Voice For Liberty

Author: Bob Weeks

  • WSU Study on Downtown Wichita Arena Not Complete

    Government Accounting Standards Board Statement 34 requires governments to account for the cost of their assets, usually by stating depreciation expense each year. Through a series of email exchanges with Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, I have learned that the WSU Center for Economic Development and Business Research was not aware of this requirement when they prepared their forecast. Mr. Wolverton admitted this after checking with the study authors.

    Mr. Chris Chronis, Chief Financial Officer of Sedgwick County, in an email conversation told me that the county will take depreciation expense for the downtown arena, or for a renovated Kansas Coliseum, for that matter.

    I appeared in a story on a local television station where I presented research I had read showing that if new development occurs around a downtown arena, it would likely be economic activity that formerly took place somewhere else in town. This is the “substitution effect.” Mr. Wolverton appeared in the same story and state that due to time constraints, the WSU study did not study these effects.

  • The leadership of our local government officials regarding the downtown Wichita arena

    It is clear that our local government leaders want a downtown arena in Wichita. Just read their remarks in the Wichita Eaglenewspaper. Since the Sedgwick County Commission has promised that they will proceed with renovation of the Kansas Coliseum if the downtown arena vote fails, it is in their interest to make the Coliseum renovation option look as bad as possible. In my opinion, they’ve done a pretty good job of this.

    If you do the math on what it costs to borrow $55 million, paying it back at $6.1 million a year for 20 years, the interest rate is 9.17%, which is a terribly high interest rate for a government to pay. Yet, if we believe the county commissioners, they are ready to pay this much if we don’t agree to the arena.

    Arena supporters cite economic benefit to the community as a reason to build the downtown arena, and they concede no such benefit is likely near a renovated Coliseum. Yet they are willing to spend millions there if we don’t give them a downtown arena.

    Arena supporters cast the Coliseum renovation in the worst possible light. Consider a homebuyer who just bought a $100,000 home, financing it at 5% for 30 years. The total payments would be about $193,000. Do these people, having just bought the $100,000 home, go about saying they just moved into a $193,000 home? Of course they don’t. The total financed cost, to be sure, is an important fact, and a bad financing decision is a handy fact for arena supporters to use as they portray the Coliseum renovations in the worst possible light.

    Arena supporters claim that there are only two decisions, the new downtown arena or the renovation of the Coliseum. Framing the debate this way, especially when one decision outcome is so distasteful, is a good strategy for downtown arena supporters to use, but not good public policy.

    The Sedgwick County Commission has said that if the downtown arena fails, Coliseum renovation will start. We, as the citizens of Sedgwick County, should not allow this coercion to affect our decision on the downtown arena. We do not have to stand for this type of bad government.

  • Economic justification of arenas and the downtown Wichita arena

    It seems that the best argument that arena supporters have for asking the entire community to pay for the Downtown Wichita arena is that it will somehow pay for itself through spillover economic benefit. That is, through increased economic development around a downtown arena, the citizens of Sedgwick County will somehow be repaid for their investment in the arena through the taxes they paid.

    Current economic research indicates otherwise, as follows.

    A review of the book “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums” by Roger G. Noll and Andrew Zimbalist, available at this url at the Brookings Institution: https://www.brookings.edu/press/books/sports.htm states in part: “The primary conclusions are: first, sports teams and facilities are not a source of local economic growth and employment; second, the magnitude of the net subsidy exceeds the financial benefit of a new stadium to a team; and, third, the most plausible reasons that cities are willing to subsidize sports teams are the intense popularity of sports among a substantial proportion of voters and businesses and the leverage that teams enjoy from the monopoly position of professional sports leagues.”

    Another important paper, “Identifying the Real Costs and Benefits of Sports Facilities” is available at this url: http://www.lincolninst.edu/pubs/dl/671_chapin-web.pdf. This is from the conclusion: “A pro-facility argument that rests solely on the magnitude of the economic benefits conferred by a new facility is unsustainable. The economic impact literature has ended once and for all the argument that the economic impact of these projects justifies public subsidies for new sports facilities.”

    From a paper titled “Professional Sports Facilities, Franchises and Urban Economic Development (UMBC Economics Department Working Paper 03-103)” available at http://www.umbc.edu/economics/wpapers/wp_03_103.pdf we can read this about the impact of sports facilities:

    Siegfried and Zimbalist (2000) recently surveyed the growing literature on retrospective studies of the economic impact of sports facilities and franchises on local economies. The literature published in peer-reviewed academic journals differs strikingly from the predictions in “economic impact studies.” No retrospective econometric study found any evidence of positive economic impact from professional sports facilities or franchises on urban economies. While evidence exists suggesting that narrowly defined occupational groups, like workers employed in the sports industry (SIC Code industry 79 — Recreation and Amusements), benefit from the construction of new sports facilities, building new sports facilities and attracting new professional sports teams did not raise income per capita or total employment in any US city. In fact, some research has found a negative economic impact of professional sports on urban economies.

    Later, from the same paper:

    Coates and Humphreys (2003) extended this research to examine the earnings and employment in narrowly-defined occupational groups in US cities with professional sports teams. In this study, the earnings and employment in the SIC-code industry containing sports facilities and teams — SIC-code 79, Amusements and Recreation — were higher but the earnings and employment in other important sectors like Retail Trade, Hotels, and Eating and Drinking Establishments were lower. The economic benefit from sports facilities and franchises appears to be concentrated in a small sector of the economy and comes at the expense of other sectors of urban economies.

    If, then, it appears that the community-wide economic benefit that arena supports claim will not materialize, the people who benefit from the arena are quite easy to identify. They buy tickets to events, or they rent the arena. These are the people who should pay its cost.

  • The value of economic impact studies

    One of the factors that usually plays a part in an economic impact study like that used to promote the Downtown Wichita arena is the “multiplier,” which accounts for the fact that money spent once is spent again, and maybe yet again.

    To quote from “Economic Impact Multipliers for Kansas” published in “Kansas Business Review” Vol 12, No. 3, Spring 1989, and available at http://www.ku.edu/pri/publicat/multipliers/multipliers.htm:

    It sometimes seems that the bigger a multiplier is, the more often it is quoted. (1) In any case, some distinctly one-sided political and economic motives encourage the propagation of exaggerated multipliers.

    In particular, economic multipliers are used to justify public concessions to private industry. Such assistance for business may include land acquisition, new roads and sewers, job training programs, subsidized loans, and tax incentives.(2) The extent of public concessions is determined through bargaining between government and industry, and in the course of the bargaining those who stand to gain most from the new enterprise have a natural tendency to inflate the relevant multipliers.(3)

    The inflation of multipliers may stem less from venality than from an innate optimism, which seems to be necessary in the risky business of development. Since multipliers are costly to measure, of uncertain accuracy, varied in their meanings, and multifarious in their origins, a convenient range of multiplier values is always available; discriminating users are free to choose the best values for their purposes.

  • Local government officials as downtown Wichita arena advocates

    Kansas Attorney General Opinion 93-125 deals with “the use of public funds to promote or advocate a governing body’s position on a matter which is before the electorate.” In its summary, it states “However, public funds may be expended to educate and inform regarding issues to be voted on by the electorate.”

    Our local government leaders, especially the Sedgwick County Commission and the Mayor of Wichita, are leading what they term the “educational effort” to get out the facts about the proposed downtown arena. I would suggest, however, that their effort is hardly educational, as they readily admit their preference, and little or no information about criticism or alternatives is to be found. On the Sedgwick County website, for example, there are no opposing viewpoints to be found. The only alternative to the downtown arena is the renovation of the Kansas Coliseum, which is portrayed as an unwise choice.

    On two television shows, Sedgwick County Commissioner Ben Sciortino wore a “Vote Yea” polo shirt.

    From an editorial by Phillip Brownlee, published in the Wichita Eagle on September 5, 2004: “If the plan is to pass, city and county elected officials — supported by business leaders — must continue their strong leadership and high-profile support for the arena.”

    It has also been shown that some of the financial contributors to the “Vote Yea” campaign are funded by taxpayers.

  • A public or private arena in downtown Wichita, which is desirable?

    Image what our town could be like if the downtown arena in Wichita vote fails and the county commissioners put aside for a moment their plans for the renovation of the Kansas Coliseum.

    Suppose, instead, that arena supporters, along with those who would vote yes for the sales tax and anyone else who wants to, formed a corporation to build and own an arena.

    Instead of having paid taxes to government, arena supporters would be investors. They would own something: their shares in the arena. They would have the pride and responsibility that comes with ownership. They would have a financial stake in its success. Even taxpayer-funded arena opponents might see merit in investing in a local business rather than paying taxes.

    Instead of politicians and bureaucrats deciding what the people of our town want and need, a privately owned arena would be subject to the guidance and discipline of markets. It would either provide a valuable service to its customers and stay in business, or it would fail to do that and it would go out of business. Governments do not have such a powerful incentive to meet the needs of their constituents.

    Instead of the bitter feelings dividing this town over the issue of a taxpayer-funded arena and other perceived governmental missteps, the arena corporation would act in the best interests of its shareholders and customers. Even if it didn’t, it wouldn’t be the public’s business, because after all, the corporation is formed of private individuals investing their own money.

    When individuals invest in an arena they are nurturing the virtues of investment, thrift, industry, risk-taking, and entrepreneurship, Wichita having an especially proud tradition of the last. There is nothing noble about politicians spending someone else’s money on projects like a downtown arena, or a renovated Kansas Coliseum for that matter.

    At this time in our town we have a chance to let private initiative and free markets work, or we can allow government to continue to provide for us in ways that few seem truly satisfied with. Writing about a public utility in England that was transferred to private enterprise, economist John Blundell observed:

    When it was “public” it was very private. Indeed, it was totally captured by a small band of bureaucrats. Even members of Parliament struggled to find out what was going on. No proper accounts were produced, and with a complete lack of market signals, managers were clueless as to the correct course to take. The greatest casualty was a lack of long-term capital investment.

    Now it is “private” and very public. Not just public in the sense of open, but also in the sense of accountable directly to its shareholders and customers. Copious reports and accounts are available and questioning citizens will find their concerns taken very seriously indeed.

    If we allow the government instead of private enterprise to build a new arena or to renovate the Kansas Coliseum, this is the opportunity we lose.

  • About Voice For Liberty in Wichita

    A voice for individual liberty, limited government, and free markets in Wichita and Kansas.

    I started this website in October 2004 in response to what I felt was a misunderstanding of the important issues in the November 2004 elections, especially involving the proposed downtown Wichita arena.

    The debate over the arena was wide-ranging, involving factors such as its cost compared to the cost of renovating the existing Kansas Coliseum, its seating capacity, traffic and parking problems, whether it will sellout or not, who will profit from building it, whether a sales tax is better than a property tax, and other such factors. Our local government leaders and media seemed to believe whichever convenient set of facts supported their position, and almost all seemed to be endorsing the downtown arena.

    I too became involved in arguing issues like these, even when I knew in my heart that the most important issues are these: How much government do we want, at the expense of how much personal liberty, and what is the proper role of government and individual? I saw very little discussion of these important issues, and most importantly, very little media coverage.

    So I started this website to explore and report on issues of government, media, and individual liberty in Wichita, Sedgwick County, the State of Kansas, and, to a lesser degree, the United States.

    Bob Weeks
    Email to bob.weeks@gmail.com
    Skype bob.weeks. AIM WichitaLiberty.
    316-708-1837
    Wichita, Kansas
    October 28, 2004

    Bob Weeks, and with his ragdoll cat Tippy

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