Voice For Liberty

Category: Wichita city government

  • Bill Davitt on blight

    Bill Davitt makes some excellent points about the dangers of giving politicians power to control blight through eminent domain. He also explains why it is best to vote for Carlos Mayans for mayor of Wichita.

    Bill warns us that your home or business may be declared blighted even though it is in good and desirable condition. He is referring to cases all over the country where local officials abuse their power to declare property blighted so that it can be taken from its owners. The Castle Coalition has examples of property that is being declared blighted. You be the judge as to the condition of these properties:
    www.castlecoalition.org/CastleWatch/bogusblight    .

    Testimony of William T. Davitt before Senate Judiciary Committee of Kansas Legislature at 9:00 A.M. on Thursday, March 1, 2007 AGAINST amending BLIGHT into Kansas Statutes as an excuse for EMINENT DOMAIN.

    My name is William T. Davitt from Wichita. Everything I say is my opinion, belief and understanding.

    Last August I went to a meeting called by Wichita City Manager. 250 people in the room. Fancy buffet with salmon sandwiches along the wall.

    Up on the stage two members of Wichita City Council show color slides on large screen. “Oh, look at the beautiful swimming pool, manicured lawn, attractive apartments! It is so wonderful that we are going to have all this in Wichita REDEVELOPMENT!”

    Standing at the microphone, big developer from St. Louis explains that he will continue owning these new apartments and collecting the rent. Says he is going to KNIT together churches and schools, city and county government, taxpayers and philanthropists.

    Question from audience: “What if we don’t want to sell our land to you?” Answer of developer: “We’ll TAKE IT with EMINENT DOMAIN … clean up Wichita’s BLIGHT!”

    And BLIGHT is why we are here today. They want the legislature to nail BLIGHT in Kansas Statutes so they can use BLIGHT as an excuse to destroy our homes and places of business with a bulldozer, take our land away from us, turn our land over to big developer from St. Louis so he can build rental apartments and scoop in millions of dollars in profits for himself.

    Well, you say your home is so beautiful that they can never declare your home BLIGHTED. Don’t kid yourself.

    BLIGHT is going to be whatever the Kansas Supreme Court says it is following the argument of BIG LAW FIRMS representing BIG DEVELOPERS . . . because every judge on Kansas Supreme Court owes his job to a handful of BIG LAW FIRMS.

    That is why we desperately need an amendment to our Kansas Constitution taking selection of these judges away from BIG LAW FIRMS and requiring these judges to be confirmed by Kansas Senate as is done in the federal.

    We also desperately need an amendment to our Kansas Constitution that will protect our homes and places of business from EMINENT DOMAIN.

    What more can I say?

    LIBERABUS DOMINE.

    William T. Davitt
    Wichita, Kansas

    Note that Wichita City Council member Carl Brewer IS in favor of creating a REDEVELOPMENT AUTHORITY.

    Wichita Mayor Carlos Mayans IS NOT in favor of creating a REDEVELOPMENT AUTHORITY.

  • A roadblock to private investment in Wichita

    As reported in The Wichita Business Journal:

    The response from the Wichita Historic Preservation Board was positive. The six members liked the design and thought the project could be good for downtown.

    They still voted no.

    So for the moment, a developer’s plan for a downtown hotel and conference center is blocked by a law, the Kansas preservation statute. What is the problem with the proposed building? “[the problem] is that it incorporates too many materials and features inconsistent with the surrounding buildings. That includes glass, marble, stainless steel, redwood and balconies.”

    This design is judged as “too modern” to be compatible with the “overall historic appearance of downtown.”

    It is a sad day in Wichita when a law prevents an individual from making an investment in the improvement of his property, especially when private investment in downtown Wichita is desired and needed. This law needs to be repealed before it causes more harm.

    Furthermore, it devalues private property rights when property owners or developers must subject themselves to the whims of groups such as the Wichita Historic Preservation Board. As John W. Sommer wrote in The Cato Journal:

    With few exceptions, historic or landmark preservation illustrates the powerful force of cultural elites who impose their tastes on the landscape at the expense of the general public. City after city has been confronted by small groups of architectural aesthetes who are as highly organized as they are both righteous and wealthy. In city after city these groups have succeeded in stalling, or permanently freezing, the pace of physical and functional change. In the name of “heritage” or “culture” or “a livable city,” and invariably “in the public interest,” preservationists seek to legislate “charm” for others.

    We would be much better off with out these two disruptive forces — the Kansas preservation statute and the Wichita Historic Preservation Board — acting against our economy and private property rights.

  • Tax increment financing in Wichita benefits few

    Today the Wichita City Council votes on granting $4.5 million in tax increment financing to a developer. Here’s an article from August 17, 2006 that explains why the council should not approve this gift.

    (Note to The Wichita Eagle: Why not report stories like this a little earlier than the day the council is voting?)

    Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood.

    How does a TIF district work? The Wichita Eagle reported: “A TIF district doesn’t cost local governments any existing tax money. It takes property taxes paid on new construction that would ordinarily go into government coffers and redirects it to the bond holders who are financing the project.”

    In the present case, the value of the benefit the developer sought is estimated to be worth $3.5 million to $4 million. Whether this benefit is given at no cost to existing government, as The Wichita Eagle article implies, is open to debate. If the new development does not use any local government services, then perhaps there is no cost in giving the benefit. But if that’s true, we might ask this question: if the development does not consume any government services, why should it have to pay taxes at all?

    There is evidence that TIF districts are great for the developers — after all, who wants to pay taxes — but not so good for the rest of the city and county. The article Tax Increment Financing: A Tool for Local Economic Development by economists Richard F. Dye and David F. Merriman states, in its conclusion:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development — not a surprising finding. What about the rest of the city? Continuing from the same study:

    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.

    So TIF districts may actually reduce the rate of economic growth in the rest of the city.

    There’s also evidence that TIF districts are simply a transfer of wealth from the taxpayers at large to a privileged few. In the paper titled “Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth?” by Iowa State University economists David Swenson and Liesl Eathington, we can read this:

    There is indirect statistical evidence that this profligate practice [establishing TIF districts] is resulting in a direct transfer of resources from existing tax payers to new firms without yielding region-wide economic and social gains to justify the public’s investment.

    This analysis suggests that the enabling legislation for tax based incentives deserves revisiting. … there is virtually no evidence of broad economic or social benefits in light of the costs.

    In the present case in Wichita, the developer says that without the benefit the TIF provides, the project is not economically viable. This is the standard rationale given for the requirement of the TIF district. Without the TIF, the development would not take place.

    It may be true that this project in College Hill is not economically viable. If so, we have to wonder about the wisdom of investing in this project. More importantly, we should ask why our taxes are so high that they discourage investment and economic activity.

    It may also be that the developer simply wishes to gain an advantage over the competition by lobbying for a favor from government. As government becomes more intrusive, this type of rent-seeking behavior is replacing productive economic activity.

    There is one truth, however, if which I am certain: when businesses and individuals pay less tax, they have the opportunity to invest more. TIFs and tax abatements are tacit recognition that the cost of government is onerous and serves to decrease private economic activity and investment.

    Here’s a better idea: reduce taxes for everyone, instead of only for companies and individuals that are successful in extracting favors from our local governments.

  • Wichita City Council and Cessna Aircraft Company Industrial Revenue Bonds

    I received this letter written to Wichita Mayor Carlos Mayans and members of the Wichita City Council. The author makes excellent points about the harmful effects of special tax treatment for special interests. A better goal would be to work to reduce taxes for all companies and all people. This way, each company and individual can decide how to make best use of their own funds, instead of the Wichita City Council deciding for us. That is, in effect, what tax breaks like this do. It is the government deciding that resources should be allocated in a way different than how the market has decided. Our experience tells us that governments aren’t as smart as markets, and that governments almost always allocate resources inefficiently.

    Mayor Carlos Mayans
    Wichita City Hall
    455 N. Main St.
    Wichita, KS 67202

    Dear Mayor Mayans:

    Item 27 on the Wichita City Council’s December 12, 2006 agenda would have the city council approve a $99 million bond issuance for Cessna Aircraft Co. This is based upon the total $800 million Industrial Revenue Bonds (IRB) for Cessna Aircraft Company authorization approved earlier this year by this council.

    If that is the case, the $99 million issuance (100% abatement) being sought will reduce city property tax revenues by my calculations almost $800,000 a year, or roughly $4 million to the city over five years. The total value of the tax break when all units of government are included is much larger.

    That is a large tax break for Cessna Aircraft Company. This is a sizable reduction when city property tax revenues were projected at $89.5 million for 2006. According to the largest taxpayer list from the Wichita Business Journal, Cessna Aircraft Company paid $2,484,343 in property taxes in 2005. The abatement being sought is the equivalent of almost 32% of the property taxes paid by this company in 2005.

    Earlier this year Mr. Jack Pelton, the President and CEO of Cessna Aircraft Company, provided public testimony in support of raising property taxes in Sedgwick County almost 10 percent. That is certainly a position that both Mr. Pelton and his company may take. According to Textron’s 2005 annual report (www.textron.com/resources/textron_annual_report_2005.pdg), the Cessna Aircraft earnings for this publicly traded company were $457 million so they could certainly afford to pay their share of this increase. In fact, they can afford to pay this tax with greater ease than almost every other Wichitan or Wichita based company.

    This week Mr. Pelton and Cessna Aircraft’s ordinance for this large property tax reduction/IRB for this firm will be in you and your city council colleagues’ hands. You and your council colleagues need to know that this tax break demonstrates rank hypocrisy from both Cessna Aircraft and Mr. Pelton. This council item conflicts with Cessna’s support for higher property taxes countywide this summer. Mr. Pelton and Cessna Aircraft Company want special property tax breaks that the rest of the citizens in Wichita do not receive.

    Two recent national surveys indicate that Kansas has high property taxes. The Tax Foundation (see Special Report 146, Nov. 2006) and the Small Business & Entrepreneurship Council (Small Business Survival Index 2006) have both issued reports showing that Kansas has the overall highest property taxes on a statewide basis of the five states (KS and surrounding states) in our region. Nationally, Kansas was among the top 25 percent of property taxes measured both as a percentage of income or on a per capita basis. Neighboring Oklahoma, in contrast, scored as the 4th lowest among all 50 states.

    Kansas has high taxes in general and high property taxes in particular. However, the tax abatement for Cessna Aircraft does not eliminate the tax burden. This tax is shifted onto the backs of homeowners, farmers, and small and medium sized businesses in this community who lack the political clout to receive a property tax abatement. The total tax break for Cessna from all levels of Kansas government is almost $3 million a year or just under $15 million over the next five years (assuming current mill levies). Ironically, all national surveys indicate that small business is more successful in creating jobs than large firms.

    So Cessna Aircraft will soon receive another special tax break. This is on top of earlier IRBs issued on their behalf by the city. Other employers will have to pay their property tax plus the share shunned by Cessna Aircraft. Cessna Aircraft’s overhead costs are reduced with the property tax abatement. As a result Cessna Aircraft is able to pay employees more and be more selective in hiring. After all, these overhead costs have been shifted onto the rest of the taxpaying community. Businesses without the property tax abatements have to pay higher overhead costs (in the form of higher property taxes) and are at a competitive disadvantage for hiring workers from within this community if they compete with Cessna (or other firms with these tax breaks) in hiring workers.

    Special tax breaks for special firms hurt the smaller businesses that compete for labor against these firms. This provides a major warning sign to outside firms that might consider relocating into Wichita. These special tax breaks raise the risk and uncertainty for firms without these breaks in this community. This is a major reason why it is hard to attract firms into the Wichita market.

    It is clear that Cessna Aircraft Company’s concern about high property taxes does not extend beyond the company’s property line. In addition, the cyclical nature of Cessna Aircraft’s business has meant sizable and substantial changes in the company’s employment. Despite these sizable tax breaks, Cessna’s Wichita employment is much lower in 2005 with 8,500 employees than it was five years earlier when Cessna had 12,509 employees. Cessna Aircraft’s employment figures have changed dramatically according to the Wichita Business Journal’s employment figures. The numbers change substantially annually.

    That is another reason why Cessna Aircraft Company needs to shift their overhead costs onto the rest of the community. Companies that engage in widespread “hiring/firing” binges have a harder time attracting and keeping workers. This is especially true for skilled and highly educated workers. If they pay the same overhead costs as the other firms seeking Wichita area workers, they have a problem finding workers. Cessna needs to be able to offer extra wages and/or benefits to attract workers into this type of cyclical company.

    There is no reason that Cessna Aircraft Company’s self imposed problems should be shifted onto Wichita area taxpayers at large. Cessna Aircraft Company has testified in support of raising property taxes in this community. The Wichita city council should reject their request for an additional property tax abatement, and welcome them into the high property tax environment that they supported in front of the Sedgwick County commission this summer. Help Cessna Aircraft Company end their policy of tax hypocrisy and their plan to shift higher taxes onto the non-abated firms and the rest of the citizens in this community.

  • The motivations of politicians

    News reports say that former Wichita mayor Bob Knight may be considering a bid for that same office. Here’s a Voice For Liberty in Wichita article from January 25, 2005 regarding Mr. Knight.

    The Motivations of Politicians

    Presently Mr. Bob Knight of Wichita, a private citizen, is promoting the building of a casino in Park City, Kansas. These articles from The Wichita Eagle have reported Mr. Knight’s position on casino gambling in Kansas when he was the mayor of Wichita:

    “GOP governor hopefuls stake their positions” (July 3, 2002) “Knight and Kerr said they oppose gambling but would consider voter approval.”

    “Trump has no plans for local casino” (May 9, 2003) “Last year, Ruffin said, he approached former Mayor Bob Knight about the possibility of relocating the track to downtown and adding a casino if lawmakers approved. Knight was not interested, he said.”

    “Gambling on the slots” (May 22, 2002) “Wichita Mayor Bob Knight, seeking the Republican nomination, said gambling is an unreliable source of revenue. ‘I don’t think it fits my sense of how you build and sustain a strong state,’ he said.”

    The cynic in me imagines Executive Assistant District Attorney Jack McCoy of the television show Law and Order with Mr. Knight on the witness stand asking — justifiably indignant — “Were you lying then, or are you lying now?”

    But I do not know Mr. Knight, and there may be other explanations. It may be that as mayor of Wichita, he wasn’t being very careful or thorough in forming his opinions. A Wichita Eagle editorial “Plan requires serious look” states in part: “He [Knight] acknowledged that as mayor he had opposed an earlier casino plan for Wichita. But after studying this project, he said, he became convinced that a true destination casino could pay off handsomely for the Wichita area and region.” Mr. Knight has been out of the mayor’s office for less than two years. What about the Wichita area has changed in that time that makes a casino a good bet (so to speak) now?

    Or, has a casino always been a good idea, but Mr. Knight either didn’t know that when he was mayor, or he just didn’t want the citizens of Wichita gambling on his watch?

    I do not know the answer to these questions, and given our collective experience with politicians, I probably wouldn’t believe Mr. Knight if he answered them. Such is the credibility of the motivations of politicians.

  • Proposed Wichita housing code change

    Thank you to John Todd for this material. John has much experience in real estate, and cares deeply about the rights of property owners.

    To: Mayor Mayans and Wichita City Council members:

    Subject: Comments and concerns regarding the proposed changes for the Housing Code of the city of Wichita.

    The city’s housing code has problems. Here is an overview of the problems. Some suggested improvements follow.

    General concerns covering the Housing Code ordinances and enforcement.

    1. Has a “crime” actually been committed if a property owner owns a property in which a board and paint separate (peel) in violation of the Housing Code? Are folks who are found in violation in front of the city’s municipal court becoming part of the growth in the population in the county jail sometimes?
    2. Is there “selective enforcement” of the existing ordinance? Does peeling paint receive the same attention in Reflection Ridge as it does in Midtown?
    3. Are city, county, and school district owned properties subject to the same code? Are code violations on government owned properties subject to no penalties?
    4. Is “blight” the cause of neighborhood crime or is the lack of enforcement of criminal activity in certain neighborhoods creating the neighborhood flight and subsequent need by property owners to secure their properties by boarding up windows and doors?
    5. Is the Municipal Environmental Court free and independent from the legislative (City Council) and executive functions (City Manager) of the City? Does the setup of the Municipal Court meet the “separation of powers” doctrine we expect from government?

    Recommendations to improve Wichita housing and the city’s housing code:

    1. Reports of prospective housing code violation complaints need to be in writing with copies of the signed complaint given to the property owner and to the person reporting the alleged violation. Nothing undermines a sense of community more than government allowing one group of people to anonymously “snitch” on another group.
    2. Mediation between the aggrieved parties should be required before the complaint goes to court. The Wichita Bar Association has a system of mediation already in place.
    3. City Code Enforcement Officials should be licensed, and be required to have at least five years of prior “hands-on” building experience.
    4. Municipal Court Judges need to be elected by the people rather than appointed by the City Council. The City Council could handle this through the passage of a Charter Ordinance.
    5. Blight needs to be defined in the ordinance.
    6. City owned properties should comply with the ordinance just like privately owned property.

    Here are the detailed comments on the proposed changes in the city’s housing code.

    1. Comments concerning the new term “Resident Agent” are discussed below.
    2. Section 20.04.055 The Minimum requirements for maintaining vacant dwellings.

    Proposed Section 11 Vacant Structures. The phrase used to describe the material used to board windows and doors shall now in addition to having a protective coating now must be “matching the predominant color of the structure”. The question of what is a matching color leaves wide latitude on the part of the city code enforcement official deciding what is matching. Perhaps a contrasting color might be appropriate? And, perhaps after a damaging weather event, unpainted plywood or OSB board should meet the requirement?

    3. Section 20.04.200 the penalty section.

    Existing Section. Since the notice of violation that the city issues to a property owner refers to a “uniform criminal complaint”, perhaps the word “crime” should be added after the word “misdemeanor” or suggested “misdemeanor crime”?

    Existing Section. The penalties discussed in the existing section seem adequate and allow the Municipal Court Judge what might be considered extreme additional latitude if he or she invokes the provision in the existing ordinance, “Each day that any violation of this ordinance continues shall constitute a separate offense and be punishable hereunder as a separate violation.” Also, jail time for a Municipal Court is limited to “a period of not exceeding one year”. Invoking this provision of the existing ordinance would potentially allow multiple years jail time to be assessed in excess of this maximum “not exceeding one year”.

    Proposed Section. The new proposed ordinance essentially doubles existing fines. Before increasing the fines, several questions need to be answered. How is the current fine schedule working? Are convicted property owners paying the fines? What is happening to property owners who do not have the money to pay the fines? Are there property owners who are being assessed fines people who could pay for the repair of their property if they had money they are being fined to do the repair(s)? Is jail time being assessed against property owners? Who bears the costs associated with incarceration? Are the additional fines actually a new “revenue source” for the city? The new proposed ordinance also requires the “mandatory” imposition of fines by Municipal Court Judges with a provision requiring alternative community service in lieu of the fines for defendants who are financially unable to pay the fines imposed. Several questions, relating to “mandatory” and alternative “community service” for the poor need to be answered before this ordinance is passed. Don’t “mandatory” fines take away the need for judgment on the part of the Municipal Court Judge when dealing with property owner defendants in his or her court in seeking compliance with the housing code ordinance? Are there not circumstances where defendant property owners that are physically, mentally, as well as financially unable to care for their properties due to age, loss of employment, disability, or other extenuating circumstance who needs “judgment” on the part of a judge rather than mandatory fines or community service? Could not a defendant property owner be earning money to repair his or her property or actually doing the repair during the time imposed for “community service”? Does the registering of a defendant property owner’s property with the Superintendent of Central Inspection comply with “equal protection under of the law” that has been a requirement under our legal system?

    Chapter 20.04.010 the Definitions are amended. The definition of “Resident Agent” is created.

    Proposed Ordinance No._______Section 30.01.020 of the Code of the City of Wichita, Kansas. The responsibilities and potential liabilities of the “resident agent” might be troublesome. Would a licensed real estate broker or salesperson be exempt from this ordinance due to provisions enumerated in the Real Estate License Act? Is it legal for an agent to be held responsible for the action or inaction of his client property owner? Why would an agent be willing to take on responsibilities for the actions or inactions of his client property owner? Is this a “can of worms” for a “resident agent”?

  • To George Kolb, regarding urban renewal in Wichita

    To Wichita City Manager George Kolb, Regarding Urban Renewal in Wichita
    By Karl Peterjohn, Executive Director Kansas Taxpayers Network

    Today, city government plays a large role in this city’s life. The most recent municipal budget is in the neighborhood of $1/2 billion. That massive sum does not seem to be large enough for many of the city leaders since there is now an effort underway to recreate one of the major mistakes of the 20th century: Urban Renewal.

    Urban renewal was a major issue in the middle of the 20th century. Cities across the country attempted to improve and revitalize themselves using urban renewal. They wanted to improve their community and remove dilapidated and blighted properties. Despite the best of intentions, urban renewal failed. The failure took a number of forms and was very costly. Minority and low income citizens were hurt badly. Housing costs rose massively while the choices available for low income citizens were reduced. At that time, this was a national program and a significant part of the urban renewal costs were paid for by the federal government. Today, that is not the case. In addition, beneficiaries of urban renewal were often more affluent citizens who positioned themselves to take advantage of this program.

    Ironically, much of the city’s land that has been provided for the east bank/Waterwalk redevelopment project in downtown Wichita was originally acquired by the city back in the urban renewal era. Cost figures on what the city paid for this land were not available when I sought that information during the public hearings over the Waterwalk project. It is a sad fact that much of this city owned land simply stagnated economically during the close to half a century that the city has exercised control over this property. In addition, the city’s need to be able to condemn private property by using eminent domain has raised the risk of property owners, diminished property rights, and made this community less competitive by expanding the public sector over the private.

    Recently, the city manager and some other local leaders have been looking at establishing another layer of local government by setting up a new redevelopment authority. I heard that you were outspoken in support of this concept at the August meeting at the Hughes Center. This is the first step in recreating urban renewal in Wichita.

    The presentation that the city council had June 27, 2006 indicates the close ties between the proposed redevelopment authority in the 21st century that relies upon the 1950’s era K.S.A. 17-4712 et seq. as well as 17-4757 and 12-2904 urban renewal statutes as the legal authority for creating this authority. These statutes indicate that Sedgwick County will also be involved in this new layer of local government too.

    What is the city going to do to avoid repeating the numerous and myriad mistakes made roughly a half century ago?

    The academic literature (a partial reading list is provided below) is clear in pointing out the mistakes and failures made with the urban renewal efforts half a century ago. A major, but unspecified, increase in taxing authority will be needed to finance this new layer of local government.

    As an organization representing taxpayers, we see that the growth of local government is a major burden stifling development locally and statewide. Recent Bureau of Labor Statistics data shows that Kansas is near the bottom of the 50 states in private sector job growth. Adding a new layer of bureaucracy is likely to hurt this community’s economy, not help it.

    City Manager Kolb and other proponents for a new “Redevelopment Authority” need to provide a clear road map on how this new governmental body will avoid repeating the very expensive and harmful mistakes made during the urban renewal era from the 1950’s. Citizens of Wichita need to know how this expensive new entity will be paid for. Will the city council want to pay for it with higher property taxes? Or sales taxes? Or some new tax?

    Our organization’s position on raising taxes is clear: voters must be able to decide this issue at the ballot box. Let’s not make Wichita worse with more expensive red tape, bureaucracy, and resurrecting urban renewal. There are many ways to improve Wichita, but recreating urban renewal is not one of them.

    Urban Renewal Reading List:
    1) The Unheavenly City, Edward Banfield.
    2) The Federal Bulldozer, A Critical Analysis of Urban Renewal 1949-1962, Martin Anderson.
    3) The Death and Life of Great American Cities, Jane Jacobs.
    4) Race and Economics, Thomas Sowell.
    5) The Art of Community, Spencer MacCallum.
    6) Beyond the Melting Pot, Nathan Glazer & Daniel Moynihan.
    7) The Tyranny of Good Intentions, Paul C. Roberts & Lawrence M. Stratton.

  • Resurrecting urban renewal in Wichita?

    Thank you to John Todd for this excellent article.

    Resurrecting Urban Renewal in Wichita?
    By John Todd

    On August 22, 2006, the City of Wichita hosted a Visioneering Committee “Public Forum on Community Revitalization” featuring Mr. Richard Baron, Chairman and CEO of McCormack Baron Salazar (MBS) of St. Louis, Missouri in the Sudermann Commons Room at the Wichita State University Hughes Metropolitan Complex. An August 14, 2006 letter from City Manager George Kolb explains, “This forum is part of the City’s commitment to and participation in a prisoner reentry initiative to help transform not only the lives of returning ex-offenders, but also to transform the communities/neighborhoods into which they will return.”

    Mr. Baron’s PowerPoint presentation had little to do with “prisoner reentry” into communities/neighborhoods, but rather the “evolution” of public housing from the failed government housing projects of the past in larger cities like St. Louis, Pittsburgh, and Los Angeles into the new “public-private” partnership housing projects that rely almost exclusively on loans/grants from local, state, and the federal government as well as national and local foundation support.

    Council Members Carl Brewer and Sharon Fearey toured several of Mr. Baron’s MBS developments in St. Louis, were sold on what he was doing, so they invited him to Wichita for the tonight’s presentation.

    Mr. Baron’s presentation explained how his company, working with government, and government money, was able to raze and rehabilitate failed government housing projects of the past that usually included city owned land and additional assembled “tax foreclosure” properties into a “mixed-income” MBS rental housing apartment units project that always included a public neighborhood K through 8 elementary school, a common swimming pool, park area, and a sprinkling of privately owned housing units. Mr. Baron indicated that his company transformed failed gang, drug, and crime infested public housing projects occupied by people with average annual income of $6,000 to “mixed-income” housing units with incomes ranging from around 35% under $10,000, with another estimated 35% from $10,000 to $30,000 and the balance above those numbers with around 1% over $100,000 per year. His company collected market rents through HUD’s Section 8 rental subsidy program. In response to a question, he said that about 40% of the total rents collected from the project came from the Section 8 subsidy. Mr. Baron indicated that most of his projects were on tracts of around 40 acres.

    The public forum was held from 6-8 p.m. in Sudermann Commons Room was attended by I would estimate over 100 people including, Mayor Carlos Mayans, City Council Members, Carl Brewer, Sharon Fearey, and Bob Martz, County Commissioners Tim Norton and David Unruh, City Manager George Kolb, County Manager Bill Buchannan, a couple of state legislators along with heavy attendance from government housing staff members along with staff members from several governmental agencies and members of several Wichita Neighborhood organizations. There appeared to be widespread crowd enthusiasm and support for Mr. Baron’s presentation. However, I regrettably have to say that I think those people more closely associated with government and local neighborhood associations failed to see through Mr. Baron’s super smooth “sales” presentation. He was given over an hour of time to tout his company’s success in assembling this “new” type of “public-private” housing project that involved massive amounts of taxpayer subsidy with the implication that the key to the success of these projects was his company’s ownership and management of the projects. During questioning he did finally admit that government played a key role in the condemnation and taking of private property for his projects through their eminent domain powers.

    Following Mr. Baron’s presentation, City Manager George Kolb spoke glowingly and enthusiastically to the group about the City’s plans to revitalize the Beat 44 neighborhood in northeast Wichita. At this point, Mr. Kolb failed to mention a private partner in his vision for Beat 44 revitalization, but rather a city-run project. No mention as to whether the project needed at least 40 acres to succeed, and how many houses would be razed for the cities project. Mr. Kolb indicated that the Beat 44 project would be a “model” for other city housing revitalization projects. Mr. Kolb did hint of “public takings” if needed to clean up the area, and he admitted to me after the meeting that he was a strong supporter of the City’s ability to use of its eminent domain power in those takings.

    I find it interesting to note that The Wichita Eagle has already started their support for the City’s neighborhood revitalization program with their recent front-page “blight” story. Earlier this year they printed an opinion letter from City Manager Kolb imploring the legislature to “either defeat the proposed (eminent domain) legislation or find a compromise that honors the tradition of eminent domain.” In that same April 9, 2006 newspaper, the editorial board agreed with the City Manager, “…it is important for the city to preserve its condemnation authority, which could be threatened by legislative efforts to curtail the use of eminent domain.” Since Mr. Kolb and the editorial staff have so little regard for private property protection, I wonder if the newspaper would have any problem with a city ordinance that would from time to time limit the Eagle’s freedom of the press in cases where a reporter was writing unfavorable articles about the City of Wichita that were having a “detrimental” impact on the collective “economic well being” of this community. Surely, the collective health of this community outweighs one individual reporter’s freedom to write anything in the newspaper that is not in the community’s best interest. This argument sounds like the same rational the newspaper uses to justify the taking of private property from an individual for the collective good of the community. Perhaps Mr. Kolb can convince the City Council to pass such an ordinance with the understanding that we can “trust” the city to use its power to curb the free press sparingly and city officials will always exercise “good judgment” in their use of this power. The Kansas League of Municipalities used this same “trust” argument before a legislative committee last spring in their efforts to stop the legislature from passing needed private property protection through meaningful eminent domain reform.

    In deference to Mr. Baron’s approach to the new public housing projects his company is involved in, the key to his company’s financial success appears to me to be their ability to gather “public” money and then apply “private” ownership and management skills with an interest in their companies bottom line “profit.” Judging from the PowerPoint presentation, his company appears to be applying sound business skills that are necessary for a project to be financially successful. I hear that our City Manager Mr. Kolb is working to form a “Housing Authority” with limited supervision by the City Council. Kolb will be the leader of the group that owns and manages the new housing development that is being proposed in the Beat 44 neighborhood. The lack of the “profit” motive with the inherent lack personal financial “risks” makes me suspect of the ability of the new “Housing Authority” to be successful in their so-called housing revitalization. This proposal resurrects the failed urban renewal policies of the 1950’s and 1960’s.

    There are several questions that I have been unable to obtain answers for after several attempts in calling Mr. Baron’s office. How are the housing projects titled? Private company? Public entity? Public-private partnership ownership entity? Non-profit entity? And, does the project pay property taxes? Have TIF’s (Tax increment financing) been used?

  • Tax increment financing in Wichita benefits few

    Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood.

    How does a TIF district work? The Wichita Eagle reported: “A TIF district doesn’t cost local governments any existing tax money. It takes property taxes paid on new construction that would ordinarily go into government coffers and redirects it to the bond holders who are financing the project.”

    In the present case, the value of the benefit the developer sought is estimated to be worth $3.5 million to $4 million. Whether this benefit is given at no cost to existing government, as The Wichita Eagle article implies, is open to debate. If the new development does not use any local government services, then perhaps there is no cost in giving the benefit. But if that’s true, we might ask this question: if the development does not consume any government services, why should it have to pay taxes at all?

    There is evidence that TIF districts are great for the developers — after all, who wants to pay taxes — but not so good for the rest of the city and county. The article “Tax Increment Financing: A Tool for Local Economic Development” by economists Richard F. Dye and David F. Merriman states, in its conclusion:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development — not a surprising finding. What about the rest of the city? Continuing from the same study:

    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.

    So TIF districts may actually reduce the rate of economic growth in the rest of the city.

    There’s also evidence that TIF districts are simply a transfer of wealth from the taxpayers at large to a privileged few. In the paper titled “Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth?” by Iowa State University economists David Swenson and Liesl Eathington, we can read this:

    There is indirect statistical evidence that this profligate practice [establishing TIF districts] is resulting in a direct transfer of resources from existing tax payers to new firms without yielding region-wide economic and social gains to justify the public’s investment.

    This analysis suggests that the enabling legislation for tax based incentives deserves revisiting. … there is virtually no evidence of broad economic or social benefits in light of the costs.

    In the present case in Wichita, the developer says that without the benefit the TIF provides, the project is not economically viable. This is the standard rationale given for the requirement of the TIF district. Without the TIF, the development would not take place.

    It may be true that this project in College Hill is not economically viable. If so, we have to wonder about the wisdom of investing in this project. More importantly, we should ask why our taxes are so high that they discourage investment and economic activity.

    It may also be that the developer simply wishes to gain an advantage over the competition by lobbying for a favor from government. As government becomes more intrusive, this type of rent-seeking behavior is replacing productive economic activity.

    There is one truth, however, if which I am certain: when businesses and individuals pay less tax, they have the opportunity to invest more. TIFs and tax abatements are tacit recognition that the cost of government is onerous and serves to decrease private economic activity and investment.

    Here’s a better idea: reduce taxes for everyone, instead of only for companies and individuals that are successful in extracting favors from our local governments.