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In Wichita Planeview neighborhood: Yes, we have!

Developers of a proposed Save-A-Lot grocery store in Wichita’s Planeview neighborhood have made the case that without two forms of subsidy, the store won’t be profitable and won’t be built.

There is a counterexample, however. On Hillside, just south of Pawnee and just across the street from Planeview, sit two grocery stores that together occupy 13,000 square feet of space. This is close in size to the proposed Save-A-Lot store’s 16,500 square feet.

While the developer says the Save-A-Lot store can’t be profitable without over $800,000 of taxpayer subsidy, the existence of these grocers proves that it can be done. They are in business, earning a profit, and doing so without government subsidy. The City of Wichita, apparently, is not aware of these success stories, or doesn’t care.

Reviewing the September 14th meeting of the Wichita City Council gives us an idea of how little the city cares how its actions affect existing business.

At that meeting, Rob Snyder, developer of the proposed Save-A-Lot store, said he has “researched every possible way” to make the project work. Without the subsidy, he said, there won’t be a grocery store. But the existence of several grocery stores in or near Planeview, operating profitably without government subsidy, shows that Snyder’s claims are false.

I’m not claiming that Snyder intentionally lied to the city council about the necessity of subsidy for his store. But he has an $800,000 motive to get the council to approve his subsidy. And there’s evidence that corporate welfare like what Snyder requests is not necessary to open and operate a successful grocery store in this part of Wichita.

During his talk to the council, it became apparent that Snyder thinks corporate welfare is a wise business and political strategy. Snyder lamented the fact that earmarks are now unpopular with the American public and not available to finance his proposed grocery store. An earmark — that is to say, a grant of money paid for by U.S. taxpayers — was used as a large part of the financing for the other Save-A-Lot in Wichita at 13th and Grove. An article by James Arbertha tells of the roll earmarks played in the opening of that store.

While it may be necessary for Snyder’s store to be propped up by taxpayer subsidy, citizen Wendy Aylworth told council members of the several grocery stores already operating in the Planeview area. Mayor Carl Brewer appeared surprised to learn of these stores and asked Aylworth for their locations.

The mayor’s surprise is evidence that the city simply does not care about the impact of its corporate welfare policies on existing business. Several people have pointed out to me that these existing stores — with the exception of one large supermarket — are ethnic grocers, although most carry a wide variety of food and household items.

Is the CID tax necessary?

One of the issues relating to CIDs is their very necessity. If a business feels it needs to generate additional revenue, why not simply raise its prices? Why is it necessary to have the government collect taxes in order to generate additional revenue for the merchants in the CID?

Ron Rhodes, who developed the existing Save-A-Lot store in Wichita, addressed the Wichita city council that day. Rhodes referred to the “people who have ability to pay” an extra sales tax, and those who don’t have the ability to pay. Listening to him I couldn’t help be reminded of another slogan: “From each according to his ability, to each according to his needs.”

Rhodes also spoke of neighborhood pride. But how proud can a neighborhood be when merchants have to rely on corporate welfare to open a store there?

In later questioning, Rhodes said that a Save-A-Lot store can’t raise its prices due to a “price deck” policy that says that most prices should be uniform in Save-A-Lot stores. This is an internal business policy of Save-A-Lot that should not bind the City of Wichita. It is not relevant to the formation of public policy in Wichita.

The issue of tax increment financing

At the same meeting, Greg Ferris, a lobbyist for Snyder, told the council that “there will not be a building on that corner if this is not passed today. There will not be any tax revenue, so we are not taking away any tax money away from schools, police, fire, etc.” He said we have “spent months” trying to figure out how to finance a project in that area. He said that “a grocery store is not going to move into the Planeview area to service those people,” alluding to how a grocery store did not move to the 13th and Grove area until the city subsidized it.

Ferris contended that there is no city tax money going in to this project that is taken from something else.

While presenting himself as speaking for the public interest, Ferris is a hired lobbyist for Snyder, the developer of the proposed grocery store. He is being paid to present Snyder’s interests, and those alone. He invokes the standard argument of those seeking corporate welfare through tax increment financing: the “but for” argument. This is the claim that without the benefit of the TIF district, nothing will happen.

It may be true that without the corporate welfare provided by the TIF district and the CID, Snyder won’t develop the Save-A-Lot store. But that doesn’t mean that it is not possible to run a successful grocery store in that part of town, as we have evidence that it is.

Ferris’ claim that no tax money from something else will go into this project is false, too. Will the Save-A-Lot store pledge to forgo the use of police, fire, and other city services? As this store wants to escape paying the same taxes that others have to pay, the rest of Wichita has to pay to provide services that Snyder doesn’t want to pay for.

TIF is not a wise policy. Research on tax increment financing indicates that TIF is a zero-sum game. When someone wins, others lose an equal amount. TIF does not increase the total amount of development that takes place in a city. It simply transfers development from one part of the region to another. This intervention by government may actually decrease the amount of development in a city.

In the case of Snyder and Ferris, the city’s actions in favoring a politically-connected developer and lobbyist with taxpayer-funded welfare may result in small ethnic grocers and one large established supermarket going out of business. How is this progress?

The moral hazard

In visiting with the owner of the large building and one of the grocery stores on Hillside, I asked him if he sought government assistance when developing that property. He answered no, that he didn’t know — speaking in his broken English — “where to dig the money” at that time.

Now he knows to get a shovel.

This creates an increasing cycle of dependence on government, particularly Wichita city government, for managing economic development. Entrepreneurship is replaced by bureaucracy and politics, not only for the revitalization of downtown Wichita, but across the city too.

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5 Comments

  1. Anonymous October 6, 2010

    Geez Bob, you can’t have it both ways.

    “One of the issues relating to CIDs is their very necessity. If a business feels it needs to generate additional revenue, why not simply raise its prices?”

    “In later questioning, Rhodes said that a Save-A-Lot store can’t raise its prices due to a “price deck” policy that says that most prices should be uniform in Save-A-Lot stores. This is an internal business policy of Save-A-Lot that should not bind the City of Wichita. It is not relevant to the formation of public policy in Wichita.”

    So the fact that they can’t raise prices is irrelevant to city policy that should say “raise your prices if you want more money”? You argue circular logic then wonder why the council gives you no credibility. You accuse them of ignorance yet I’d say “Pot meet kettle”.

  2. bman October 6, 2010

    perhaps the city of wichita should go into the grocery store business. I’m sure they can find a lot of neighborhoods that need this service. Of course, being government run they would have to be tax payer supported. Suggest the city council go to Caracas and find out how the experts set this scheme up.

  3. Wendy October 6, 2010

    Great idea bman!

    After all, Wichita City Council members have been making trips to Germany & France, as well as numerous cities in other states to find out how they can run Wichita. Why don’t they just go to the expert – Hugo Chavez of Venezuela?

    Chavez has expropriated stores, food processors & a few million farms. Some arrogant government leaders think they know best how to get food to the people. Look at the results in Venezuela — since Chavez took control of food distribution Venezuelans are starving in this formerly wealthy OPEC member nation.

    We can thank our current city council for gutting the once wealthy Wichita.

  4. james October 6, 2010

    The pricing may seem like a circular argument to you, but in fact it isn’t. What Save-A-Lot is asking the city to do is hand over taxpayer money to them because they’re unwilling to change an internal company pricing policy. Isn’t that interesting? Which would be easier to change? Quite honestly if that is how Save-A-Lot is operating it’s no wonder they say they need government money, even McDonalds and Wal-Mart don’t have such policies. Just drive to Cassoday on the turnpike and see how much a Big-Mac costs you there compared to in Wichita.

    Look, they want the CID so they can show shoppers a lower price but then make it up in the end, that’s what it’s all about. If shoppers saw the higher prices before putting it in their cart, it’d never make it in, it’s that simple.

  5. Anonymous October 7, 2010

    “So the fact that they can’t raise prices is irrelevant to city policy that should say ‘raise your prices if you want more money?’ ”

    It seems like the first commenter didn’t fully think through their argument. Yes, internal policies of private organisations should not be relevant to city government. If I have a policy in my store of selling gold for $1 an once should city government subsidies my store until it’s profitable? No, nor should they subsidize Save-A-Lot due to their internal policies.

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