Last week’s meeting of the Wichita City Council featured a message from Council Member Janet Miller that illustrated her firm belief in centralized government planning for the purposes of economic development. It also contained a material mistake in the understanding of the facts of the project.
In her remarks from the bench, Miller disagreed with those who testify at council meetings against tax increment financing (TIF). She said there is much information that says this type of economic development incentive is effective.
She said “Sometimes I wonder what city folks are living in when they talk about the negative, or the lack of results from TIFs.” She then named several Wichita TIF districts that she said performed well.
If her remarks were aimed at me and some of the other people who have testified at city council meetings against the formation of TIF districts, council member Miller may not have been listening very carefully. We do not deny that TIF districts produce results — within the district itself. Things get built, buildings get renovated. It is the effect of TIF on the city as a whole that we are concerned with.
It’s the observed effects of TIF, as economists Dye and Merriman have found and I have mentioned to the city council, including Miller, several times: “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.”
It’s also the unobserved effects — the things that don’t happen because Wichita props up developers in politically-favored areas such as downtown. This form of centralized planning from Wichita city hall overrides the decisions that the citizens of Wichita make with their own pocketbooks, and concentrates power in the hands of bureaucrats and politicians.
As Randal O’Toole has written: “TIF today is often part of a social engineering agenda that Americans should reject.”
Miller praised the amount of office space Real Development has brought online in downtown Wichita. To the extent that this has been done without government assistance, this should be praised.
She agreed with Vice Mayor Longwell’s assessment of this project, saying “This is not a tax abatement project.” She is just as wrong as is Longwell and other council members who believe this.
In discussing the risk involved in this project, Miller told of how the disbursements from a HUD-guaranteed loan that will finance much of this project will made directly to contractors, not to Real Development. City of Wichita documents indicate that the City’s payments will be made in the same way. This is a quite peculiar arrangement: we are placing a huge bet of the success of downtown Wichita redevelopment in the hands of the principals behind Real Development, but evidently we don’t trust them enough to write them a check and be confident they will pay their bills.
Miller also spoke of the jobs that will be created by this project. Implicit in her argument is that this project, or something similar, would not occur without the city’s subsidy. Her argument also ignores what economists tell us — that TIF districts simply transfer development from one part of town to another.
What Wichitans should be most concerned about, however, is a misstatement by Miller that other council members may have relied on in making their decision on how to vote. Miller said: “The property tax increases, the increment that’s being calculated in this project, includes only the buildings in this project.”
This statement directly contradicts the facts. In the Longhofer study, other properties owned by Real Development — the Petroleum Building, Sutton Place, 105 S. Broadway, and others — are used to support the TIF loan for the Exchange Place project. In response to my question, Wichita’s urban development director Allen Bell confirmed the same.
In her message from the bench, Miller said that city staff and council members have had enough time to go over this proposal. Her mistaken remarks indicate, however, that the project is still not understood very well by the council, neither its mechanics or its economic effect.
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