Tuesday’s Wichita City Council meeting will provide an opportunity for the mayor, council members, and city hall staff to let Wichitans know if our city is governed by the rule of law and proper respect for it, or if these values will be discarded for the convenience of one person and his business partners.
Here’s the situation: a person wants to gain approval of a tax increment financing (TIF) district project plan. This requires a public hearing, which the city has scheduled for September 13th.
But this schedule doesn’t suit the applicant. He has a personal business need — an expiring purchase option — and wants the city to issue a letter of intent stating that the city intends to do all the things that are the subject of the September public hearing.
The letter of intent is not binding, city officials tell us. The council will still have to hold the September public hearing and vote on the incentives the developer wants. And the list of incentives is large, amounting to many millions of dollars. Whether to issue these incentives deserves discussion and a public hearing.
But the letter of intent, in effect, circumvents the public hearing. It reduces the hearing to a meaningless exercise. No matter what information is presented at the September public hearing, no matter how strong public opinion might be against this project, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I imagine that persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?
And the developers are planning to take action based on this letter of intent. To them, the letter does have meaning. If it had no meaning, why would they ask for it?
That bears repeating: If the letter of intent is non-binding, why issue it at all?
The last time someone felt the city reneged on a letter of intent, it resulted in a court case that went all the way to the Kansas Supreme Court. I imagine the city is not anxious to repeat that experience.
Part of the purpose of public hearings and their advance notice, usually 30 days or so, is to give interested parties time to prepare for the hearing. But citizens are given just a few days notice of the proposed letter of intent. The parties who will receive the subsidies, of course, have known about this for some time. Their bureaucratic and political enablers have, too.
The issuance of the letter of intent on Tuesday, if the city council decides to do so, is an affront to the rule of law. It would be a powerful statement by the council that it intends to go ahead with the project and its subsides, public hearing — and citizens — be damned. It is a striking show of arrogance by the city and its political leadership, which is to say Mayor Carl Brewer.
After Tuesday’s meeting we will know one thing. We will know if the Wichita City Council and city staff value the rule of law more than the needs of one small group of people. We won’t really know about individual city staff, but the council members and mayor will have to vote on this item. We’ll know exactly where each of them stands. Expect waffling.
Tuesday provides citizens a chance to learn exactly how the mayor and each council members value the rule of law as compared to the needs of one person and his business partners. It is as simple as that.
The project
The project is the development of a new hotel in an existing building downtown. It sounds like a neat project and would be a great addition to Wichita. But — this project is a product of central government planning backed by massive government intervention in the form of millions of dollars of subsidy. Pretty much all the tools have been tapped in the proposed corporate welfare, even one form that will require the city to pass a special charter ordinance.
The lead developer, David Burk, is well known in Wichita and has produced a number of successful projects. (We must qualify this as “seemingly successful,” as it seems as all of Burk’s projects require some sort of taxpayer involvement and subsidy. So we don’t really know if these projects would be successful if they had to stand on their own.)
I’ve written extensively on the problems with government-directed planning and taxpayer-funded investment in downtown Wichita. See Downtown Wichita regulations on subsidy to be considered or Downtown Wichita revitalization for examples. This project suffers from all these problems.
Furthermore, we see the problems of the public choice theory of politics at play here. Perhaps most prominent is the problem of concentrated benefits and dispersed costs. In this case Burk and his partners stand to garner tremendous benefit, while everyone else pays. This is why Burk and his wife are generous campaign donors to both conservative and liberal city politicians.
Burk and past allegations
The involvement of Burk in the project, along with the city’s response, is problematic. City documents indicate that the city has investigated the backgrounds of the applicants for this project. The result is “no significant findings to report.” Evidently the city didn’t look very hard. In February 2010 the Wichita Eagle reported on the activities of David Burk with regard to property he owns in Old Town. Citizens reading these articles might have been alarmed at the actions of Burk. Certainly some city hall politicians and bureaucrats were.
The opening sentence of the Wichita Eagle article (Developer appealed taxes on city-owned property) raises the main allegation against Burk: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”
A number of Wichita city hall officials were not pleased with Burk’s act.
According to the Eagle reporting, Burk was not authorized to do what he did: “Officials in the city legal department said that while Burk was within his rights to appeal taxes on another city-supported building in the Cinema Plaza, he did not have authorization to file an appeal on the city-owned parking/retail space he leases. … As for Burk signing documents as the city’s representative, ‘I do have a problem with it,’ said City Attorney Gary Rebenstorf, adding that he intends to investigate further.”
Council member Jeff Longwell was quoted by the Eagle: “‘We should take issue with that,’ he said. ‘If anyone is going to represent the city they obviously have to have, one, the city’s endorsement and … two, someone at the city should have been more aware of what was going on. And if they were, shame on them for not bringing this to the public’s attention.’”
Council member Lavonta Williams, now serving as vice mayor, was not pleased, either, according to her quotations: “‘Right now, it doesn’t look good,’ she said. ‘Are we happy about it? Absolutely not.’”
In a separate article by the Eagle on this issue, we can learn of the reaction by two other city hall officials: “Vice Mayor Jim Skelton said that having city development partners who benefit from tax increment financing appeal for lower property taxes ‘seems like an oxymoron.’ City Manager Robert Layton said that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”
The manager’s quote is most directly damaging. In a tax increment financing (TIF) district, the city borrows money to pay for things that directly enrich the developers, in this case Burk and possibly his partners. Then their increased property taxes — taxes they have to pay anyway — are used to repay the borrowed funds. In essence, a TIF district allows developers to benefit exclusively from their property taxes. For everyone else, their property taxes go to fund the city, county, school district, state, fire district, etc. But not so for property in a TIF district.
This is what is most astonishing about Burk’s action: Having been placed in a rarefied position of receiving many millions in benefits, he still thinks his own taxes are too high.
Some of Burk’s partners have a history of dealing with the city that is illustrative of their attitudes. In 2008 the Old Town Warren Theater was failing and its owners threatened to close it and leave the city with a huge loss on a TIF district formed for the theater’s benefit. Faced with this threat, the city made a no-interest and low-interest loan to the theater. The theater’s owners included David Wells, who is one of Burk’s partners in the project being considered by the council for the letter of intent.
Entrepreneurs are not always successful. Business failure, if handled honestly and honorably, is not shameful.
But when a business is already receiving taxpayer subsidy, and the response to failure is to demand even more from the taxpayer — that is shameful.
Burk and Wells, by the way, played a role in the WaterWalk project, which has a well-deserved reputation as a failed development. In 2011 the city’s budget includes a loss of slightly over one million dollars for the TIF district that has benefited its owners to the tune of over $41 million.
Burk has been personally enriched by city hall action before. An example from the same article: “A 2003 lease agreement gave Burk use of the retail strip at the front of the parking garage for $1 a year for the first five years.” Nearly-free property that you can then lease at market rates is a sweet deal.
These gentlemen have had their bite at the taxpayer-funded apple. Now they want another bite, on their own schedule, without regard to rule of law and the public.