2008, Janet Harrah of the Center for Economic Development and Business Research at Wichita State University produced a report titled “Wichita Public Schools: Impact Analysis Operations Impact, Bond Impact and Success Measures.” This report painted a glowing picture of the USD 259 (Wichita, Kansas public school district) bond issue in 2000. The district uses it to promote the success of the 2000 issue, and to promote the proposed bond issue that may be voted on sometime in 2008. The study may be viewed at the CEDBR website here.

The author of the study told me that the Wichita school district paid $1,500 for this study. Usually, research such as this that is purchased by the customer is treated as just that: something bought because it suits the customer’s needs. Since the customer controls what is done with the product, it is certain that if this study had produced a result that didn’t show a fantastically positive benefit for Wichita school district spending, the school board would not have released it to the public. But as we shall see, the way this study is structured guarantees a positive result. Also, the price of $1,500 is astonishingly low for a study of some 28 pages with three authors.

Perhaps the primary problem with this study is that it treats the cost of the bond issue as though it doesn’t exist. The study presents evidence of the benefits of school district spending, but mentions only in passing school district taxation:

An opportunity cost exists for the use of public funds for education. If public funds were not used to provide public education, they would be available for alternative use. Estimating the potential economic impact of alternative uses of these opportunity costs was beyond the scope of this analysis. (Page 6)

It is the lack of analysis of these “alternative uses” that is most important. Actually, not much analysis is required. All that is needed is to recognize that when money is paid to the Wichita public schools, that money is not available for other spending. It means that when a construction worker is hired to build a Wichita school, that construction worker isn’t working on something else in Wichita. It cannot be any other way. As Henry Hazlitt explained in his classic work Economics in One Lesson:

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

The study also uses the technique of the “multiplier,” which is to say that spending by the school district causes other spending to happen, and other jobs are therefore created. But the construction worker, whether working on a school building or a shopping mall, is paid the same and spends his wages in the same way. The multiplier effect is the same.

This study also analyzes the impact of the bond issue (and ongoing operations) on local governments such as the City of Wichita and Sedgwick County. From page 6: “These measures view the taxing entities’ expenditures as a public investment. Public benefits are measured by tax collections. If public benefits exceed public costs then the rate of return is greater than 100 percent and the benefit-cost ratio is greater than 1.”

These rates of return can be fantastic. For Wichita and Sedgwick County, their rate of return for the 2000 bond issue is over 1,000%! By way of explanation the study states: “These ROI percentages for the city and county are relatively high since these jurisdictions derive significant benefits from increased sales tax collections as a result of the District’s payroll, while incurring very few costs.”

The problems with this analysis are these: First, the taxing entities’ investment is raised by taxing their residents. Second, the public benefits, as explained above, are the taxes that the government collects. It is as though we tax ourselves so that we can pay even more taxes, all this to feed the machinery of government. And if you believe in limited government and personal liberty, it is not a benefit to pay more taxes.

While it is true that the City of Wichita derives benefits from Wichita school district spending, the city’s benefits are funded by taxes paid to the school district. It is only by considering these local governmental entities to be separate from each other that this fantastic rate of return on “investment” is possible. If the total cost of government is considered, the picture is different.

These defects and omissions — not realizing that tax funds could be spent elsewhere if not sent to government, not realizing that benefits that government receives are the taxes that people pay, and separating government into compartments that play off each other to create artificial returns — need to recognized as we read this report.

Wichita City Manager Search: Look Before You Leap

By James Barfield

In the business world, there’s an old adage that says “look before you leap.” So, upon hearing that the Wichita city council was going to hire the only city manager candidate interviewed, I decided to do some looking. What I have seen thus far, has not been all that pretty to me. One of the reasons for the “rush,” we were told, is Pat Salerno is a finalist for the same position in Durham, North Carolina. What we were not told was that he was a finalist in Durham in 2001, and was not selected. Also, this candidate was passed over in recent months by two cities in Florida, Naples and Fort Meyers. Both took a pass after initially interviewing Pat Salerno for a city manager position.

In talking with people in Sunrise, Florida, I found several people who gave Pat Salerno glowing comments regarding his economic development achievements. However, I could find no one who said they would hire him again. They listed several reasons as to why not. Chief among them were the following:

  • Pat Salerno likes to run a “one man show.”
  • City commissioners in Sunrise were not allowed email privileges.
  • Also not allowed were city issued cell phones.
  • In his 18 years of service, he constantly refused to provide information to city commission members and staff.
  • He refused to hire an assistant city manager, even though there was a line item in the budget authorizing him to do so.
  • He refused to hire a deputy fire chief, or a deputy police chief for 18 years.
  • He has hired not a single minority department head in his 18 years of service.
  • He is not considered by any to be a “people person.”
  • He does not embrace the idea of “open government.”

And last but certainly not least, Pat Salerno administered a $270,000,000 city fund that was used in part to invest in sub prime real estate, without the knowledge of commission members. Commission members found out about this fund by reading a newspaper article in the Miami Herald newspaper. The fund was later frozen.

One Sunrise commissioner was quoted as saying “When you’ve got Pat Salerno doing everything, what’s the use in having a commission.” The same commissioner accused Salerno of “acting without the advice and consent of elected leaders.”

I would like to ask the citizens of Wichita, is this not the same kind of feedback that preceded the hiring of one George Kolb? Furthermore, is this what you want in a new city manager? I certainly don’t.

I for one, don’t find the need to rush justified. We seem to have a very good interim manager in place. Did we not learn anything from the hiring of George Kolb? As a business man, I like the idea of “look before you leap.”

The smoking ban in Wichita

Some commentary regarding Wichita’s half-passed smoking ban that I received.

University of Kansas School of Medicine professor Dr. Rick Kellerman is on the front page of the May 30 Wichita Eagle. Kellerman is upset that a complete ban on smoking is not expected to be adopted by the city council at their June 3 meeting.

Who appointed Dr. Kellerman to be Wichita’s doctor? The doctor’s elitist and authoritarian statement in today’s Wichita Eagle indicates that he is either trying to become the 21st century version of the Prohibition era’s Carrie Nation or the 20th century’s version of the infamous Nurse Ratched (see Ken Kesey’s classic One Flew Over the Cuckoo’s Nest) for improper behavior. The arguments that Kellerman uses could also be used to ban everything from firearms, cars, risky behaviors from hang gliding to bungee jumping, and a host of activities that free people exercising their freedom in a responsible way may decide to engage in performing.

While it is a common leftist trait to call their political opponents “fascists” it is a historical fact that the most famous anti-tobacco and anti-smoking advocate in the first half of the 20th century was Adolf Hitler, who was happy to use his tyrannical powers to impose his will upon his subjects. This was (and is) part of the authoritarian elitism that underlies all totalitarian ideologies.

Dr. Kellerman’s desire to follow in these footsteps here in Wichita as part of his campaign to destroy individual liberty, property rights for individuals and business owners, as well as broadly restrict human freedom. Dr. Kellerman knows better than the peasants what is good for us.

Obviously this arrogant professor has never read Thomas Sowell’s the Vision of the Anointed, a book that describes Kellerman’s ideology and elitist arrogance perfectly. The same issue of The Wichita Eagle has a small story about how California’s state senate has passed a ban on smoking within one’s own apartment. Friendly fascism of the nanny state elitists like Dr. Kellerman are active all across this country.

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 bob.weeks@gmail.com, 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.