Remarks delivered at the May 20, 2009 meeting of the Board of Sedgwick County Commissioners.
As Sedgwick County considers whether to enter the industrial land development business, there are many considerations that must be weighed before proceeding. My greatest concern is the impact that government land development will have on the private sector in Wichita.
Information prepared by Sedgwick County states that there will be tracts as small as 18 acres, and that the county will be able to subdivide the tracts.
I realize that it is the county’s intent to focus on large companies as tenants in this proposed industrial park. This is to correct an alleged “market failure,” in that the private sector is not providing the product the county believes should be provided.
But as time goes on, the pressure to “do something” with the land will increase. Then, the county will be competing directly with existing private sector land development.
Government has advantages that the private sector doesn’t. It has access to free capital. It can give away land to companies. It can forgive future taxes. It can offer free infrastructure.
The effect of this will be to drive the private sector out of the new industrial real estate market.
It might seem like with government having all the advantages, why not turn over all development to it? The answer is that government doesn’t have something the private sector has: profits and losses. It is the profit and loss system that lets us know whether resources are being used efficiently. The profit and loss system drives the inefficient producers out of the market and tells us who are the effective producers.
Without the ability to calculate profit, government doesn’t know if it is being efficient.
Government land development will also have the effect of harming existing development, too. As existing tenants see the perks heaped on companies that locate in the government’s industrial park, they’ll want the same concessions from their landlords, too.
If the county proceeds with this industrial park, we need some way to minimize the harm to existing private sector development. We might, for example, limit buildings in the new park to a certain minimum size. We could restrict tenants to companies from outside our metropolitan area. We’ll also need to do something to help our existing industrial companies feel like they’re appreciated.
An important and easy thing to do is to limit the size of the proposed industrial park to something much smaller than 808 acres.
If the county decides we need to enter the land development business, let’s try to limit the harm to our existing private sector that’s in the same business.
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