At the December 2, 2008 meeting of the Wichita City Council, Jeff Fluhr, the new president of the Wichita Downtown Development Corporation, spoke on behalf of the expansion of the Center City South Redevelopment District, commonly known as the downtown Wichita arena TIF district.
Attending the meeting with him were several members of that organization’s board of directors, headed by Joe Johnson of Schaefer Johnson Cox Frey Architecture. This board, emblematic of the “good ol’ boy” network, is stocked with those who seek to profit in the halls of government power rather than in the marketplace where consumers rule. It’s easier that way — no pesky consumers with their varied wants and desires.
The problem Mr. Fluhr faces is that in order to lure developers to downtown Wichita, incentives must be offered. Now some on the Wichita city council act as though incentives come at no cost. The proceeds from TIF financing, they say, are used only for infrastructure, as though this is something the city is obliged to provide. But as I show in my post Many Wichita Developers Pay for Infrastructure, market-based developers pay for their infrastructure. The city doesn’t give away much to them.
The TIF developers, they being the political entrepreneurs, are privileged to use their own property taxes to pay for their infrastructure, and for other things, too. This sets up a situation where the city, through its attempts at centralized planning, thwarts the will of the people by forcing Wichitans to subsidize developers who are lured — “incentivized,” as one city council member put it — to develop where politicians want them to.
This sets up a tension. Citizens are starting to realize the reality of the transfer of wealth from taxpayers to the political entrepreneurs, and they don’t like it. They’re starting to realize that public/private partnerships mean the public takes the risk, and the “privates” earn the profits. This is far removed from capitalism, which is what we need to build the wealth of our city. “Crony capitalism” is a better term for the relationship between the TIF district developers and local government officials.
Then there’s the defect in the process surrounding the public hearing before the Wichita city council. As Randy Brown wrote about this meeting: “Among other transgressions, we had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue.” Mr. Fluhr needs to decide if he’s on the side of open and transparent government, or whether he’s in favor of crony capitalism and the good ol’ boy network. If he would request that the City of Wichita withdraw this TIF district until a proper public hearing is held, we’d get a good indication of his thinking. Of course, if he doesn’t make such a request, we’ll know just as well.
Finally, Mr. Fluhr stated in his presentation to the Wichita city council: “[The TIF district] will greatly contribute to Wichita’s development as a destination river city, which will in turn enhance the economic vitality of downtown and the community at large.” (emphasis added)
I would ask that Mr. Fluhr and the citizens of Wichita familiarize themselves with the research to the contrary. A number of studies tell us that TIF districts, while good for the subsidized developers, are not a good deal for the city as a whole. As economists Dye and Merriman (see below) found out: “We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.”
Kenneth A. Kriz: Tax Increment Financing: Its Effect on Local Government Finances
Dye, Richard and David Merriman: Tax Increment Financing: A Tool for Local Economic Development
Dye, Richard and David Merriman: The Effects of Tax Increment Financing on Economic Development
Danny Santivasci: Tax Increment Financing: Private Investment at the Expense of Local Community