Voice For Liberty

Tag: Carl Brewer

Wichita Mayor Carl Brewer

  • Kansas and Wichita quick takes: Tuesday August 16, 2011

    Future of Kansas insurance exchange. “TOPEKA — A federal appeals court ruling in Georgia that overturned a portion of the nation’s latest health insurance law Friday did little to end confusion over how to follow that law in Kansas. A three-judge panel of the 11th U.S. Circuit Court of Appeals ruled that the Patient Protection and Affordable Care Act, which requires all Americans to carry health insurance or face penalties, is unconstitutional. The Court ruled that Congress exceeded its constitutional powers by requiring people to buy health insurance when they choose not to do so.” At issue is whether the state should continue to spend money and work on infrastructure to support Obamacare, when it appears increasingly likely that the law will be ruled unconstitutional. Gene Meyer reports in Kansas Reporter.

    Concern over Wichita spending. At today’s city council meeting the council considered whether to pay travel expenses for Wichita Mayor Carl Brewer to attend a sister cities exchange meeting in Mexico. The mayor announced that he would be paying his own airfare, that the hotel and meals would be paid for by the host city, so the only expense would be for his luggage and perhaps some incidental meals. Council Member Pete Meitzner (district 2, east Wichita) said that if the city sends representatives on worthwhile missions, the city should pay all travel expenses. Vice Mayor Lavonta Williams (district 1, northeast and east Wichita) disagreed, noting that just last week she traveled to Texas on city business, and she paid for her own airfare. The mayor remarked that “primarily what we’re doing is we’re paying to perform the job we’re assigned to do,” and that previous commitments had been made that obligate the current council to follow through. … The next item was to pay for travel for other persons to attend the conference. The agenda packet for today’s meeting contained no information on these two items, certainly not the amounts of money involved or the persons to travel. … The council’s concern over spending on items like the mayor’s airfare is welcome, but this spending is small relative to the many areas in which the city could trim spending.

    Kansas governor praises wind power. Today Kansas Governor Sam Brownback promoted investment in wind energy. In a press release he said “I want Kansas to be known as the ‘Renewable State.’ To get there, we have to balance the three E’s: Energy, Economy and the Environment. My first priority as Governor is to grow the Kansas economy, and getting wind power to market is a key component accomplishing that.” Contrary to the governor’s rosy picture, Lisa Linowes details the long string of failures of the wind power industry, including the fact that wind power is becoming more expensive, despite its massive federal subsidy. It is unknown why Brownback — who generally supports free markets — supports wind power and the government intervention necessary to prop up the industry. The same can be said for his support of ethanol, which is rapidly losing support for its three forms of government intervention that support it: a subsidy for its producers, a mandate to use it, and a tariff to protect domestic producers from foreign competition.

    Corporate taxes. Mitt Romney made it an issue. David Henderson comments: “No, I’m making the simple point that a tax on corporations is a tax on people. I remember that in addressing the issue in the 1980s, the late Herb Stein said that it’s as if people think that if the government imposed a tax on cows, the tax would be paid by the cows.” In a video, Milton Friedman explained that “There’s no business to be taxed. There are people. Only people can pay taxes. … When you talk about a tax on business, it has to be paid by somebody. Either it’s paid by the stockholder, or it’s paid by the customer, or it’s paid by the worker. There’s no other way it can come from.” He also addressed the fiction that the Social Security tax is paid equally by employers and workers.

    How the racism charge is used. The Capital Research Center has published a piece that illustrates how the political left tosses around a charge that no one wants to be accused of: racism. In an email the Center says: “Author Kevin Mooney examines a little-known group called Color of Change, which alleges that conservatives in the media are racists. Targeting figures like TV talk show host Glenn Beck and Fox News CEO Rupert Murdoch, Color of Change enjoys the praise of prominent left-of-center groups like Media Matters and MoveOn.org. Mooney says the Left admires Color of Change because it has learned how to use the incendiary charge of racism to stifle conservatives’ free speech.” … The report itself says: “The intense anti-Fox animus is not new, but this time conservatives have good cause to be concerned about one aspect of the new campaign against Fox. That campaign aims to exploit the most incendiary of tactics — the issue of race — to dislodge conservatives from prominent media posts. … Despite much evidence that contemporary America has moved beyond the tragic legacy of slavery and segregation, the Left remains eager to accuse its opponents of racism.” … It will come as no surprise that George Soros is a financier of this organization. The compete report is The Left Wing Targets Conservative Media.

  • Wichita City Council bows to special interests

    Yesterday’s meeting of the Wichita City Council revealed a council — except for one member — totally captured by special interests, to the point where the council, aided by city staff, used a narrow legal interpretation in order to circumvent a statutorily required public hearing process.

    The issue was a downtown hotel to be developed by a team lead by David Burk of Marketplace Properties. The subsidies Burk wants, specifically tax increment financing (TIF), require a public hearing to be held. The city scheduled the hearing for September 13th.

    That schedule, however, didn’t suit Burk. In order to provide him a certain comfort level, the council agreed to issue a letter of intent stating that the council intends to do the things that the public hearing is supposed to provide an opportunity for deliberation.

    I, along with others, contend that this action reduces the September 13th public hearing to a meaningless exercise. This action is not good government, and it’s not open and transparent government, despite the claims of Mayor Carl Brewer. It goes against our country’s principle of the rule of law, part of which holds that our laws are more important than any single person.

    Several times council members — and once city attorney Gary Rebenstorf — explained that the letter of intent is non-binding on either party. But: No matter what information is presented at the September public hearing, no matter how strong public opinion might be against the incentives involved, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I think there is very little possibility of that.

    Persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?

    During the discussion, no one was able to explain adequately why a letter of intent — if it is non-binding and therefore does not commit the city — was asked for by the developers. Despite the lawyerly explanation of Rebenstorf and council members — including the mayor — the letter does have meaning. Practically, it has such a powerful meaning that it makes the holding of the public hearing on September 13th a mere charade, a meaningless exercise in futility.

    It’s not just me and a handful of others who contend this. The Wichita Eagle’s Rhonda Holman, who is usually in favor of all forms of public spending on downtown, wrote: “Even though the letter of intent will be nonbinding, it risks making the Sept. 13 public hearing on tax-increment financing seem like a pointless afterthought.”

    In his remarks, City Manager Bob Layton explained that the meeting was the first time for council members to “formally vet this project and all of the incentives.”

    He added: “If the council were to say, for instance, there were two or three pieces of that that you had discomfort with, that would then put everyone on notice that the deal may not go forward.” He said this is the purpose of today’s action, and he added that the action is non-binding.

    I would suggest that since the council, with the exception of Council Member Michael O’Donnell (district 4, south and southwest Wichita), found no problems with issuing the letter of intent, it has no problems with the deal, and this is what makes the September public hearing, as Holman said, a “pointless afterthought.”

    Astonishingly, the manger said while this is “not intended to be the normal process,” he said that he “kind of like it” as it gave an initial opportunity to gauge the sentiment of council members.

    I’m glad the manager didn’t mention the sentiment of the public, as with little notice as to the content of the deal and its incentives, citizens had no meaningful opportunity to prepare.

    An example of the contorted logic council members use to justify their action: Council Member Jeff Longwell (district 5, west and northwest Wichita) explained that issuing letters of intent is a common practice in real estate deals. He confused, however, agreements made between private parties and those where government is a party. Private parties can voluntarily enter into whatever agreements they want. But agreements with government are governed by laws. Yesterday, the city council announced its intent to do something for which it is required to hold a public hearing. That didn’t violate the letter of the law, but it certainly goes against its spirit and meaning. Longwell said he has no problem with that.

    Their bureaucratic enablers helped out, too. Wichita Downtown Development Corporation President Jeff Fluhr, in his testimony, said we are working towards becoming a “city of distinction.” That we are, indeed — a city distinguished by lack of respect for the rule of law and its disregard for citizens in favor of special interests.

    A few observations from the meeting follow.

    Public investment

    In response to a question from the mayor, Allen Bell, Wichita’s Director of Urban Development, said that the ratio of private dollars to public dollars for this project is about 2.2 to 1. Whether these numbers are correct is doubtful. It will take an analysis of the deal to determine the true numbers, and the details have been available for only a short time. But if correct, this ratio falls well short of the stated goals. Two years ago, when agitation for a new round of downtown planing started, boosters spoke of a ratio of 15 to 1. Eventually planners promised a ratio of 5 to 1 private to public investment for downtown. This project, while of course is just a single project and not the entirety of downtown development, doesn’t reach half that goal.

    Order of events and media coverage

    During the meeting, Council Member Pete Meitzner (district 2, east Wichita) conceded that “the order of events is confusing.”

    Before that, Council Member Janet Miller (district 6, north central Wichita) claimed that there had been much media coverage of the proposed hotel, and that the public was actually getting two opportunities to talk about this project. She said that the media had published information about today’s meeting and the public hearing on September 13th.

    Miller is gravely mistaken. Until a Wichita Eagle article on Saturday, I saw no mention of the letter of intent, and no detail of the form of subsidies to be considered for this project. The city’s list of legal notices contains no mention of the action that was taken at this meeting.

    Questions not answered

    During my remarks to the council, I related how last year the Wichita Eagle alleged that David Burk, the managing member of this project — and I quote here: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

    This Eagle article and a companion article went on to quote these people as having trouble with and being concerned, to varying degrees, with Burk’s acts: City Attorney Gary Rebenstorf; City Council member Jeff Longwell; City Council Member Lavonta Williams, now serving as vice mayor; then-Vice Mayor Jim Skelton, now on the Sedgwick County Commission; and City Manager Robert Layton.

    In particular, the manager said, according to the Eagle, that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”

    The manager’s quote is most directly damaging. Despite the fact that nearly all the property taxes Burk pays directly enriches himself and only him, he still doesn’t want to pay them. And according to the Wichita Eagle — not me — he engaged in deception in order to reduce them.

    None of the four people in the council chambers — Rebenstorf, Longwell, Williams, and Layton — explained their apparent change of mind with regard to Burk’s acts.

    Burk, who addressed the council immediately after I asked if he cared to explain his actions, decided to avoid the issue. In his shoes, I probably would have done the same, as there is no justification for the acts the Eagle accused him of doing. He, and his political and bureaucratic enablers in Wichita city hall, have to hope this issue fades.

    Campaign contributions

    Council member O’Donnell asked about a parking garage to be built at a cost of $6 million to the city: Will the city be putting this project out to competitive bid? Bell replied no, that is the developer’s request. City attorney Rebenstorf added that there is a charter ordinance that exempts these types of projects from bidding requirements.

    O’Donnell said that awarding the construction contract to a company that has made campaign contributions to all council members (except him) “seems a little questionable.”

    The company in question is Key Construction. Its principals regularly appear on campaign finance reports, making the maximum allowed contribution to a wide variety of candidates. Similarly, Burke and his wife also frequently make the maximum contribution to city hall candidates.

    O’Donnell is correct to publicize these contributions. They emit a foul odor. In our political system, many people make contributions to candidates whose ideology they agree with, be it conservative, liberal, or something else.

    But Burk and others routinely make the maximum contribution to all — or nearly all — candidates, even those with widely varying political stances. How can someone explain Burk’s (and his wife’s) contributions to liberals like Miller and Williams, and also to conservatives like Longwell, Meitzner, and former council member Sue Schlapp?

    The answer is that Schlapp and Longwell, despite their proclamations of fiscal conservatism, have shown themselves to be willing to vote for any form of developer welfare Burk and others have asked for. They create tangled webs of tortured logic to explain their votes. Meitzner, along with his fellow new council member James Clendenin (district 3, south and southeast Wichita), seems to be following the same path.

    Several council members and the mayor took exception to O’Donnell’s raising of this matter. Clendenin, for his part, objected and said that the public has had over 30 days to consider and take exception with this project. This contention, like Miller’s, isn’t supported by any facts that I am aware of. It appears that the first mention of any of the details of the plan and the subsidies is contained in a MAPC agenda that appears to have been created on July 29. Besides not being 30 days in advance, the MAPC agenda is an obscure place to release what Clendenin believes is adequate public notice.

    Regarding the issue of campaign contributions, the mayor — without mentioning his name — strongly criticized O’Donnell for bringing up this matter. Many people watching this meeting felt that the extreme reaction of Brewer and others to O’Donnell’s observation reveals a certain uneasiness regarding these contributions. I don’t believe the mayor and council members are taking illegal bribes, although when any city is enriching people with millions of dollars of developer welfare there is always that threat, and in some cities and states such practices are commonplace.

    The fact remains, however, that there is a small group of campaign contributors who — over and over — ask for and receive largess from city hall.

    The mayor’s criticisms

    In his comments, Mayor Brewer accused opponents of providing only partial facts about matters, because the full facts did not support their case. He was referring to my remarks that a lawsuit brought against the city by a party who felt the city had reneged on a letter of intent was litigated all the way to the Kansas Supreme Court. In my remarks I didn’t mention who won that case — the city did — and the mayor believes this is an example of slanting the facts.

    The mayor went on to make accusations of “grandstanding” from some of the public and “some council members” because there are cameras in the council chambers. He mentioned that news media are present at every meeting and that council meetings are broadcast on television.

    The mayor should take notice, however, that most people who care about public affairs and policy are severely disappointed with news media coverage of city hall events. The resources of news gathering agencies, especially newspapers, are severely depleted as compared to the past. In my coverage of a talk given by former Wichita Eagle editor Davis Merritt, I wrote this: “A question that I asked is whether the declining resources of the Wichita Eagle might create the danger that local government officials feel they can act under less scrutiny, or is this already happening? Merritt replied that this has been going on for some time. ‘The watchdog job of journalism is incredibly important and is terribly threatened.’ When all resources go to cover what must be covered — police, accidents, etc. — there isn’t anything left over to cover what should be covered. There are many important stories that aren’t being covered because the ‘boots aren’t on the street anymore,’ he said.” See Former Wichita Eagle editor addresses journalism, democracy, May 11, 2009.

    In addition, Bill Wilson, the reporter the Wichita Eagle sent to cover the meeting, has a documented bias against the concept of free markets, and against those who believe in them.

    The mayor, when delivering his criticism, does not use the names of those he criticizes. It would be useful if he did, but it would mean he has to take greater accountability for his remarks.

    Following are links to excerpts of testimony from the meeting — perhaps examples of the “grandstanding” the mayor complained about: John Todd, Shirley Koehn, and Bob Weeks.

  • Wichita city council to decide between rule of law, or rule by situation

    Tuesday’s Wichita City Council meeting will provide an opportunity for the mayor, council members, and city hall staff to let Wichitans know if our city is governed by the rule of law and proper respect for it, or if these values will be discarded for the convenience of one person and his business partners.

    Here’s the situation: a person wants to gain approval of a tax increment financing (TIF) district project plan. This requires a public hearing, which the city has scheduled for September 13th.

    But this schedule doesn’t suit the applicant. He has a personal business need — an expiring purchase option — and wants the city to issue a letter of intent stating that the city intends to do all the things that are the subject of the September public hearing.

    The letter of intent is not binding, city officials tell us. The council will still have to hold the September public hearing and vote on the incentives the developer wants. And the list of incentives is large, amounting to many millions of dollars. Whether to issue these incentives deserves discussion and a public hearing.

    But the letter of intent, in effect, circumvents the public hearing. It reduces the hearing to a meaningless exercise. No matter what information is presented at the September public hearing, no matter how strong public opinion might be against this project, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I imagine that persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?

    And the developers are planning to take action based on this letter of intent. To them, the letter does have meaning. If it had no meaning, why would they ask for it?

    That bears repeating: If the letter of intent is non-binding, why issue it at all?

    The last time someone felt the city reneged on a letter of intent, it resulted in a court case that went all the way to the Kansas Supreme Court. I imagine the city is not anxious to repeat that experience.

    Part of the purpose of public hearings and their advance notice, usually 30 days or so, is to give interested parties time to prepare for the hearing. But citizens are given just a few days notice of the proposed letter of intent. The parties who will receive the subsidies, of course, have known about this for some time. Their bureaucratic and political enablers have, too.

    The issuance of the letter of intent on Tuesday, if the city council decides to do so, is an affront to the rule of law. It would be a powerful statement by the council that it intends to go ahead with the project and its subsides, public hearing — and citizens — be damned. It is a striking show of arrogance by the city and its political leadership, which is to say Mayor Carl Brewer.

    After Tuesday’s meeting we will know one thing. We will know if the Wichita City Council and city staff value the rule of law more than the needs of one small group of people. We won’t really know about individual city staff, but the council members and mayor will have to vote on this item. We’ll know exactly where each of them stands. Expect waffling.

    Tuesday provides citizens a chance to learn exactly how the mayor and each council members value the rule of law as compared to the needs of one person and his business partners. It is as simple as that.

    The project

    The project is the development of a new hotel in an existing building downtown. It sounds like a neat project and would be a great addition to Wichita. But — this project is a product of central government planning backed by massive government intervention in the form of millions of dollars of subsidy. Pretty much all the tools have been tapped in the proposed corporate welfare, even one form that will require the city to pass a special charter ordinance.

    The lead developer, David Burk, is well known in Wichita and has produced a number of successful projects. (We must qualify this as “seemingly successful,” as it seems as all of Burk’s projects require some sort of taxpayer involvement and subsidy. So we don’t really know if these projects would be successful if they had to stand on their own.)

    I’ve written extensively on the problems with government-directed planning and taxpayer-funded investment in downtown Wichita. See Downtown Wichita regulations on subsidy to be considered or Downtown Wichita revitalization for examples. This project suffers from all these problems.

    Furthermore, we see the problems of the public choice theory of politics at play here. Perhaps most prominent is the problem of concentrated benefits and dispersed costs. In this case Burk and his partners stand to garner tremendous benefit, while everyone else pays. This is why Burk and his wife are generous campaign donors to both conservative and liberal city politicians.

    Burk and past allegations

    The involvement of Burk in the project, along with the city’s response, is problematic. City documents indicate that the city has investigated the backgrounds of the applicants for this project. The result is “no significant findings to report.” Evidently the city didn’t look very hard. In February 2010 the Wichita Eagle reported on the activities of David Burk with regard to property he owns in Old Town. Citizens reading these articles might have been alarmed at the actions of Burk. Certainly some city hall politicians and bureaucrats were.

    The opening sentence of the Wichita Eagle article (Developer appealed taxes on city-owned property) raises the main allegation against Burk: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

    A number of Wichita city hall officials were not pleased with Burk’s act.

    According to the Eagle reporting, Burk was not authorized to do what he did: “Officials in the city legal department said that while Burk was within his rights to appeal taxes on another city-supported building in the Cinema Plaza, he did not have authorization to file an appeal on the city-owned parking/retail space he leases. … As for Burk signing documents as the city’s representative, ‘I do have a problem with it,’ said City Attorney Gary Rebenstorf, adding that he intends to investigate further.”

    Council member Jeff Longwell was quoted by the Eagle: “‘We should take issue with that,’ he said. ‘If anyone is going to represent the city they obviously have to have, one, the city’s endorsement and … two, someone at the city should have been more aware of what was going on. And if they were, shame on them for not bringing this to the public’s attention.’”

    Council member Lavonta Williams, now serving as vice mayor, was not pleased, either, according to her quotations: “‘Right now, it doesn’t look good,’ she said. ‘Are we happy about it? Absolutely not.’”

    In a separate article by the Eagle on this issue, we can learn of the reaction by two other city hall officials: “Vice Mayor Jim Skelton said that having city development partners who benefit from tax increment financing appeal for lower property taxes ‘seems like an oxymoron.’ City Manager Robert Layton said that anyone has the right to appeal their taxes, but he added that ‘no doubt that defeats the purpose of the TIF.’”

    The manager’s quote is most directly damaging. In a tax increment financing (TIF) district, the city borrows money to pay for things that directly enrich the developers, in this case Burk and possibly his partners. Then their increased property taxes — taxes they have to pay anyway — are used to repay the borrowed funds. In essence, a TIF district allows developers to benefit exclusively from their property taxes. For everyone else, their property taxes go to fund the city, county, school district, state, fire district, etc. But not so for property in a TIF district.

    This is what is most astonishing about Burk’s action: Having been placed in a rarefied position of receiving many millions in benefits, he still thinks his own taxes are too high.

    Some of Burk’s partners have a history of dealing with the city that is illustrative of their attitudes. In 2008 the Old Town Warren Theater was failing and its owners threatened to close it and leave the city with a huge loss on a TIF district formed for the theater’s benefit. Faced with this threat, the city made a no-interest and low-interest loan to the theater. The theater’s owners included David Wells, who is one of Burk’s partners in the project being considered by the council for the letter of intent.

    Entrepreneurs are not always successful. Business failure, if handled honestly and honorably, is not shameful.

    But when a business is already receiving taxpayer subsidy, and the response to failure is to demand even more from the taxpayer — that is shameful.

    Burk and Wells, by the way, played a role in the WaterWalk project, which has a well-deserved reputation as a failed development. In 2011 the city’s budget includes a loss of slightly over one million dollars for the TIF district that has benefited its owners to the tune of over $41 million.

    Burk has been personally enriched by city hall action before. An example from the same article: “A 2003 lease agreement gave Burk use of the retail strip at the front of the parking garage for $1 a year for the first five years.” Nearly-free property that you can then lease at market rates is a sweet deal.

    These gentlemen have had their bite at the taxpayer-funded apple. Now they want another bite, on their own schedule, without regard to rule of law and the public.

  • Wichita’s letter of intent for Douglas Place LLC

    On Tuesday August 9th the Wichita City Council will consider passing a letter of intent to do something. Then, on September 13th, the council will hold a public hearing on whether the city should do the things contained in the letter of intent. Is this putting the cart before the horse? The agenda packet for the meeting is available at Wichita city council agendas, or an excerpt of the relevant pages is at Letter of Intent for Downtown Incentives for the Douglas Place Project.

    Mayor Carl Brewer
    Manager Robert Layton

    Gentlemen,

    I am concerned about the letter of intent for Douglas Place LLC to be considered at Tuesday’s city council meeting. Without regard to the merits of this project, it seems that endorsing a letter of intent regarding a matter, and then later on holding a public hearing on the very same matter, reduces the public hearing to a meaningless exercise.

    I realize that Tuesday’s item is only to pass a letter of intent, and that the council would still have to pass ordinances implementing the ideas mentioned in the letter. The text of the letter states so: “This letter of intent is subject in all respects to subsequent actions by the City Council to authorize specific incentives outlined herein and does not constitute a binding obligation of the parties … ”

    But prior to this, in the same paragraph, the letter states “… this Letter of Intent with Douglas Place LLC, is submitted in order to set forth the agreement of the parties concerning the principal elements of Douglas Place LLC’s commitment to the City and the City’s intent to provide the incentives outlined herein … ” (emphasis added)

    The city’s intent could not be more clear.

    Mayor and Manager, no matter what information is presented at the September 13 public hearing, and no matter how strong public opinion might be against this project, is there any real likelihood that the council would not proceed with this plan and its incentives, having already passed a letter of intent to do so? I imagine that persuasive arguments will be made that since the city issued a letter of intent, and since the developers may have already taken action based on that letter, it follows that the city is obligated to pass the plan. Otherwise, who would ever vest any meaning in a future letter of intent from this city?

    May I also ask this: What is the need for this letter of intent? If the developer is not going to take action based on the proposed letter, why is it necessary?

    I would urge the city to withdraw consideration of this letter of intent until after a public hearing is held.

  • Wichita city budget savings

    Today the Wichita City Council accepted public input on the 2012 budget. I appeared before the council and provided a few ideas, as follows. The final opportunity for public input is at the council meeting on August 9th.

    In Wichita, we’ve outsourced the mowing of parks. But that’s not all we can do. The city of Sandy Springs, Georgia, outsources nearly everything the city does. It would take me a while to read the list of functions that the city outsources. This is not a small town; its population is over 90,000. We in Wichita can do more with outsourcing as a way to improve service delivery at lower cost.

    Speaking of outsourcing and the proper role of government, I can see no reason why the city should be owning and operating golf courses. We should sell them as soon as we can.

    If we could make that leap — and that’s not a very long leap to make — we could then easily realize that no government, including the city of Wichita, should be in the business of providing art and culture to its citizens. Our governor is leading the way in this regard with the elimination of the Kansas Arts Commission. Besides saving money, when decisions about how much to spend on what types of art are made through the political process, we use the worst possible way of making decisions to decide about something that should be deeply personal.

    Earlier this summer, Mayor Brewer, you said these decisions about allocating arts funds are stressful. You said that no matter what we do, there will be some who feel it’s not right or not fair. “We’d have to wade through all the political aspects of it — who’s associated with who, who’s friends with who.”

    That was very perceptive. Now we need to go one step farther and realize there is an easy solution to this problem: Remove these decisions from the political system and place them in the private sector. When people make their own decisions voluntarily in free markets, no one loses. When we see people spend in ways we don’t agree with, we don’t get mad, because we have no right to be mad at other people for spending their own money in ways they want. There is no stress.

    After we eliminate the Division of Arts & Cultural Services, we can look to the Office of Urban Development and our economic development efforts.

    During the Wichita State of the City Address this year, we were told that the city’s efforts saved 745 jobs and created 435 jobs, for a total impact of 1,180 jobs. To place those numbers in context, we note that the labor force in Wichita is 191,760 persons. This means that the economic development efforts of the City of Wichita affected a number of jobs equivalent to 0.6 percent of the city workforce. This small number of jobs impacted by the city’s economic development initiatives is dwarfed by other economic events.

    Further, we now find examples of how these incentives are often not needed. We’ve recently seen two examples of people pleading to this council for taxpayer assistance, saying that they must have their developer welfare in order for the projects to be viable. When they didn’t get it, somehow the projects were able to proceed.

  • Job creation at young firms declines

    A new report by the Kauffman Foundation holds unsettling information for the future of job growth in the United States. Kauffman has been at the forefront of research regarding entrepreneurship and job formation.

    Previous Kauffman research has emphasized the importance of young firms in productivity growth. Research by Art Hall found that for the period 2000 to 2005, young firms created nearly all the net job growth in Kansas.

    So young firms — these are new firms, and while usually small, the category is not the same as small businesses in general — are important drivers of productivity and job growth. That’s why the recent conclusion from Kauffman in its report Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation is troubling: “The United States appears to be suffering from a long-term leak in job creation that pre-dates the recession and has the potential to persist for an unknown time. The heart of the problem is a pullback by newly created businesses, the economy’s most critical source of job creation, which are generating substantially fewer jobs than one would expect based on past experience. … This trend has only worsened since the onset of the most recent recession. The cohort of firms started in 2009, for example, is on track to contribute close to a million jobs less in its first five to ten years than historical averages.”

    The report mentions two assumptions that are commonly made regarding employment that the authors believe are incorrect:

    First, policymakers’ focus on big changes in employment because of events such as a new manufacturing plant or the recruitment of a business to a community ignore the more important fact that our jobs outlook will be driven more by the collective decisions of the millions of young and small businesses whose changing employment patterns are not as easy to see or influence. Second, it is just as easy to be deluded into thinking that the jobs problem will be solved by growth in the number of the self-employed.

    The importance of young firms is vital to formulating Kansas economic development policy. Kansas Governor Sam Brownback has incorporated some of the ideas of economic dynamism in his economic plan released in February. The idea of dynamism, as developed by Dr. Art Hall, is that economic development is best pursued by creating a level playing field where as much business experimentation as possible can take place. The marketplace will sort out the best firms. The idea that government economic development agencies can select which firms should receive special treatment is sure to fail. It is failing.

    While the governor’s plan promotes the idea of economic dynamism, some of his actual policies, such as retaining a multi-million dollar slush fund for economic development, are contrary to the free marketplace of business experimentation and letting markets pick winning firms.

    At the City of Wichita, economic development policy is tracking on an even worse direction. Among city hall bureaucrats and city council members, there is not a single person who appears to understand the importance of free markets and capitalism except for one: council member Michael O’Donnell, who represents district 4 (south and southwest Wichita).

    The policy of Wichita is that of explicit crony capitalism, with city leaders believing they have the wisdom to develop policies that recognize which firms are worthy of taxpayer support. And if they want to grant subsidies to firms that don’t meet policies, they find exceptions or write new policies. Elected officials like Wichita Mayor Carl Brewer and city council member Jeff Longwell lust for more tools in the economic development toolbox.

    At the Sedgwick County Commission, two of the five members — Karl Peterjohn and Richard Ranzau understand the importance of free markets for economic development. But the city has a much larger role in targeted incentives for economic development, as it is the source of tax increment financing districts, industrial revenue bonds, economic development exemptions, community improvement districts, and other harmful forms on economic interventionism.

  • Despite allegations, Wichita’s Dave Burk remains favored

    As Wichita proceeds with the redevelopment of its downtown, one developer seems to be on the cutting edge of harvesting corporate welfare — despite his past behavior. Last year this person, Dave Burk of Marketplace Properties, acted in a way the Wichita Eagle described as deceptive in order to reduce his property taxes. Yet, Burk remains a favored developer at city hall, and he’s soon going to ask taxpayers to pay higher taxes for his benefit. These are the same taxes he himself doesn’t like to pay. The following article from February 2010 explains.

    Today’s Wichita Eagle contains a story about a well-known Wichita real estate developer that, while shocking, shouldn’t really be all that unexpected.

    The opening sentence of the article (Developer won tax appeal on city site) tells us most of what we need to know: “Downtown Wichita’s leading developer, David Burk, represented himself as an agent of the city — without the city’s knowledge or consent — to cut his taxes on publicly owned property he leases in the Old Town Cinema Plaza, according to court records and the city attorney.”

    Some might say it’s not surprising that Burk represented himself in the way the Eagle article reports. When a person’s been on the receiving end of so much city hall largess, it’s an occupational hazard.

    And when you’ve been the beneficiary of so much Wichita taxpayer money, you might even begin to think that you shouldn’t have to pay so much tax anymore.

    At the state level, you might seek over a million dollars of taxpayer money to help you renovate an apartment building.

    Burk has certainly laid the groundwork, at least locally. A registered Republican voter, Burk regularly stocks the campaign coffers of Wichita city council members with contributions. These contributions — at least for city council candidates — are apparently made without regard to the political leanings of the candidates. How else can we explain recent contributions made to two city council members who are decidedly left of center: Lavonta Williams and Janet Miller? Burk and his wife made contributions to their campaigns in the maximum amount allowed by law.

    This is especially puzzling in light of Burk’s contributions to campaigns at the federal level. There, a search at the Federal Election Commission shows a single contribution of $250 to Todd Tiahrt in 2005.

    It’s quite incongruous that someone would contribute to Tiahrt, Williams, and Miller. Except Williams and Miller can — and have — cast votes that directly enrich Burk. Politicians at the federal level don’t have the same ability to do that as do Wichita city council members. Well, at least not considering Wichita city business.

    So which is it: is Burk a believer in Republican principles, a believer in good government, or someone who knows where his next taxpayer handout will come from?

    Burk’s enablers — these include Wichita’s lobbyist Dale Goter, Wichita Downtown Development Corporation president Jeff Fluhr and chairman Larry Weber, Wichita City Manager Robert Layton, Wichita economic development chief Allen Bell, and most importantly Wichita Mayor Carl Brewer and various city council members — now have to decide if they want to continue in their efforts to enrich Burk. Continuing to do so will harm their reputations. The elected officials, should they run for office again, will have to explain their actions to voters.

    At the state level, the bill that will enrich Burk will likely be voted on in the Kansas Senate this week. Then, similar action may take place in the Kansas House of Representatives. Let’s hope they read the Wichita Eagle in Topeka.

  • Clusters as economic development in Kansas

    Is the promotion by Kansas government of industry clusters as economic development good for the future of Kansas?

    The formula for creating these clusters is always the same: Pick a hot industry, build a technology park next to a research university, provide incentives for businesses to relocate, add some venture capital and then watch the magic happen. But, as I have noted before, the magic never happens. Most of the top-down cluster-development projects in the United States and around the world have died a slow death in relative obscurity. Politicians who held the press conferences to claim credit for advancing science and technology are long gone. Management consultants have cashed in their big checks. Real estate barons have reaped fortunes, and taxpayers are left holding the bag.

    The author is Vivek Wadhwa, writing in the Washington Post article Industry clusters: The modern-day snake oil.

    Wadwha is criticizing Harvard professor Michael Porter’s cluster theory, which he says has to do with how “geographic concentrations of interconnected companies, specialized suppliers, and service providers gave certain industries a productivity and cost advantage.” Wardwha describes the magical potential: “[Porter’s] legions of followers postulated that by bringing these ingredients together into a ‘cluster,’ regions could artificially ferment innovation. They just needed to build the right infrastructure and bring together chosen industries.”

    It’s something that Wichita and Kansas has embraced. We hear — continually — about the importance of the aviation cluster in south-central Kansas and its importance to our state’s economy. Talk of this becomes particularly intense each time the major aviation companies and their suppliers approach local governments for handouts in the form of economic development incentives.

    Wichita Mayor Carl Brewer wants to create a cluster of wind energy companies in and around Wichita, and he has traveled as far as Germany in this quest.

    Kansas Governor Sam Brownback has embraced the cluster concept. In June, Governor Brownback promoted one such cluster, saying “As a state, we must formulate strategies to achieve a successful economic cluster around the animal health sector.”

    Other clusters the state wants to promote include life sciences, tourism, and, as aleady mentioned, aviation. Brownback has held summits on most of these topics. A presentation titled Kansas Competitiveness: State and Cluster Economic Performance, billed as “Prepared for Governor Sam Brownback” in February by Harvard’s Porter analyzes Kansas and its business clusters.

    Evidence that backs up Wardwha’s criticism of clusters is found in the recent paper When local interaction does not suffice: Sources of firm innovation in urban Norway (Rune Dahl Fitjar and Andrés Rodríguez-Pose). Summarizing it, Wardwha wrote: “The study found that regional and national clusters are ‘irrelevant for innovation.’”

    In particular, the paper states in its introduction: “The results indicate that firm innovation in urban Norway is mainly driven by global pipelines, rather than local interaction. The most innovative — both in terms of basic product innovation and radical product and process innovation — firms are those with a greater diversity of international partners. Local and even national interaction seems to be irrelevant for innovation.”

    And from the conclusion: “Recent analyses of clusters and agglomeration have looked for the sources of innovation of firms in the combination of the multiple interactions of firms within the region and in the connections of certain firms in the region with the outside world. The story emerging was one of complementarity. Local interaction took place without much effort through frequent face-to-face interaction in high trust environments, while global pipelines implied a conscious and often costly attempt by individual firms to engage with external actors in order to generate greater innovation and reap economic benefits. … There is a dearth of analyses that have systematically addressed whether the complementarity of these two types of interaction holds across a large number of firms. This has been the main aim of this paper, which has looked at the sources of innovation of 1604 firms across the five main urban agglomerations in Norway. The picture which emerges from the analysis does not conform to that generally stemming from the theoretical literature and from case-studies.”

    Is the promotion and pursuit of business and industry clusters a misguided effort by Kansas politicians like Brewer and Brownback and the state’s economic development officials? To the extent that promotion of certain industries means the state is using a top-down, “active investor” approach to economic development — rather than being the caretaker of a competitive platform that encourages as much business experimentation as possible — yes, it is misguided. We run the risk of all the problems described in the opening quotation appearing in this article.

  • For Wichita, Save-A-Lot teaches a lesson

    The announcement that a Save-A-Lot grocery store will proceed — contrary to the claims of developers and city staff who rely on their information — should provide a lesson that yes, economic development in Wichita can and will happen without public assistance. Additionally, examination of the public hearing for this matter before the Wichita City Council last September should teach us to be very cautious in relying on the claims of people who have a huge economic stake in obtaining public assistance.

    At a city council public hearing on both the Community Improvement District and Tax Increment financing district last September, developer Rob Snyder sought public assistance in the form of a tax increment financing district (TIF) and a Community Improvement District (CID). Over a period of years, the two forms of subsidy were estimated to be worth $900,000 to the developer. The project’s total cost was presented as slightly over $2 million.

    (By the way, in its recent coverage of this matter, the Wichita Eagle has an incorrect recording of events. The Eagle reported, referring to the Wichita City Council and Sedgwick County Commission: “The boards ultimately rejected the financing, despite support from some officials.” Actually, the city council unanimously approved both the CID and TIF. Then, the county commission exercised its statutory prerogative to veto the formation of a TIF district. The commission has no authority to intervene in the formation of CIDs.)

    As part of his presentation to the council Allen Bell, Wichita’s Director of Urban Development explained that to be eligible for TIF, developers must demonstrate a “gap,” that is, an analytical finding that conventional financing is not sufficient for the project, and public assistance is required: “We’ve done that. We know, for example, from the developer’s perspective in terms of how much they will make in lease payments from the Save-A-Lot operator, how much that is, and how much debt that will support, and how much funds the developer can raise personally for this project. That has, in fact, left a gap, and these numbers that you’ve seen today reflect what that gap is.”

    Snyder told the council that without the public assistance, there will be no grocery store: “We have researched every possible way, how do we make this project work with the existing funding that’s available to us. … We might as well say if for some reason we can’t figure out how to get this funding to go through, there won’t be a shopping center over there.”

    Greg Ferris, a former city council member who lobbies local government on behalf of clients, was adamant in his insistence that the grocery store could not be built without public financing: “There will not be a building on that corner if this is not passed today. … That new building would not be built. I absolutely can tell you that because we have spent months … trying to figure out a way to finance a project in that area. A grocery store is not going to move into the Planeview area to service those people just like they didn’t move into the area at 13th and Grove until the city subsidized that with several hundred thousand dollars of city money. … What you’ve heard is misinformation. … This project just won’t happen and the people of Planeview will suffer.”

    Now, we see that the financing gap has been closed, and without government assistance. The claims that a grocery store can’t be built in that neighborhood without welfare for developers have been demonstrated to be false.

    Wichita Mayor Carl Brewer has referred to those who oppose government intervention like TIF and CID as “naysayers.” Here’s an example where free markets, capitalism, and economic freedom have overcome Wichita’s true naysayers: those who say it can’t happen without government intervention.

    A message from John Todd: “This Wednesday (June 8th) at 2:00 pm there will be a groundbreaking ceremony for the new Planeview Save-A-Lot grocery store located on the southeast corner of George Washington Boulevard and Pawnee. This project was initially proposed with $900,000 in CID and TIF public subsidies for the developer that were approved by the Wichita City Council last fall. When the Sedgwick County Commission rejected giving the county’s portion of the TIF generated real estate taxes to the developer and away from the public treasury, the project appeared to be dead. The Wichita Eagle recently reported that the Save-A-Lot grocery store owner has now decided to develop the project on his own with his own financing. Perhaps it is appropriate for those citizens who appreciate businesses who develop market-driven projects in Wichita and Sedgwick County on their own nickel to show their appreciation to the grocery store owner/developer by attending the groundbreaking ceremony and personally thanking him.”