The Douglas Design District seeks to transform from a voluntary business organization to a tax-funded branch of government.
Tomorrow the Wichita City Council will consider forming a business improvement district (BID) in east-central Wichita. Previously, city documents offered some explanation regarding the district: 1
First, there already exists a voluntary organization: “The Douglas Design District (DDD) is a voluntary organization of over 300 local businesses located near Douglas Avenue between Washington Avenue and Oliver Avenue. In 2017, the DDD established a five-year strategic plan to become a financially self-sustaining organization that is not reliant on elective membership.”
The purpose of a business improvement district: “A BID provides for the administration and financing of additional and extended services to businesses within the district and is funded by the City levying a mandatory service fee on the businesses within the district.”
Who will collect, and who will spend? “While the City levies the service fee, it can contract with a third-party organization such as the DDD to operate the BID. The approach is similar to that used by the City to contract with the Wichita Downtown Development Corporation in downtown.”
All this is repeated in the agenda packet for this week’s meeting. 2
The action on the agenda this week finalizes the district’s funding mechanism: “The annual fee ranges from $100 to $550 depending on the size of the business and is anticipated to generate approximately $50,000 a year.” By size, the city means the number of square feet. If a business or property owner does not pay, the city may start collection activity, although what that means is unspecified: “If any delinquent Fee or penalty is not paid within sixty (60) days from the date on which the Fee or penalty became delinquent, the City may give notice to the business of its intention to initiate a collection action.”
Are BIDs a good idea? Most information about them is provided by their boosters, that is, those who directly benefit from the service fee, which is really a tax. But there are some doubters. The New Republic, by no means a conservative publication, printed a piece arguing against BIDs, stating: “But too often BIDs have turned against the businesses they were meant to serve, making the cost of entry into a new area even higher for local merchants, or lacking the transparency needed to instill trust from the community.” 3
A larger and more balanced look at BIDs comes from Washington Monthly in 2018:
The privatized structure of BIDs may raise liberals’ hackles, but it’s clear that BIDs can be a useful tool to remake neighborhoods into places where people actually want to spend their time. Many big-city mayors — who are overwhelmingly Democratic — have thrown their weight behind them. D.C. Mayor Muriel Bowser recently doled out grants totaling $300,000 to five neighborhoods thinking about forming their own BIDs. (One of the grantees, Dupont Circle, with the decaying park, will start collecting taxes from business owners in the fall.)
Still, there are real downsides to BIDs for renters and small business owners, who will not benefit from rising property values and may ultimately be pushed out of the area. Luckily, this isn’t a hugely difficult problem to remedy. The best, and easiest, way to revamp how BIDs are run is through city halls; they’re the ones who legislate what BIDs can and can’t do, while holding them accountable to the public. But too often, they renege on that responsibility. 4
From Canada, harsh criticism:
In this paper, we propose and develop the concept of “socio-economic hygiene” to denote the ways in which neoliberal Western urban space is spatially regulated and re-oriented towards consumption in a way that reinforces social exclusion. … We conclude by tracking how sociological strategies of “hygiene” have moved from racial and biological features to features of place and socioeconomic status, and how BIDs, resembling genocidal states in certain ways, use these strategies to continually justify their own existence. 5
Civil society, or government?
What should trouble everyone is the replacement of civil society with political society. Edward H. Crane explains: “There are basically only two ways to organize society: Coercively, through government mandates, or voluntarily, through the private interaction of individuals and associations. … In a civil society, you make the choices about your life. In a political society, someone else makes those choices.”
Right now DDD is a voluntary organization. Civil society, in other words. But now it is proposed to replace it with political society.
Why trade voluntary cooperation for the force of government? The annual report of the DDD (included in the city council agenda packet in 2018) explains: “Approximately 1/3 of businesses in DDD’s project area are DDD members yet ALL businesses benefit from DDD’s efforts. A BID eliminates this ‘free rider’ problem and, if implemented, would allow DDD to have a singular focus on implementing the BID business plan rather than always chasing membership.” For emphasis, the report notes: “THE PAYMENT OF THE BID ASSESSMENT WILL REPLACE MEMBERSHIP DUES.”
Another term for chasing membership is selling your product by showing how it creates value. If the formation of the BID is successful, the Douglas Design District will be relieved of this necessity. Will having a guaranteed source of revenue make DDD more or less responsive to its members?
Also, the DDD annual report states: “A BID assessment is not a tax.” But for those who decide to skip paying this tax? After a few years, they will experience the blunt power of government tax collection.
Taxation without transparency
The agenda packet states this about the relationship between the city and the district: “While the City levies the service fee, it can contract with a third-party organization such as the DDD to operate the BID.”
Wichita has similar organizations. One is the Wichita Downtown Development Corporation, now known as Downtown Wichita. This organization is funded nearly entirely by tax revenue from an improvement district. Yet, it refuses to make its spending records public, and the city supports that decision. 6
Another similar taxpayer-funded organization is the city’s convention and tourism bureau, which has gone by several names over the years. Regarding it, in 2012 I wrote:
We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.” 7
Of interest is a segment from the KAKE Television public affairs program “This Week in Kansas” where the failure of the Wichita City Council, especially council member Pete Meitzner (district 2, east Wichita), to recognize the value of open records and open government is discussed. Video is here.
Since this time, the city has formed a business improvement district known as a TBID. It covers all hotels in the city and imposes an additional 2.75 percent tax to hotel bills, although the city and hotels call it a “City Tourism Fee.” 8 I’ve not asked for records of this spending, but I am sure the request would be rejected.
Will the Douglas Design District follow the standard set by Wichita’s other improvement districts and evade accountability and transparency?
Results from current improvement districts
The Washington Monthly piece mentions that city halls can hold BIDs accountable. But lack of transparency works against oversight and accountability.
Then, if anyone wonders what about the results of Wichita’s improvement districts, here are a few findings:
For the past decade business activity in downtown Wichita has been on a downhill trend. The data for 2017 (the most recent year for data) holds good news, with business activity rising. It isn’t the vibrant growth we’ve been told is happening in downtown Wichita, but at least things are not getting worse. 9
Truthfulness is in short supply. The Downtown Wichita organization has been caught in either a huge lie or gross incompetence regarding its claim of the number of people working in downtown Wichita. After brought to its attention, the number is no longer used. 10
Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates. 11
Looking at hotel guest tax receipts, which are a surrogate for total hotel room revenue, we observe that of the largest markets in Kansas, Wichita has experienced nearly the least growth in hotel guest tax collections since 2010. 12
Despite this record, Wichita City Hall seems satisfied with these results.
We should be wary of government planning in general. But when those who have been managing and planning the foundering Wichita-area economy want to step up their management of resources, we risk compounding our problems.
As announced by the City of Wichita, “In response to recent recommendations from Project Wichita and the Century II Citizens Advisory Committee, community organizations and their leadership are stepping forward to take the next step to create a comprehensive master plan and vision that connects projects and both banks of the Arkansas River.”
The city says these organizations will be involved:
We should note that these organizations have been responsible for developing the Wichita-area economy for many years. Despite recent developments like Cargill and Spirit Aerosystems, the Wichita economy has performed below the nation. While improving, our economic growth is perhaps half the national rate, and just two years ago Wichita lost jobs and population, and economic output fell.
Thus, the question is this: Why these organizations?
Then, recent behavior by the city, specifically surrounding the new ballpark, has resulted in a loss of credibility. Few seem happy with the city’s conduct. To this day, we still do not know the identities of the partners except for one.
In the future, can we trust the city and its partners are telling us the truth, and the whole truth?
Planning seems like a good thing. But O’Toole tells us the problem with government plans: “Everybody plans. But private plans are flexible, and we happily change them when new information arises. In contrast, special interest groups ensure that the government plans benefiting them do not change — no matter how costly.”
He continues: “Like any other organization, government agencies need to plan their budgets and short-term projects. But they fail when they write comprehensive plans (which try to account for all side effects), long-range plans (two to 50 years or more), or plans that attempt to control other people’s land and resources. Many plans try to do all three.”
Other problems with government planning as identified by O’Toole (and many others):
Planners have no better insight into the future than anyone else
Planners will not pay the costs they impose on other people
Unlike planners, markets can cope with complexity
Some will argue that the organizations listed above are not government entities and shouldn’t exhibit the problems inherent with government planning. But their plans will undoubtedly need to be approved by, and enforced by, government.
Further, some of these organizations are funded substantially or nearly entirely by government, are in favor of more government (such as higher taxation and regulation), and campaign vigorously for candidates who support more taxes and planning.
Following, from Randal O’Toole as published in 2007.
Government Plans Don’t Work
By Randal O’Toole
Unlike planners, markets can cope with complexity and change.
After more than 30 years of reviewing government plans, including forest plans, park plans, watershed plans, wildlife plans, energy plans, urban plans, and transportation plans, I’ve concluded that government planning almost always does more harm than good.
Most government plans are so full of fabrications and unsupportable assumptions that they aren’t worth the paper they are printed on, much less the millions of dollars taxpayers spend to have them written. Federal, state, and local governments should repeal planning laws and shut down planning offices.
Everybody plans. But private plans are flexible, and we happily change them when new information arises. In contrast, special interest groups ensure that the government plans benefiting them do not change — no matter how costly.
Like any other organization, government agencies need to plan their budgets and short-term projects. But they fail when they write comprehensive plans (which try to account for all side effects), long-range plans (two to 50 years or more), or plans that attempt to control other people’s land and resources. Many plans try to do all three.
Comprehensive plans fail because forests, watersheds, and cities are simply too complicated for anyone to understand. Chaos science reveals that very tiny differences in initial conditions can lead to huge differences in outcomes — that’s why megaprojects such as Boston’s Big Dig go so far over budget.
Long-range plans fail because planners have no better insight into the future than anyone else, so their plans will be as wrong as their predictions are.
Planning of other people’s land and resources fails because planners will not pay the costs they impose on other people, so they have no incentive to find the best answers.
Most of the nation’s 32,000 professional planners graduated from schools that are closely affiliated with colleges of architecture, giving them an undue faith in design. This means many plans put enormous efforts into trying to control urban design while they neglect other tools that could solve social problems at a much lower cost.
For example, planners propose to reduce automotive air pollution by increasing population densities to reduce driving. Yet the nation’s densest urban area, Los Angeles, which is seven times as dense as the least dense areas, has only 8 percent less commuting by auto. In contrast, technological improvements over the past 40 years, which planners often ignore, have reduced the pollution caused by some cars by 99 percent.
Some of the worst plans today are so-called growth-management plans prepared by states and metropolitan areas. They try to control who gets to develop their land and exactly what those developments should look like, including their population densities and mixtures of residential, retail, commercial, and other uses. “The most effective plans are drawn with such precision that only the architectural detail is left to future designers,” says a popular planning book.
About a dozen states require or encourage urban areas to write such plans. Those states have some of the nation’s least affordable housing, while most states and regions that haven’t written such plans mostly have very affordable housing. The reason is simple: planning limits the supply of new housing, which drives up the price of all housing and leads to housing bubbles.
In states with growth-management laws, median housing prices in 2006 were typically 4 to 8 times median family incomes. In most states without such laws, median home prices are only 2 to 3 times median family incomes.
Few people realize that the recent housing bubble, which affected mainly regions with growth-management planning, was caused by planners trying to socially engineer cities. Yet it has done little to protect open space, reduce driving, or do any of the other things promised.
Politicians use government planning to allocate scarce resources on a large scale. Instead, they should make sure that markets — based on prices, incentives, and property rights — work.
Private ownership of wildlife could save endangered species such as the black-footed ferret, North America’s most-endangered mammal. Variably priced toll roads have helped reduce congestion. Pollution markets do far more to clean the air than exhortations to drive less. Giving people freedom to use their property, and ensuring only that their use does not harm others, will keep housing affordable.
Unlike planners, markets can cope with complexity. Futures markets cushion the results of unexpected changes. Markets do not preclude government ownership, but the best-managed government programs are funded out of user fees that effectively make government managers act like private owners. Rather than passing the buck by turning sticky problems over to government planners, policymakers should make sure markets give people what they want.
The City of Wichita says it values open and transparent government. But the city’s record in providing information and records to citizens is poor, and there hasn’t been much improvement.
The City of Wichita is proud to be an open and transparent governmental agency, its officials say. Former Mayor Carl Brewer often spoke in favor of government transparency. 1
Mayor Jeff Longwell penned a column in which he said, “First off, we want City Hall to be open and transparent to everyone in the community.” And the mayor’s biography on the city’s website says, “Mayor Longwell has championed many issues related to improving the community including government accountability, accessibility and transparency …”
But the reality is different. It shouldn’t be. Nearly four years ago the city expanded its staff by hiring a Strategic Communications Director. When the city announced the new position, it said: “The Strategic Communications Director is the City’s top communications position, charged with developing, managing, and evaluating innovative, strategic and proactive public communications plans that support the City’s mission, vision and goals.”
But there has been little, perhaps no, improvement in the data and information made available to citizens. The Wichita Eagle has editorialized on the lack of sharing regarding the details surrounding the new baseball team. 3
While this is important and a blatant example, there are many things the city could do to improve transparency. Some are very simple.
For example, it is very common for governmental agencies post their checkbooks on their websites. Sedgwick County does, as does the Wichita school district. But not the City of Wichita.
Until a few years ago, Wichita could supply data of only limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult and beyond the capability of most citizens to translate the data to a useful format. Even if someone translated the reports to computer-readable format, I don’t think it would be very useful. This was a serious defect in the city’s transparency efforts.
Now, if you ask the city for this data, you’ll receive data in an Excel spreadsheet. This is an improvement. But: You may be asked to pay for this data. The city says that someday it will make check register data available, but it has been promising that for many years. See Wichita check register for the data and details on the request.
Another example: For several years, the Kansas city of Lawrence has published an economic development report letting citizens know about the activities of the city in this area. The most recent edition may be viewed here.
The Lawrence report contains enough detail and length that an executive summary is provided. This report is the type of information that cities should be providing, but the City of Wichita does not do this.
Example from the Lawrence report. Click for larger.It’s not like the City of Wichita does not realize the desirability of providing citizens with information. In fact, Wichitans have been teased with the promise of more information in order to induce them to vote for higher taxes. During the campaign for the one cent per dollar Wichita city sales tax in 2014, a city document promised this information regarding economic development spending if the tax passed: “The process will be transparent, with reports posted online outlining expenditures and expected outcomes.” (This is what Lawrence has been doing for several years.)
The city should implement this reporting even though the sales tax did not pass. If it’s good for citizens to have this type of information if the sales tax had passed, it’s good for them to know in any circumstance, because the city (and other overlapping governmental jurisdictions) still spends a lot on economic development.
Why is this information not available? Is the communications staff overwhelmed, with no time to provide this type of information?
During the sales tax campaign Wichita city staff had time to prepare news releases with titles like “City to Compete in Chili Cook-off” and “Jerry Seinfeld Returns to Century II.” Now the city produces headlines like “Wichita Transit to Receive Good Apple Award.”
But if you want to know how the city spends economic development dollars, you won’t find that.
Most of all, the city simply needs to change its attitude. Here’s an example.
Citizen watchdogs need access to records and data. The City of Wichita, however, has created several not-for-profit organizations that are controlled by the city and largely funded by tax money. The three I am concerned with are the Wichita Downtown Development Corporation, Visit Wichita (the former Go Wichita Convention and Visitors Bureau), and Greater Wichita Economic Development Coalition, now the Greater Wichita Partnership. Each of these agencies refuses to comply with the Kansas Open Records Act, using the reasoning that they are not “public agencies” as defined in the Kansas law that’s designed to provide citizen access to records.
The city backs this interpretation. When legislation was introduced to bring these agencies under the umbrella of the Kansas Open Records Act, cities — including Wichita — protested vigorously, and the legislation went nowhere.
Recently the City of Wichita added a new tax to hotel bills that may generate $3 million per year for the convention and visitors bureau to spend. Unless the city changes its attitude towards citizens’ right to know, this money will be spent in secret.
This attitude has been the policy of the city for a long time. In 2008, Randy Brown, at one time the editorial page editor at the Wichita Eagle wrote this:
I’m fairly well acquainted with Bob Weeks, our extraconservative government watchdog. It’s fair to say that I agree with Weeks no more than one time in every 20 issues. But that one time is crucial to our democracy.
Weeks is dead-on target when he says that conducting the public’s business in secret causes citizens to lose respect for government officials and corrupts the process of democracy (“TIF public hearing was bait and switch,” Dec. 5 Opinion). And that’s what happened when significant 11th-hour changes to the already controversial and questionable tax-increment financing plan for the downtown arena neighborhood were sneaked onto the Wichita City Council’s Tuesday agenda, essentially under cover of Monday evening’s darkness.
This may not have been a technical violation of the Kansas Open Meetings Act, but it was an aggravated assault on its spirit. Among other transgressions, we had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue.
The Wichita officials involved should publicly apologize, and the issue should be reopened. And this time, the public should be properly notified.
Randy Brown
Executive director
Kansas Sunshine Coalition for Open Government
A few years later, Brown noticed the attitude had not improved. Although he did not mention him by name, Brown addressed a concern expressed by Wichita City Council Member Pete Meitzner (district 2, east Wichita). He accurately summarized Meitzner’s revealed attitude towards government transparency and open records as “democracy is just too much trouble to deal with.”
“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.” Wichita City New Release. Available at https://www.wichita.gov/News/Pages/2013-03-18b.aspx. ↩
The Douglas Design District proposes to transform from a voluntary business organization to a tax-funded branch of government (but doesn’t say so).
Update: On August 21, the council approved the formation of the planning committee.
This week the Wichita City Council will consider taking the first step in forming a business improvement district (BID) in east-central Wichita. Some explanation from the agenda packet for the meeting: 1
First, there already exists a voluntary organization: “The Douglas Design District (DDD) is a voluntary organization of over 300 local businesses located near Douglas Avenue between Washington Avenue and Oliver Avenue. In 2017, the DDD established a five-year strategic plan to become a financially self-sustaining organization that is not reliant on elective membership.”
The purpose of a business improvement district: “A BID provides for the administration and financing of additional and extended services to businesses within the district and is funded by the City levying a mandatory service fee on the businesses within the district.”
Who will collect, and who will spend? “While the City levies the service fee, it can contract with a third-party organization such as the DDD to operate the BID. The approach is similar to that used by the City to contract with the Wichita Downtown Development Corporation in downtown.”
The action on the agenda this week is to establish a planning committee to develop things like district boundaries, services to be provided, and a budget. Although city documents aren’t specific, it’s likely this “service fee” will be levied as a property tax.
Are BIDs a good idea? Most information about them is provided by their boosters, that is, those who directly benefit from the service fee, which is really a tax. But there are some doubters. The New Republic, by no means a conservative publication, printed a piece arguing against BIDs, stating: “But too often BIDs have turned against the businesses they were meant to serve, making the cost of entry into a new area even higher for local merchants, or lacking the transparency needed to instill trust from the community.” 2
A larger and more balanced look at BIDs comes from Washington Monthly this summer:
The privatized structure of BIDs may raise liberals’ hackles, but it’s clear that BIDs can be a useful tool to remake neighborhoods into places where people actually want to spend their time. Many big-city mayors — who are overwhelmingly Democratic — have thrown their weight behind them. D.C. Mayor Muriel Bowser recently doled out grants totaling $300,000 to five neighborhoods thinking about forming their own BIDs. (One of the grantees, Dupont Circle, with the decaying park, will start collecting taxes from business owners in the fall.)
Still, there are real downsides to BIDs for renters and small business owners, who will not benefit from rising property values and may ultimately be pushed out of the area. Luckily, this isn’t a hugely difficult problem to remedy. The best, and easiest, way to revamp how BIDs are run is through city halls; they’re the ones who legislate what BIDs can and can’t do, while holding them accountable to the public. But too often, they renege on that responsibility. 3
From Canada, harsh criticism:
In this paper, we propose and develop the concept of “socio-economic hygiene” to denote the ways in which neoliberal Western urban space is spatially regulated and re-oriented towards consumption in a way that reinforces social exclusion. … We conclude by tracking how sociological strategies of “hygiene” have moved from racial and biological features to features of place and socioeconomic status, and how BIDs, resembling genocidal states in certain ways, use these strategies to continually justify their own existence. 4
Civil society, or government?
What should trouble everyone is the replacement of civil society with political society. Edward H. Crane explains: “There are basically only two ways to organize society: Coercively, through government mandates, or voluntarily, through the private interaction of individuals and associations. … In a civil society, you make the choices about your life. In a political society, someone else makes those choices.”
Right now DDD is a voluntary organization. Civil society, in other words. But now it is proposed to replace it with political society.
Why trade voluntary cooperation for the force of government? The annual report of the DDD (included in the city council agenda packet) explains: “Approximately 1/3 of businesses in DDD’s project area are DDD members yet ALL businesses benefit from DDD’s efforts. A BID eliminates this ‘free rider’ problem and, if implemented, would allow DDD to have a singular focus on implementing the BID business plan rather than always chasing membership.” For emphasis, the report notes: “THE PAYMENT OF THE BID ASSESSMENT WILL REPLACE MEMBERSHIP DUES.”
Another term for chasing membership is selling your product by showing how it creates value. If the formation of the BID is successful, the Douglas Design District will be relieved of this necessity. Will having a guaranteed source of revenue make DDD more or less responsive to its members?
Also, the DDD annual report states: “A BID assessment is not a tax.” I wonder what will happen to anyone who decides to skip paying this tax. After a few years, they will experience the blunt power of government tax collection.
Taxation without transparency
The agenda packet states this about the relationship between the city and the district: “While the City levies the service fee, it can contract with a third-party organization such as the DDD to operate the BID.”
Wichita has similar organizations. One is the Wichita Downtown Development Corporation, now known as Downtown Wichita. This organization is funded nearly entirely by tax revenue from an improvement district. Yet, it refuses to make its spending records public, and the city supports that decision. 5
Another similar taxpayer-funded organization is the city’s convention and tourism bureau, which has gone by several names over the years. Regarding it, in 2012 I wrote:
We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.” 6
Of interest is a segment from the KAKE Television public affairs program “This Week in Kansas” where the failure of the Wichita City Council, especially council member Pete Meitzner (district 2, east Wichita), to recognize the value of open records and open government is discussed. Video is here.
Since this time, the city has formed a business improvement district known as a TBID. It covers all hotels in the city and imposes an additional 2.75 percent tax to hotel bills, although the city and hotels call it a “City Tourism Fee.” 7 I’ve not asked for records of this spending, but I am sure the request would be rejected.
Will the Douglas Design District follow the standard set by Wichita’s other improvement districts and evade accountability and transparency?
Results from current improvement districts
The Washington Monthly piece mentions that city halls can hold BIDs accountable. But lack of transparency works against oversight and accountability.
Then, if anyone wonders what about the results of Wichita’s improvement districts, here are a few findings:
For the past decade business activity in downtown Wichita has been on a downhill trend. The data for 2016 (the most recent year for data) is a bit of good news, with the decline stopping and business activity remaining mostly unchanged. It isn’t the vibrant growth we’ve been told is happening in downtown Wichita, but at least things are not getting worse. 8
Truthfulness is in short supply. The Downtown Wichita organization has been caught in either a huge lie or gross incompetence regarding its claim of the number of people working in downtown Wichita. After brought to its attention, the number is no longer used. 9
Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates. 10
Looking at hotel guest tax receipts, which are a surrogate for total hotel room revenue, we observe that of the largest markets in Kansas, Wichita has experienced the least growth in hotel guest tax collections since 2010. 11
Despite this record, Wichita City Hall seems satisfied with these results.
The Wichita City Council will consider a budget for the city’s tourism fee paid by hotel guests.
If you stay at a hotel in Wichita, you’ll pay sales tax of 7.5 percent, hotel tax (transient guest tax) of 6.00 percent, and since 2015, a tourism fee of 2.75 percent. The tourism fee arises from the city’s creating of a Tourism Business Improvement District (TBID), with boundaries matching those of the city. 1 Funds collected from this fee go to Visit Wichita, the city’s visitor and convention bureau. (Of note, the TBID ordinance specifies that if the tax is itemized on hotel bills, it is to be called the “Tourism Fee.” Everyone pays, even those who are not tourists.) (Also, some hotels are in Community Improvement Districts, charging up to another 2 percent.)
Coming to Wichita for business. (Click for a larger version.)
This week the Wichita City Council will consider the budget for the use of this tourism fee revenue. 2 City documents (the agenda packet) show actual results and goals for economic impact. As can be seen in the nearby excerpt, for leisure travel in 2017, Visit Wichita claims $81,343,227 in economic impact. This figure comes from summing identifiable dollars, which comes to $20,433,737. Then a multiplier is applied to produce the economic impact. All this results in a return of investment of $53 dollars for every dollar of investment (“Media Leisure Investment”), Visit Wichita says. (This is for the “leisure” market segment only. There are separate goals and statistics for group travel, which is meetings, conventions, or sporting events.)
This data represents what is called “incremental” travel, for which Visit Wichita takes credit: “The rate of travel by those who are ‘unaware’ is considered the base rate of travel, which would have been achieved if no advertising were placed. Any travel above this base by ‘aware’ households is considered influenced — or the rate of incremental travel.” 3
As for the performance of the overall Wichita hotel market, growth is slow. Looking at growth in hotel tax collections, only two of the ten largest markets in Kansas have grown slower than Wichita. This is since January 1, 2015, which was when the tourism fee started. (Hotel tax collections collected by the Kansas Department of Revenue do not include local taxes like the city tourism fee.)
Liquor enforcement tax collections provide insight into the economic impact of hosting NCAA basketball tournament games in Wichita.
In Kansas, a tax is collected at liquor stores, grocery stores, and convenience stores on the sale of alcoholic beverages. The same tax is also collected on sales to clubs, drinking establishments, and caterers by distributors. 1 This tax is called the liquor enforcement tax. The rate has been 8 percent since 1983, when it was raised from 4 percent. 2
This tax provides some insight into the level of sales of alcoholic beverages at bars, clubs, and restaurants. It is not a perfect measurement of that, and perhaps not even a very good measurement, as it also includes sales at retail outlets for consumption offsite.
Nonetheless, it’s data we have. The Kansas Department of Revenue provides this data on a monthly basis for each county. With the touted influx of visitors for the NCAA men’s basketball tournament games in Wichita in May — along with the generalized party atmosphere — we might to expect to see these tax collections rise during March. Here’s what happened.
The liquor tax collections exhibit pronounced seasonality, so it’s useful to compare the same month of the previous year, as follows for Sedgwick County:
March 2017: $1,315,653
March 2018: $1,085,214
Change: -$230,439, a decline of 17.5 percent.
Not only was March 2018 lower than March 2017, it was lower than five of the previous six months of March.
The monthly average for the 12 months prior to March 2018 was $1,243,793. March 2018 didn’t meet that standard.
Kansas liquor enforcement tax collections are available in an interactive visualization here.
Liquor enforcement tax collections in Sedgwick County. Click for larger.
—
Notes
“Liquor Enforcement or Sales Tax. The second level of taxation is the enforcement or sales tax, which is imposed on the gross receipts from the sale of liquor or CMB to consumers by retail liquor dealers and grocery and convenience stores; and to clubs, drinking establishments, and caterers by distributors.”
Also: “Enforcement. Enforcement tax is an in-lieu-of sales tax imposed at the rate of 8 percent on the gross receipts of the sale of liquor to consumers and on the gross receipts from the sale of liquor and CMB to clubs, drinking establishments, and caterers by distributors.
A consumer purchasing a $10 bottle of wine at a liquor store is going to pay 80 cents in enforcement tax.
The club owner buying the case of light wine (who already had paid the 30 cents per gallon gallonage tax as part of his acquisition cost) also now would pay the 8 percent enforcement tax.”
Kansas Legislative Research Department. Kansas Legislator Briefing Book 2017. Available at http://www.kslegresearch.org/KLRD-web/Publications/BriefingBook/2017Briefs/J-4-LiquorTaxes.pdf. ↩
Hotel tax collections provide an indication of the economic impact of hosting a major basketball tournament.
The Kansas Department of Revenue has released transient guest tax collections for March 2018. This is a tax added to hotel bills in addition to sales tax. The rate in Kansas is 6.00 percent, although some localities add additional tax to that.
For the city of Wichita, here are the collections:
March 2017: $538,539
March 2018: $543,844
Increase: $5,305 or 0.99 percent
With the hotel tax at 6.00 percent, that increase implies additional sales of $88,417 for the same month of the prior year. (The 2.75% tourism fee that is also added to Wichita hotel bills is paid directly to the city, so it does not appear in the statistics from the Kansas Department of Revenue.)
While an increase from the same month of the previous year is good, the average monthly hotel tax collections for the year before (March 2017 through February 2018) was $590,770.
So March 2018 didn’t exceed the average month of the previous year. It also didn’t exceed March 2016. Whatever was happening in Wichita during that month, the city generated $665,854 in hotel taxes.
Kansas transient guest tax collections are available in an interactive visualization here.
The action on the agenda this week finalizes the district’s funding mechanism: “The annual fee ranges from $100 to $550 depending on the size of the business and is anticipated to generate approximately $50,000 a year.” By size, the city means the number of square feet. If a business or property owner does not pay, the city may start collection activity, although what that means is unspecified: “If any delinquent Fee or penalty is not paid within sixty (60) days from the date on which the Fee or penalty became delinquent, the City may give notice to the business of its intention to initiate a collection action.”
This week the Wichita City Council will consider the budget for the use of this tourism fee revenue. 2 City documents (the agenda packet) show actual results and goals for economic impact. As can be seen in the nearby excerpt, for leisure travel in 2017, Visit Wichita claims $81,343,227 in economic impact. This figure comes from summing identifiable dollars, which comes to $20,433,737. Then a multiplier is applied to produce the economic impact. All this results in a return of investment of $53 dollars for every dollar of investment (“Media Leisure Investment”), Visit Wichita says. (This is for the “leisure” market segment only. There are separate goals and statistics for group travel, which is meetings, conventions, or sporting events.)
This week the 
