Voice For Liberty

Category: Sedgwick county government

  • Thank You, Sedgwick County Commissioners

    In an article in the May 12, 2005 Wichita Eagle titled “County plans no tax rate increase” we learn that “Sedgwick County’s property tax rates will stay the same next year and the county will be able to avoid layoffs and drastic cuts in programs, officials predicted Wednesday.”

    Spending in next year’s budget will not contain “significant increases in spending.”

    Before I go too overboard with thanks, I will remind readers that it was this commission that pushed for the sales tax increase for the downtown Wichita arena.

  • Sedgwick County Arena Sales Tax Ready to Pass

    Following is a message from Karl Peterjohn, Executive Director Kansas Taxpayers Network, regarding the debate over SB 58, allowing Sedgwick County to raise its sales tax to pay for the downtown Wichita arena. I listened to the (as Karl rightly characterises it) “debate.” Karl’s reporting of the legislative action and the effects the sales tax will have is accurate. (Someone called the sales tax the “Western Butler County Improvement Act.”)

    After a relatively brief and lackluster debate, the 1 cent sales tax hike for the downtown arena in Wichita received preliminary approval in the Kansas house March 21 on a voice vote. SB 58 will be voted upon for final action tomorrow in the Kansas House of Representatives. This odious bill should have been amended but a bipartisan group of Wichita legislators worked hard and were successful in keeping it “clean” so there weren’t any amendments. An amendment would have required a conference committee and a delay in enacting this tax. SB 58 will be passed easily and signed by the governor within the next couple of weeks.

    The closest amendment to getting added to this bill was a “prevailing wage,” amendment offered by Democrat Minority Leader McKinney that failed on a division vote (no roll call) with over 40 yes votes. Prevailing wage would require union wages for the construction of this project but even the Democrats did not press this very hard since they did not even bother forcing a roll call vote on this amendment.

    After some desultory comments by proponents, Rep. Huebert offered an amendment to address the uniformity issue but then withdrew it following Rep. Wilk’s opposition and promise that the tax committee that Wilk chairs would take up this issue shortly.

    Your tax dollars were hard at work lobbying. Two tax funded lobbyists from Sedgwick County along with Sen. Carolyn McGinn were there to follow the vote. Wichita had its contract lobbyist as well as city employee Jeanne Goodvin was there. Other tax funded organizations like Ed Wolverton from the Wichita Downtown Development Corporation, Bob Hanson from the Sports Commission, and another sports commission board member Joe Johnston had lobbied the house members as they entered the chamber. A number of other business and labor lobbyists supporting the arena were also monitoring the desultory debate.

    Huebert was the only member to oppose the bill during this “debate.” Steve spoke about his district’s opposition (2-to-1) and how this vote, where the county segment was opposed while the Wichita area was supportive (both voted 54-46 on their respective sides last November) might relate to a consolidation of government bill in Shawnee County’s vote on their city-county consolidation issue. The retroactive tax authorization WAS NOT EVEN MENTIONED in the debate.

    Steve Brunk, who serves on the tax committee, “carried” the bill on the floor. Mario Goico, Brenda Landwehr, Jo Ann Pottorff, and Nile Dillmore all praised this measure in a form of Sedgwick County bipartisanship. Goico liked the eco-devo aspect while Pottorff praised the downtown revitalization with the waterwalk boondoggle for economic growth.

    I have been told privately that there has been commitments for vote trading on this issue and other issues coming before the house that are of concern to non-Sedgwick County legislators. While there will certainly be a number of no votes cast on final action tomorrow, the final outcome is now clear. July 1 the sales tax rate in Sedgwick County will rise to 7.3% with the exception of Derby where it will rise to 7.8%. In a couple of years there will be a brand new pigeon coop, that lacks an anchor tenant, in downtown Wichita to add to the succession of money losing boondoggles that already litter the area.

    If the Senator Hensley’s of the world prevail (he is the senate minority leader who issued his statewide tax hike plan last week), the 2005 legislature will soon pass a statewide sales tax hike and he would add at least another .2% to the figures cited in the previous sentence. The governor favors a statewide tax hike and there is talk of “rounding up” to say, an even 6 percent statewide. If that happens, there are parts of this state that will have total (state and local)sales tax rates approaching 10 percent.

    The new millionaires who will be created through the prices the county will pay for the land it wants downtown for this boondoggle project will provide an interesting (but expensive) source of amusement in the near future too. It will also be interesting to see what portion of the construction labor used is “union” versus non union. Dale Swenson praised prevailing wage and other mandatory union wage rates like the federal government’s Davis-Bacon Act during the debate on that amendment.

    As a frame of reference, New York City has a 8.625% sales tax rate. New York City does NOT tax groceries. I’ll let you decide, regardless of whether Kansas raises state rates or not, how we compare with a sales tax rate of 7.3%-or as much as-8.0%. If one of the tax raising legislators had not taken ill in the senate, the odds of a statewide tax hike raising the sales tax to 6.0% is not out of the question. Sedgwick County will have a high sales tax rate.

    The only suggestion for Sedgwick County taxpayers that I can think of is that most of the cities in Butler County only have a 1/2 cent local sales tax, so their total is 5.8%. If you live in eastern Sedgwick County and want to save on grocery purchases, there is a Dillons at Andover Road and Kellogg. You should be able to save $1.50 on the purchase of $100 worth of groceries after July 1 based upon the variable local sales tax rates between Sedgwick and Butler counties.

    I look forward to fulfilling my promise and including the recorded vote on final passage of SB 58 into the 2005 Kansas Taxpayers Network’s vote rating. Every legislator who cast an affirmative vote for SB 58 will have to bear some responsiblity for this looming boondoggle. The next battle will be trying to get this odious sales tax removed because a fiscal “crisis” in government will certainly appear before this tax expires. Rep. Huy was absent.

  • Letter to County Commissioners Regarding AirTran Subsidy

    March 18, 2005

    Board of Sedgwick County Commissioners

    Dear Commissioner:

    I am writing to explain my opposition to Sedgwick County funding the AirTran subsidy.

    My primary reason for opposing this subsidy is that it distorts the market process through which individuals and businesses decide how to most productively allocate capital.

    Aside from that, it seems to me that the argument that many Fair Fares supporters make is flawed. They are grossly — I would say even speciously — overstating the importance of the airport to our local economy.

    As an example, Mr. Troy Carlson, then Chairman of Fair Fares, wrote a letter that was published on September 16, 2004 in the Wichita Eagle. In that letter he claimed $2.4 billion economic benefit from the Fair Fares program ($4.8 billion for the entire state). I was curious about how these figures were derived. Through correspondence With Mr. Steve Flesher, air service development director for the city of Wichita, I learned that the basis for them is a study by the Center for Economic Development and Business Research at Wichita State University that estimates the economic impact of the airport at $1.6 billion annually. In this study, the salaries of the employees of Cessna and Bombardier, because these companies use the airport’s facilities, are counted as economic impact dollars that the airport is responsible for generating.

    To me, this accounting doesn’t make sense on several levels. For one thing, if we count the economic impact of the income of these employees as belonging to the airport, what then do we say about the economic impact of Cessna and Bombardier? We would have to count it as very little, because the impact of their employees’ earnings has been assigned to the airport.

    Or it may be that someday Cessna or Bombardier will ask Sedgwick County for some type of economic subsidy, and they will use these same economic impact dollars in their justification. But these dollars will have already been used, as they were attributed to the airport.

    Or suppose that Cessna tires of being on the west side of town, so it moves east and starts using Jabara Airport. Would Cessna’s economic impact on Sedgwick County be any different? I think it wouldn’t. But its impact on the Wichita airport would now be zero. Similar reasoning would apply if Cessna built its own runway.

    An article I wrote titled Stretching Figures Strains Credibility provides more information, including a link to the Center for Economic Development and Business Research study.

    I would be happy to speak to the County Commission as a group if you think they would be interested.

    I thank you for your time and consideration.

    Sincerely,

    Bob Weeks

  • Testimony in Opposition to Senate Bill 58

    From John Todd.

    Members
    House Taxation Committee
    State Capitol
    Topeka, Kansas 66612

    Subject:
    Testimony in OPPOSITION TO SENATE BILL #58 (Sales Tax Increase For The Proposed Downtown Wichita Arena).

    My name is John Todd. I am a self-employed real estate broker from Wichita, and I come before you in opposition to the enabling legislation that would allow Sedgwick County to raise the local sales tax 1% to fund a new Downtown Arena in violation of current state law.

    Under current state law, Counties in Kansas are not authorized to raise county sales taxes for projects like the proposed Downtown Wichita Arena without first obtaining the required legislative approval prior to any vote of the public. A public vote advertised as non-binding was held in Sedgwick County on November 2, 2004 without the legislative approval as required by law, and now Sedgwick County officials are asking you to approve this illegal vote retroactively to the November General Election.

    Before you consider the favorable passage of Senate Bill #58 into law that would make an illegal vote legal, ex post facto, after the fact, and retroactively, you really ought to consider what was the original legislative intent of the current state law in the first place, and whether it is good precedence to allow counties to decide which laws to obey and which to ignore. Does anyone suppose that the intent of the current law was a desire on the part of prior legislators to exercise some modest control over a counties ability to “approve” massive sales tax hikes on it’s citizens, particularly for non-essential entertainment venues like arenas? Do you, as legislators not have a fiduciary responsibility to your constituents and the people of Kansas by demanding that local governmental units follow the rule of law in the same manner as you expect citizens to follow the law? If the current statute is flawed, perhaps you should be working to correct those flaws before you allow Sedgwick County to break the law?

    The solution to this problem is for you to reject Senate Bill #58 or at a bare minimum, I would suggest that you amend the Bill by approving the 1% sales tax subject to new vote of the people, as current state law requires. Local governmental units should not be allowed to selectively ignore the state law(s) they chooses not to follow by essentially placing themselves above the law. This sets bad legislative precedence, and you should not allow it to happen.

    Sincerely,

    John R. Todd

  • Testimony regarding House Bill No. 2132

    Written testimony of Bob Weeks regarding House Bill No. 2132. A pdf version is available here: http://wichitaliberty.org/files/House_Bill_2132_Testimony_by_Bob_Weeks_2005-03-10.pdf

    March 10, 2005

    Thank you for allowing me to present this written testimony. I realize that the voters in Sedgwick County voted for the arena sales tax increase. I believe, however, there is ample reason why you should vote against the tax. The idea of the taxpayer-funded arena came about so fast in the summer of 2004 that there was little thought given to the underlying issues. I wish to present what my research has uncovered.

    WSU Study Not Complete

    On of the main arguments advanced for having all the residents of Sedgwick County pay to build the arena was a study prepared by the Center for Economic Development and Business Research at Wichita State University. The study claimed a large economic benefit from the arena. It is because of this economic benefit that arena supporters say the entire community should pay to build the arena. This study, however, is incomplete in two important areas: its lack of depreciation accounting, and it ignores the substitution effect.

    No Depreciation Accounting

    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 study. Mr. Wolverton admitted this after checking with the study authors. Furthermore, 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. I do not know what a figure for depreciation expense would be, but it would likely be several million dollars per year, and it would materially and substantially change the arena’s financial footing.

    No Substitution Effect Allowed For

    In a television new story reported by Mr. Erik Runge of KWCH Television on October 25, 2004, I was interviewed, and I mentioned the substitution effect. This is the term used to describe what research has found: that much of the new economic activity such as bars and restaurants that might appear around a downtown arena would be bars and restaurants that have moved from other parts of the city. There is little or no new economic activity, just movement of existing activity. Mr. Runge interviewed Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, who said “In WSU’s report they felt like there definitely could be some substitution effect.” The reporter explained “But how much was never studied. Downtown development backer Ed Wolverton says mostly due to time restraints.”

    These two glaring omissions of materially important facts by the WSU study should lead us to question its other findings. Other than the report on KWCH, I saw no reporting of these two matters.

    Claimed Economic Benefit is Not Realized

    Arena supporters say that everyone should pay to build and operate the arena because it will generate economic impact that everyone will benefit from. The economic benefit claimed by arena supporters, however, has not been found to materialize in other cities. In the March 2001 issue of “FedGazette,” published by the Federal Reserve Bank of Minneapolis, an article titled “Stadiums and convention centers as community loss leaders” contains this quote:

    “Current research indicates that stadiums and arenas have a particularly bad track record when it comes to delivering on promises of community economic windfalls. University researchers Mark Rosentraub and Mark Swindell found that three decades worth of studies ‘lead to the inescapable conclusion that the direct and indirect economic impacts of sports teams and the facilities are quite small’ and do not create much in the way of new jobs or economic development.”

    In a paper titled “Professional Sports Facilities, Franchises and Urban Economic Development” (UMBC Economics Department Working Paper 03-103) by Dennis Coates and Brad R. Humphreys of the University of Maryland, Baltimore County we find this quote:

    “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.”

    Arena Tax Requires Everyone to Subsidize the Interests of a Few

    Since, as current research has found, arenas do not generate the positive economic impact that their supporters claim, the arena tax instead becomes the public as a whole subsidizing the leisure activities of a relatively small number of people. The people who do use the arena, moreover, are quite easy to identify: they purchase tickets to events, or they pay to rent the arena. It is these people who should pay the full cost of the arena construction and operation.

    Local Officials Not Truthful

    Sedgwick County Commissioners stated that if the downtown arena sales tax did not pass, they would borrow money to renovate the Kansas Coliseum. If we do the math on the figures they quoted, that is to borrow $55 million and pay it back at $6.1 million a year for 20 years, we find that the interest rate is 9.17%, which is a terribly high interest rate for a government to pay. The county commissioners told us they were ready to pay this much if the arena tax didn’t pass.

    I wrote to Sedgwick County Commissioner Tom Winters, asking him for an explanation. He replied that the interest rate is really 7.5% for this reason: To the $55.3 million cost of the renovations, we must add $6.5 million for capitalized interest during the construction period, and $.9 million for debt issuance costs. So yes, Commissioner Winters is correct about the 7.5% rate, but this also means that the cost of the Coliseum renovations should be stated as $62.7 million instead of $55 million. But even 7.5% interest is too high to pay.

    What is troubling is that local government officials are not being truthful with the public.

  • SB 58 Testimony from Kansas Taxpayers Network

    More testimony opposing SB 58, the bill to allow Sedgwick County to increase its sales tax to pay for the downtown arena.

    Testimony Opposing SB 58
    By Karl Peterjohn, Executive Director, Kansas Taxpayers Network

    SB 58 is a flawed bill that should either be re-drafted or defeated in its current form, Let me outline the major problems with this legislation.

    1) This bill does not address the serious flaws already contained within KSA 12 187 that cry out for correction. This is a grossly non uniform statute that should be made, uniform covering all local government units. Today, cities may, and some already have, opt out of this statute using their home rule powers because of this statute’s non uniform condition. County home rule requires a change in statutes for the lid on local sales taxes (see KSA 19 101a). At some point in time the cities may opt out of this statute in a way that negates any requirement for voter approval at an election. It will be a sad day for Kansas government when the voter approval requirement within this statute gets voided within a municipality. This is only a matter of when, not a matter of if

    It may surprise this committee that the Kansas Taxpayers Network (KTN) supports removing this local sales tax Ed under limited circumstances. The circumstances are straightforward. KTN strongly supports requiring voter approval before taxes are raised. KTN has repeatedly testified in front of both legislative tax committees in support of this principle. We strongly urge this committee to broaden this voter approval requirement to extend to city, county, and local property tax millage hikes. KTN would also like to see a requirement added to this statute that would extend this principle of voter approval of tax hikes to extend to all local taxes. Currently, Missouri, Colorado, and Oklahoma require voter approval before property taxes can be raised in those three states. In Colorado and Missouri this requirement for voter approval currently covers all local taxes.

    This would correct the pro tax raising bias that exists in current law. Local sales tax hike proponents raise local sales taxes in a way I’ll describe ‘in three words: “carrot and stick.” The “carrot” approach to raising sales taxes is how Sedgwick County originally got their 1 cent local sales tax 20 years ago, “Vote for this local sales tax and we’ll lower your property tax.” That’s how Pottawatomie County got their local sales tax raised last year.

    The “stick” approach was used by arena proponents in narrowly getting voter approval during the advisory vote November 2, 2004 in Sedgwick County. “If you don’t vote for this temporary sales tax hike we’ll raise your property taxes.” Arena proponents’ flyers and advertising said, “Vote No. And a 20 year property tax buys a facelift for the aging Kansas Coliseum… ” So it all comes down to: higher sales or higher property taxes would the condemned prefer to be hung or shot?

    2) SB 58 is a slap in the face for taxpayers by making an advisory vote retroactively into a binding vote. This is an affront to the rule of law. The county knew they had no authority to raise the local sales tax under current state law. Now they want you to retroactively provide them with this approval. I wrote an editorial ‘in the Wichita Eagle last August that publicly informed them that they had no legal authority under Kansas law to impose this tax. They arrogantly proceeded anyway and now want the legislature to grant retroactive authorization.

    Now I’m not saying that you can’t add retroactivity into Kansas tax law. That has occurred in the past nationally and fairly recently. In 1993 then President Clinton proposed adding retroactive provisions to federal tax code as part of his tax raising bill. This was enacted, it was litigated and the U.S. Supreme Court ruled that retroactive tax law was constitutional. This was bad federal tax law in 1993 and Kansas should not adopt this retroactively principle in 2005.

    Now let me demonstrate how a taxpayer would be a second class citizen in Kansas if you enact SB 58 in its current form. If I decided as a citizen that I would no longer be bound by the portions of the tax law I’d like to see changed, and then proceeded to ignore the law, I would be in violation of the law and could be penalized under this law. Apparently, that is not a problem if the legal entity happens to be a local government, like Sedgwick County in Kansas. If I then had the arrogance to proceed to ask you as legislators to retroactively change state law to help me out of my own violation of state law, you would not take my request seriously. Today, you are taking the county’s request very seriously and if recent press reports are correct, a majority of you have already decided to vote for this bill. If this bill passes it will clearly establish the fact that taxpayers are second or perhaps even third class citizens behind local units of government in Kansas.

    This bill would be a gross violation of the rule of law in this state. In fact, the legislature rarely provides retroactive provisions in state law and usually enacts statutes that only take effect at a future date.

    3) Since the November 2 vote was advisory *in nature, the fact that arena opponents were outspent is an abuse of taxpayer funds but is not critical under current Kansas law. Arena opponents raised over $20,000 in private funds in the unsuccessful advisory election November 2, 2004. We were outspent by a greater than 2 to I margin by city, county, and state funded tax dollars spent by tax funded organizations.

    This included city property taxes, city hotel/motel taxes, county tax funds, and state turnpike and regents tax dollars. This statute should be amended to ban the use of state and local tax funds in tax referendum elections. It is now clear that Kansas has already descended upon the slippery slope where tax dollars are being spent to promote higher taxes.

    4) If the legislature does not act upon SB 58 or any similar legislation then one of two events will occur. The county could follow the usual practice and get KSA 12 187 changed so a binding election could occur. The city of Wichita, which also strongly backs this tax hike, could exercise their home rule option in this matter or also seek a change in this statute to hold a binding election in the future. The rule of law could be preserved even if this important principle is contained within this flawed and non uniform statute.

    SB 58 is flawed and should be rejected by this committee. KTN has intentionally not discussed the merits of the downtown arena since that is an issue for a binding election and not for this committee or the legislature to consider. The legislature must make state law for all the citizens and all of the local units. SB 5 8 makes a bad statute worse.

    A better approach would be to extend the principle of voter approval of local sales taxes to cover all local taxes in Kansas. Then you could remove the caps, terminate the “carrot and sticks,” tax raising strategy, delete the non uniformities, and allow the Kansas economy to begin to be able to compete with our neighboring states that have already empowered their citizens with mandatory tax referendums at the ballot box.

  • From John Todd: Testimony regarding Senate Bill No. 58

    February 3, 2005

    Members
    Senate Assessment and Taxation Committee
    State Capitol
    Topeka, Kansas 66612

    Subject: Testimony in OPPOSITION TO SENATE BILL #58 (Sales Tax Increase For The Proposed Wichita/Sedgwick County Arena).

    My name is John Todd. I am a self-employed real estate broker from Wichita, and I come before you in opposition to the enabling legislation that would allow Sedgwick County to raise the local sales tax 1% to fund a new Downtown Arena.

    The reason why I am here in opposition to this government driven plan is my basic belief that individuals know best how to spend their own money, and that they should be allowed the freedom to spend the fruit of their own labor as they wish, and not as government dictates, particularly when it involves mandatory spending for an elective entertainment venue like the proposed downtown arena.

    If the need for a Downtown Arena were market driven, the private sector would already be building it, and the taxpayers would be left out of the loop. Obviously, it is not, and so the proponents want the taxpayers to build it and absorb the losses. I believe their plan calls for over $20 million in operational losses. This does not count the business property that will be taken off the tax rolls for a county owned facility. If the Wichita Eagle’s pre-election numbers of $40 million in property value was correct, those losses in real estate taxes could amount to $1 million more in lost taxes per year, and I would bet that that shortfall will be spread back over the other real estate property taxpayers.

    How did we ever get the idea that the road to prosperity is built on government spending and the heavy taxation of our people? How far from the truth can this be?

    Anyone who has read the Eagle in recent months can attest to the massive number of so called “economic development” projects in downtown Wichita that are losing money, and that the taxpayer is being asked to cover. One only needs to read of the $1.00 per year 99 year leases that are being awarded for the millions of dollars taxpayer owned land and the $7 million dollars needed to lure a second or third choice anchor retailer downtown to grow disenchanted with local government’s ability to “manage” anything, particularly if it is related to real estate development.

    And why should anyone be concerned with these boondoggles? We can’t continue to take $184.5 million here and $140 million there, and $100 million yonder out of our economy and hope to favorably compete with other cities, counties, and states in our region.

    There are numerous excellent examples of free market economics at work in our city. One only needs to look north and south on Rock Road in Wichita to observe the benefits of this privately funded system that expands the tax base, creates jobs, and is indeed true “economic growth”, and best of all, the taxpayer is not liable if any of these business ventures fail. Will a 1% sales tax that will remove $184.5 million from the Sedgwick County economy hurt these local businesses? Absolutely! And according to an article in the March 2001 issue of “FedGaxette,” published by the Federal Reserve Bank of Minneapolis entitled “Stadiums and convention centers as community loss leaders” contains this quote:

    “Current research indicates that stadiums and arenas have a particularly bad track record when it comes to delivering on promises of community economic windfalls. University researchers Mark Rosentraub and Mark Swindell found that three decades worth of studies ‘lead to the inescapable conclusion that the direct and indirect economic impacts of sports teams and the facilities are quite small’ and do not create much in the way of new jobs or economic development.”

    The proponents of this Bill here today will tell you that 52% of the voters voted for the arena. That is true; however, they ignore the fact that our County elected officials were less than forthcoming in advising voters that the arena vote was an advisory election only, and is not binding. The County is not authorized to raise sales taxes without first obtaining legislative approval prior to any vote. Sedgwick County broke state law! The legislature is now faced with the dilemma of passing enabling legislating, and making it retroactive to the November 2, 2004 election and calling that election binding. This is wrong, and you should not let it happen. At the very least, if you pass the enabling legislation, a subsequent public vote should be required before allowing the County to raise the sales tax.

    Before you pass this Bill into law, several matters need to be considered.

    1. Is the $184.5 million dollar price tag excessive?

    2. What is the real impact of taking $184.5 million dollars out of the private economy in terms of retailer profits and potential job losses?

    3. The arena vote was won by a narrow margin. Rural Sedgwick County voters voted against the arena as did voters in the less affluent neighborhoods. Perhaps the sales tax should be optional at the check out stand. Those who want to pay the arena tax could and those who don’t could simply ‘opt out’.

    4. What will happen to the Sedgwick County economy if the Legislature or the Supreme Court mandates a statewide sales tax to meet the Court’s requirements for school financing?

    5. What is the specific location for the proposed arena? Who owns the land? Is the land going to cost $1.00 per square foot or $20.00 per square foot? And is the $20 million for land acquisition going to cover the actual cost, or will it be double or triple that amount? Would not an astute “private” investor already own the land or control the price under an option to purchase contract? If the Legislature allows the County to fill its checkbook, will not the price of land double or triple?

    6. No one knows what the proposed arena will look like since it has not been designed. Should not the taxpayers have known what they are voting for?

    7. Before you authorize giving the Sedgwick County Commission a blank check with $184.5 million of taxpayer money deposited in it, perhaps you need to consider placing some “controls” over how they spend the money?

    8. Will the people who contributed to the pro arena campaign be allowed to bid on the construction work, participate in the design work, earn commissions for the sale/purchase of the land, or will these be considered a “conflict of interest”?

    9. Will the Sedgwick County commissioners be required to explain why they voted for a $55 million dollar renovation for the Kansas Coliseum and then decided that it was too expensive? What did they do with the long-term capital improvement fund(s) that should have been earmarked for this project? And how do they explain that only $25 million in private funds were needed to renovate a similar size arena at Wichita State University? Does it always cost the public sector twice the amount to do the work as the private sector? Perhaps we need to enlist the business acumen of the private sector to build the arena for half of the proposed cost?

    10. Perhaps our voters need better information in order for them to make an informed decision regarding a new arena or a renovated Coliseum? Property taxes were made an issue in the arena campaign. Many votes expressed their frustration to me that they were not given the opportunity to vote for “none of the above”, and since they were more opposed to property taxes than sales taxes, they were forced to vote for the arena. Perhaps the legislature needs to enact legislation requiring a public vote before local governments can raise local property taxes?

    11. Are not government directed projects like the arena the antitheses of the free market system? Does anyone else tire of working until April or May of each year to pay his or her taxes? Is government really the answer?

    Too many questions need to be answered before you decide pass this Bill into law. A non-binding public vote for a downtown arena in 1993 failed to pass by a wide margin. Since the 1993 vote was ignored, you have the necessary precedence and current state law on your side to ignore this vote, and at the very least amend this Bill to require another public referendum.

    Thank you for allowing me to speak. I would be glad to answer questions.

    Sincerely,

    John R. Todd

  • Written testimony regarding Senate Bill No. 58 (Wichita downtown arena tax)

    Written testimony of Bob Weeks regarding Senate Bill No. 58, an act concerning sales taxation; relating to countywide retailers’ sales tax in Sedgwick County.

    February 3, 2005

    Members
    Senate Assessment and Taxation Committee
    State Capitol
    Topeka, Kansas 66612

    Honorable Senators:

    Thank you for allowing me to present this written testimony.

    I realize that the voters in Sedgwick County voted for the arena sales tax increase. I believe, however, there is ample reason why you should vote against the tax. The idea of the taxpayer-funded arena came about so fast in the summer of 2004 that there was little thought given to the underlying issues. I wish to present what my research has uncovered.

    WSU Study Not Complete

    On of the main arguments advanced for having all the residents of Sedgwick County pay to build the arena was a study prepared by the Center for Economic Development and Business Research at Wichita State University. The study claimed a large economic benefit from the arena. It is because of this economic benefit that arena supporters say the entire community should pay to build the arena. This study, however, is incomplete in two important areas: its lack of depreciation accounting, and it ignores the substitution effect.

    No Depreciation Accounting

    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 study. Mr. Wolverton admitted this after checking with the study authors. Furthermore, 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. I do not know what a figure for depreciation expense would be, but it would likely be several million dollars per year, and it would materially and substantially change the arena’s financial footing.

    No Substitution Effect Allowed For

    In a television new story reported by Mr. Erik Runge of KWCH Television on October 25, 2004, I was interviewed, and I mentioned the substitution effect. This is the term used to describe what research has found: that much of the new economic activity such as bars and restaurants that might appear around a downtown arena would be bars and restaurants that have moved from other parts of the city. There is little or no new economic activity, just movement of existing activity. Mr. Runge interviewed Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, who said “In WSU’s report they felt like there definitely could be some substitution effect.” The reporter explained “But how much was never studied. Downtown development backer Ed Wolverton says mostly due to time restraints.”

    These two glaring omissions of materially important facts by the WSU study should warn us to question its other findings. Other than the report on KWCH, I saw no reporting of these two matters.

    Claimed Economic Benefit is Not Realized

    Arena supporters say that everyone should pay to build and operate the arena because it will generate economic impact that everyone will benefit from. The economic benefit claimed by arena supporters, however, has not been found to materialize in other cities. In the March 2001 issue of “FedGazette,” published by the Federal Reserve Bank of Minneapolis, an article titled “Stadiums and convention centers as community loss leaders” contains this quote:

    “Current research indicates that stadiums and arenas have a particularly bad track record when it comes to delivering on promises of community economic windfalls. University researchers Mark Rosentraub and Mark Swindell found that three decades worth of studies ‘lead to the inescapable conclusion that the direct and indirect economic impacts of sports teams and the facilities are quite small’ and do not create much in the way of new jobs or economic development.”

    In a paper titled “Professional Sports Facilities, Franchises and Urban Economic Development” (UMBC Economics Department Working Paper 03-103) by Dennis Coates and Brad R. Humphreys of the University of Maryland, Baltimore County we find this quote:

    “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.”

    Arena Tax Requires Everyone to Subsidize the Interests of a Few

    Since, as current research has found, arenas do not generate the positive economic impact that their supporters claim, the arena tax instead becomes the public as a whole subsidizing the leisure activities of a relatively small number of people. The people who do use the arena, moreover, are quite easy to identify: they purchase tickets to events, or they pay to rent the arena. It is these people who should pay the full cost of the arena construction and operation.

    Local Officials Not Entirely Truthful

    Sedgwick County Commissioners stated that if the downtown arena sales tax did not pass, they would borrow money to renovate the Kansas Coliseum. If we do the math on the figures they quoted, that is to borrow $55 million and pay it back at $6.1 million a year for 20 years, we find that the interest rate is 9.17%, which is a terribly high interest rate for a government to pay. The county commissioners told us they were ready to pay this much if the arena tax didn’t pass.

    I wrote to Sedgwick County Commissioner Tom Winters, asking him for an explanation. He replied that the interest rate is really 7.5% for this reason: To the $55.3 million cost of the renovations, we must add $6.5 million for capitalized interest during the construction period, and $.9 million for debt issuance costs. So yes, Commissioner Winters is correct about the 7.5% rate, but this also means that the cost of the Coliseum renovations should be stated as $62.7 million instead of $55 million. But even 7.5% interest is too high to pay.

    What is troubling is that local government officials are not being truthful with the public.

    Unintended Economic Effects

    A paper titled “An Assessment of the Economic Impact of a Multipurpose Arena” by Ronald John Hy and R. Lawson Veasey, both of the University of Central Arkansas, (Public Administration & Management: An Interactive Journal 5, 2, 2000, pp. 86-98) looked at the effect of jobs and economic activity during the construction of the Alltel Arena in Pulaski County, Arkansas. This arena cost $50 million. It was funded in part by a one percent increase in the county sales tax for one year (1998). The sales tax generated $20 million.

    In the net, considering both jobs lost and jobs gained due to sales tax and construction effects, workers in the wholesale and retail trades lost 60 jobs, and service workers lost 52 jobs. There was a net increase of 198 jobs in construction.

    The fact that jobs were lost in retail should not be a surprise. When a sales tax makes nearly everything sold at retail more expensive, the supply curve shifts to the left, and less is demanded. It may be difficult to estimate the magnitude of the change in demand, but it is certain that it does change.

    Workers in these sectors, should the sales tax increase take effect, may want to reconsider their career plans. How many retail and service workers can make the transition to construction work is unknown. It is certain, however, that when workers lose their jobs it imposes benefits costs on the government — and the taxpayers.

    The population of Pulaski County in 2000 was 361,474, while Sedgwick County’s population at the same time was 452,869, so Sedgwick County is a somewhat larger. Our sales tax will last 2.5 times as long, and our proposed arena is about three times as expensive. How these factors will impact the number of jobs is unknown, but I feel that the number of jobs lost in Sedgwick County in retail and services will be larger that what Pulaski County experienced.

    It is interesting to note that the authors of this study, while measuring a positive net economic impact for the Alltel Arena, make this conclusion:

    “The primary reason for this positive economic impact is that the state of Arkansas contributed $20 million to the construction of the arena. As a result, the economic impact of building the arena in Pulaski County is greater than it would be if the county had funded the arena by itself. A vast majority of the jobs that will be created will be in the service sector that frequently offers lower wages than jobs in other sectors of the economy.”

    The proposed downtown Wichita arena does not have the advantage of having 40% of its cost paid for by outsiders. It may be that we feel even more strongly the negative impacts of the sales tax.

    The Difference Between a Publicly-Owned and Privately-Owned Arena

    Instead of the government building an arena, suppose that arena supporters, along with those who voted 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 the government, arena supporters would be investors and 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 to a government.

    Instead of government bureaucrats deciding what the people of our town want and need, a privately owned arena would be subject to the guidance and discipline of free 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 succeed.

    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 a politician taxing and 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 the 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.

  • Letter to Kansas Legislators regarding Sedgwick County arena tax

    January 25, 2005

    Dear Senator or Representative:

    I am writing to express my opposition to the legislature granting Sedgwick County the authority to raise its county-wide sales tax in order to fund the proposed downtown Wichita arena.

    I realize that the voters in Sedgwick County voted for the tax. Still, I believe there is ample reason why you should vote against the tax.

    The primary reason is that the idea of the arena came about so fast in the summer that there was little thought given to the underlying issues. The Center for Economic Development and Business Research at Wichita State University produced a study showing a large positive economic impact for a downtown arena. I found much academic research that showed otherwise, that taxpayer-funded facilities such as the proposed downtown Wichita arena rarely live up to their expectations, and instead become a burden on the taxpayers. I also uncovered the fact that the WSU study was flawed in that it omitted important factors such as depreciation, the accounting for which is now required by Government Accounting Standards Board Statement 34. Incredibly, the CEDBR at WSU was not aware of this requirement when they prepared the study that was used to promote the economic benefit of the proposed arena. They admitted this when I called it to their attention.

    Thus, what is presented as an economic boon for all the people instead becomes the county as a whole subsidizing the interests of a few.

    I presented my findings to many news outlets in Wichita, but there was little interest. Because I experienced such resistance to my message I started a website, the “Voice for Liberty in Wichita.” It is located at wichitaliberty.org. Much of the research I uncovered is posted there. As an example I am enclosing an article that I recently wrote. It is based on what was found to happen in Pulaski County, Arkansas (Little Rock), when they built an arena funded in part by taxpayers.

    I would be happy to provide you with any additional information that I can.

    Thanking you in advance for your time,

    Bob Weeks