Voice For Liberty

Tag: Carl Brewer

Wichita Mayor Carl Brewer

  • Hawker Beechcraft to receive subsidy from Wichita City Council

    Tomorrow the Wichita City Council will very likely live up to its part in a deal to award $2.5 million in subsidy to aircraft manufacturer Hawker Beechcraft. Sedgwick County will also be called on to contribute the same amount, and the state has agreed to chip in $40 million.

    Undoubtedly the occasion will be used by Wichita Mayor Carl Brewer and others to crow about the city’s effort to retain Hawker Beechcraft in the face of an offer from the State of Louisiana. While our local governments got what they wanted in this instance, it nonetheless provides a lesson in the futility of corporate welfare as economic development policy: Someone is usually willing to pay more. We would be much better off if we start transforming Kansas to a state where all companies are nurtured, not by bureaucratic and political oversight and government handouts, but by a low taxing and spending environment, and a reasonable regulatory regime.

    I use “got what they wanted” rather than “success,” as there are important questions surrounding the wisdom of this deal. First, there is some evidence that Hawker may need to shrink substantially in order to survive, handouts notwithstanding. See The Teetering State of Hawker Beechcraft. Besides indicting Hawker for a “bloated and inefficient production process,” the report claims the company’s pension plan is underfunded by $296 million.

    Some have called into question the validity of the competing offer. Louisiana had purportedly offered up to $400 million to attract Hawker’s 4,000 jobs. This is a cost of $100,000 per job, a very costly number, but some states have paid even more. If genuine, Kansas got a deal at only $11,250 per job.

    But: These are retained jobs, not new jobs. H. Edward Flentje explained in his analysis Brinkmanship with jobs: “But the Hawker Beechcraft deal is different, focused on saving existing jobs, not creating new jobs, and the result diverts millions in limited taxpayer funds, primarily state income tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.”

    Flentje went on to explain the new economic development policy in Kansas and the precedent the Hawker deal sets: “The barn door has been flung open as well over 500 Kansas businesses are now eligible for state assistance, a tenfold increase over the year 2000, thanks to lawmakers. The expanding game of brinkmanship with jobs leaves state and local officials more vulnerable and can be expected to divert millions more in state tax revenues from state government’s primary obligations in response to the demands of companies that choose to play.”

    The major problem, however, is that economic development policy in Wichita and Kansas is not moving in the right direction. We place large bets on old, established industry, when we should be looking to foster dynamism and young companies as the engine to propel the Kansas economy.

    Somewhere in Wichita or Kansas there is a small, new, unknown company that has half a dozen or so employees — maybe more, maybe less — that is working on some innovation. If we’re lucky, we have many such companies. These companies could be working on a new technology, manufacturing process, computer software, video game, internet site, food processing technology, retail concept, chemical process, restaurant idea, manufacturing methodology, agricultural process, airplane wing — we just don’t know. Many will fail. But some will succeed, and a few will, hopefully, succeed in a big way.

    But these small startup companies may not fit in to the economic development programs the city and state have. Being of entrepreneurial spirit, these people may not even think of looking to government for economic development assistance.

    Any of these new and now-small companies could become the next Microsoft, Google, Home Depot, or Pizza Hut. We just don’t know which — and it’s impossible for anyone, government bureaucrats included — to know. But these companies, when in startup phase, struggle to pay the taxes that large companies are able to escape. Being small, they may also be disproportionally impacted by regulation. They don’t qualify for the economic development programs that larger companies benefit from, and they probably couldn’t afford to devote the time and effort to apply.

    It’s not necessarily the case that a small startup aviation company is competing directly in aircraft sales with Hawker Beechcraft and is handicapped by the larger company’s government handouts. But these two companies could be competing for the same employees, for example, and that puts the smaller, unsubsidized company at a disadvantage.

    But having decided to pursue a policy of giving in to the demands of companies who threaten to leave or build elsewhere, we have a question to answer: How can we identify which companies are deserving of government subsidy? Which companies should have their tax burden softened, their treasury fattened, at the expense of others? Allocating resources and deciding what to do in the face of uncertainty is the crux of entrepreneurship. It’s something that government is not equipped to do, as its incentives and motivations are all wrong.

    For politicians, the prime motivation is to be reelected. It is rare that the time horizon of a politician extends beyond the next election. For bureaucrats, the motivation is to expand their sphere of influence and power. Neither of these motivations are compatible with entrepreneurship. Some are not compatible in any way with running a business. For example, a business firm looks at its employees as a cost that must be managed and controlled if a profit is to be made and the firm survive. But to government, spending on employees is a social benefit, and one that is paid for by someone else.

    The deal with Hawker continues and expands the same process that Kansas and other states have been using for economic development. Therein lies the problem: Kansas’ approach to economic development is piecemeal. We respond to problems, as in the case of Hawker. But the state’s response gives more companies the incentive to come up with their own “problems” that require state intervention.

    In order to succeed, Kansas needs to embrace dynamism in its approach to economic development. For more on this see Kansas economic growth policy should embrace dynamism and Embracing Dynamism: The Next Phase in Kansas Economic Development Policy.

    Deals like this with Hawker move Kansas towards towards more state-controlled economic development and away from creating a dynamic economy. We prop up the old and declining at the expense of the new and vibrant.

    And, we don’t learn. At the same meeting the Wichita City Council is considering approval of its policies for awarding economic development subsidy in downtown — another example of the very type of government planning that stifles economic dynamism and replaces it with cronyism.

  • Wichita elections a blow for economic freedom

    Results from yesterday’s elections for Wichita mayor and city council members were in contrast to the message voters have sent in recent state and national races. There, voters expressed a preference for smaller government, less government spending, and less debt. For these Wichita city offices, however, voters — with one exception — voted for those who promised more government intervention and less economic freedom.

    The winning candidates, of course, didn’t mention the loss of economic freedom in their campaign pitches. But their promise to grow government means just that. Yes, they promise to carefully scrutinize city spending and incentives on a case-by-case basis, insisting they are wise enough and knowledgeable enough to determine which projects are worthy of taxpayer support, and which aren’t. They all say that, always.

    The winners in yesterday’s election — besides the officeholders — are those who will benefit from having a compliant and emboldened mayor and like-minded council members in office as they seek to earn their fortunes at city hall at taxpayer expense. We see these people and their names on the campaign donation reports of many of the successful candidates. Their interest is not good government, but personal enrichment. They generally contribute to all city council members regardless of political stance. It’s difficult to see how someone who has a consistent political ideology they believe in could contribute to all city council members. But they do.

    The incumbents who won re-election — Mayor Carl Brewer and council member and Vice Mayor Jeff Longwell — have already proven themselves to be totally captured by these special interests. Now the new council members have a decision to make: Do they stand up for limited government and economic freedom in Wichita, or do they join the mayor and other council members on the side of the crony capitalists?

    I’ll be surprised if any council member — excepting Michael O’Donnell — ever votes against any of the projects our city’s crony capitalists bring forward.

    This is not a happy day for the future of Wichita. While today’s Wichita Eagle editorial wrote of the mayor’s “enthusiasm for Wichita and optimism about its future,” we need to question the assumptions underlying his sentiments. Is it “optimistic” when a city feels it must dish out corporate welfare to any company that hints of leaving town for purportedly greener pastures? Is it “enthusiasm” when a government that doesn’t trust its citizens to build, work, and live where they want — instead pushing through a heavy-handed, taxpayer-funded downtown plan?

    The takeaway is that it’s easy for people to succumb to the mayor’s false promise of economic prosperity through government intervention. The message of economic freedom, of free people conducting their affairs with minimal interference, is more difficult to believe in for many people. Unfortunately, Wichita does not have a newspaper that believes in economic freedom and limited government, preferring instead the big-government approach to managing a city and its economy. Unlike in other recent elections, this time voters largely followed recommendations made by the Wichita Eagle editorial board.

    Going forward, we can expect a proposal for a tax increase of some sort soon. Some desire a citywide sales tax for the purposes of economic development. These ideas, along with any others expanding the reach and power of city government, will probably not face much resistance from the new city council.

  • Education gap on Wichita City Council

    Before Jim Skelton left the council in January, none of the four men serving on the Wichita City Council had completed a college degree. The three women serving on the council set a better example, with all three holding college degrees.

    Of the candidates running in next week’s election for four council seats and the office of mayor, less than half hold college degrees.

    Is it necessary to complete college in order to serve in an office like mayor or city council? Apparently none of the four men who held these offices without a degree thought so. The two running to retain their present positions — Mayor Carl Brewer and council member Jeff Longwell (district 5, west and northwest Wichita) — evidently don’t think so, or they would not be running again.

    But we tell young people that college holds the key to success. We encourage schoolchildren to consider college and to take a rigorous high school curriculum in order to prepare for it. We encourage families to save for college. Our region’s economic development agency promotes the number of people with college or advanced degrees. We promote our colleges and universities as a factor that distinguishes Wichita. We hope that our elected officials will set an example we want young people to follow.

    Once in office, we ask our city elected officials to attempt to grasp and understand complex sets of financial data, working with a budget of about half a billion dollars for the City of Wichita. We hope that they will be able to consider large and weighty issues such as the role of government in a free society. Members of the professional management staff — bureaucrats — that manage the city, county, and state are generally required to hold college degrees.

    The irony is that elected officials often are highly reliant on the bureaucratic staff for information, data, and advice, and this professional bureaucracy is often highly educated. Does this imbalance create problems?

    Elected officials compared to regular people

    Amazingly, it turns out that elected officials, as a group, are less knowledgeable about civics than the general population. That’s the finding of Intercollegiate Studies Institute, which surveyed Americans and their knowledge of civics in 2008. After analyzing the data, ISI concluded: “Simply put, the more you know about American government, history, and economics the less likely you are to pursue and win elective office.”

    Related: Local elections, qualifications of Wichita’s elected officials.

  • TIF, a Wichita ‘tool,’ might be on the way out in California

    In the Wall Street Journal, Steven Greenhut writes about California’s redevelopment agencies, which are very similar to tax increment financing districts (TIF) in Kansas. California governor Jerry Brown has proposed ending these agencies. Local government officials, who are beneficiaries of the agencies, are pushing back. A controller’s report in California finds that the agencies are a “source of waste and governmental abuse — not a generator of jobs and economic growth.” This is consistent with other economic research on TIF districts.

    Greenhut correctly diagnosis the problem with these agencies or districts: “Redevelopment has attracted the Brown administration’s attention for an obvious reason: The more aggressive cities have become in using this ‘tool,’ the more they divert tax dollars from traditional public services like schools, fire-fighting and police services.” The use of the term “tool” evokes the rhetoric of Wichita city council members, who are wishing for more “tools in the toolbox.”

    As part of its approval of the Goody Clancy plan for the revitalization of downtown Wichita, Susan Estes asked the city council to formally disavow the use of eminent domain for the purposes of transferring property from one person to another. While the city says it does not intend to use the power of eminent domain for this purpose, the reluctance of the council to add this provision to the plan means that it is held in reserve. Mayor Carl Brewer believes it is “one of the tools that is available to the city.” And when perceived to be needed, the power of eminent domain is usually too powerful to resist.

    TIF district money is expected to be a key component of the public financing contribution to downtown Wichita redevelopment.

    Greenhut concludes: “While economic development and local control are crucial issues, it’s hard to understand why any Republican would believe that a regime of government planning and subsidy is the best way to achieve those goals. They should be standing up against the abuses of property rights and the fiscal irresponsibility inherent in the redevelopment process and championing market-based alternatives to urban improvement — even if it means defending a proposal from a Democratic governor they often disagree with.” Or here in Wichita, a liberal Democratic mayor who champions the centralized government planning of the Wichita Downtown Development Corporation.

    Greenhut’s most recent book is Plunder: How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.

    Jerry Brown’s Good Deed Gets Punished

    California’s governor wants to close his state’s redevelopment agencies, which abuse property rights and breed dependency among city governments.

    By Steven Greenhut

    Forced to choose between funding public schools and subsidizing ritzy golf courses, many California officials prefer the latter. That’s become painfully clear in the past few weeks as Golden State politicians have fiercely opposed Gov. Jerry Brown’s plan to shave $1.7 billion from the state’s budget deficit by shuttering California’s 400 redevelopment agencies.

    The roots of this story go back to 1945, when the California legislature allowed cities and counties to form these redevelopment agencies. Their purpose, at least in theory, was to fight urban blight. Once public officials deem an area blighted, redevelopment agencies can use eminent domain to clear old properties and sell bonds to pay for improvements.

    To pay off the bonds, the agencies gobble up any subsequent increase in tax revenue — what the state calls the “tax increment.” In addition, a portion of the sales taxes generated by the new retail and commercial centers go into city, not state, coffers. That’s the main reason redevelopment agencies are popular among local politicians, Republican and Democratic alike. (Plus, they allow pols to reward favored corporations and developers.)

    Continue reading at the Wall Street Journal (subscription required) or Pacific Research Institute (no subscription required).

  • Wichita Eagle endorsements out of step with Wichita

    Yesterday’s primary election for Wichita city and school board races revealed a Wichita Eagle editorial board increasingly out of step with voters, who followed several of the board’s recommendations but also voted strongly against several Eagle-endorsed candidates. It’s not the first time this has happened.

    The endorsements are not the Eagle’s prediction of who will win, but instead are “recommendations as information to consider as you make up your own minds about the candidates.”

    For the race for Wichita mayor, voters strongly followed the Eagle’s endorsement of incumbent Carl Brewer. That contest attracted several challengers, but none with the stature to raise the money necessary to seriously challenge an incumbent in a city-wide election.

    For city council district 2, the Eagle editorial board strongly endorsed Steve Harris, calling him “best choice by far.” Pete Meitzner was mentioned as a credible candidate. But the winner of the election was Charlie Stevens, who the Eagle dismissed as an also-ran. The Eagle’s recommended candidate Harris finished in third place behind Meitzner, although the margin is small at 1,302 votes to 1,292 votes.

    For city council district 3, the editorial board recommended James Clendenin, and he won. Its second choice of Hoyt Hillman finished in third place behind Mark Geitzen, who will advance to the general election with Clendenin. Geitzen, too, was characterized by the Eagle as an also-ran.

    In city council district 4, the Eagle named June Bailey the “standout candidate.” She finished in third place behind Joshua Blick and Michael O’Donnell, the latter placed by the Eagle in the also-ran category.

    For the at-large seat for USD 259, the Wichita public school district, the Eagle recommend Sheril Logan, and she won.

    A distinguishing feature of the candidates the Eagle endorsed for city offices is their support for government intervention in the local economy through the use of economic development incentives and outright subsidy. (But always to be used prudently, of course, with scrutiny and discretion.) In particular, district 2 council candidate Harris embraced government intervention and was endorsed by several of Wichita’s most prominent crony capitalists. Other candidates like Clendenin and Bailey look favorably on big government, too.

    While Clendenin won in his district, voters preferred other candidates to Harris and Bailey. In particular, Stevens in district 2, Gietzen in district 3, and O’Donnell in district 4 have an explicit free-market perspective in their messages. The Wichita Eagle editorial board believes in all things opposite — crony capitalism, large-scale interventionism in the name of social engineering, and reliance on government rather than free people to solve problems and create prosperity — so it’s no surprise the names of these three candidates and their positions were buried. The Eagle’s political and economic preferences, however, are increasingly out of step with what Wichita voters want.

  • Kansas and Wichita quick takes: Monday February 21, 2011

    Kansas legislature website. Over the weekend a new version of the website for the Kansas Legislature appeared. It has a new design over what’s been available for the last six weeks or so. It will take a while to shake out the new site, but here are a few observations: Finally, pdf documents are displayed in a standard — that is to say plain — method that should be usable on devices of all types. … Attempting a search produces a “page not found” error. … There is no mobile version that works on devices like an Iphone, which is a popular thing to have these days. … There is a link named “A/V Live” which is not active at this time, but points to the goal of having committee testimony broadcast on the website. Here’s a better idea: almost all conferees that testify before committees have written testimony that is provided to committee members. Make that testimony available to the people of Kansas. This could be done fairly easily — and inexpensively — and is more useful. … The Wichita Eagle has some reporting today about the troubles with the new site. But the biggest question is: why is this work being done during the legislative session? Why not do it from June through December when the legislature is not in session and demand for the site is less? Why wasn’t the old site left running while the new site was built?

    Legislators on Governor’s plan. At a meeting with Wichita-area legislators on Saturday, some spoke on Governor Brownback’s economic development plan. As with much of the news media, legislators seem mostly oriented on the reorganization of some agencies rather than the call for an end — or at least reduction — of targeted incentives and subsidies. Some legislators emphasized that we are competing with other states for jobs. It will be difficult for elected officials to give up the arms race of offering subsidy to companies to come to Kansas, or as we see in the Hawker Beechcraft deal, simply agree to remain in Kansas, even with a smaller number of jobs. … The governor’s plan still contains a slush fund for attracting jobs to Kansas, which should keep the big-government fans happy for a while.

    Could Wisconsin demonstrations come to Kansas? At the meeting with legislators, I asked if the demonstrations taking place in Wisconsin could be seen in Kansas. There, state employees are protesting the governor’s proposal to ask them to pay more for health insurance and pensions. Also proposed are measures that would reduce the power of the state workers union. Representative Jim Ward said: “I don’t think it would happen in Kansas.” While people in Kansas are passionate, we have a tradition of civility, he added. … The Kansas public employee retirement system is among the most underfunded and will probably require someone to pay more. The process of selecting who has to pay — employees or taxpayers — is likely to be contentious.

    Wichita trash. It seems likely that Wichitans will see another trash plan proposed, according to Wichita Eagle reporting. The urge by government bureaucrats like city manager Robert Layton to create a solution to a problem that doesn’t exist is compelling, it seems. While some Wichitans are paying much more than others for trash service, the publicity generated by the Eagle reporting has informed everyone as to how much trash service should cost. … Most candidates for city council seem to be against city involvement in trash service.

    Wichita mayoral forum didn’t go well. According to reporting from KWCH, a forum for candidates for Wichita mayor didn’t go well: “Wichita residents came to a political forum to listen to political issues, but left shaking their heads.” Continuing in the story: “Some say they weren’t impressed with incumbent Carl Brewer either. ‘The Mayor was just relying on his name and everyone else just had wild views,’ said one listener. ‘The Mayor basically knew he wasn’t going anywhere,’ said another listener. Onlookers say a meeting that was supposed to educate them on important issues, just left them with a bad feeling about the political future of Wichita. ‘They just proved why I shouldn’t vote for them in my opinion,’ said Graham.”

    Wichita City Council this week. The Wichita City Council will not meet this week, as it’s a Tuesday after a holiday. Most private sector workers might have trouble remembering there is a holiday today, but not so for the city council.

    Sedgwick County commission this week. At Wednesday’s meeting, the Sedgwick County Commission has several important items on its agenda. The commission will be asked to adopt Project Downtown: The Master Plan for Wichita, November 2010 as an amendment to the Wichita-Sedgwick County Comprehensive Plan. This is the plan for the revitalization of downtown Wichita prepared by planning firm Goody Clancy. This item is not a public hearing, and it is not known how much time commission chair Dave Unruh, who assumed that position in January, will allow for citizens to address the commission. Previous chairs Karl Peterjohn and Kelly Parks — as well as current Wichita Mayor Carl Brewer — always asked if citizens wanted to speak on an item and were generous with time allotted. … Also Jeremy Hill of Wichita State University Center for Economic Development and Business Research will make a presentation. CEDBR has been criticized for for a report it produced on the economic impact of the Affordable Airfares program. That report was produced before Hill started his tenure at CEDBR. … The appraiser will report on real estate valuation trends in Sedgwick County.

  • Kansas governor releases economic development plan

    Yesterday Kansas Governor Sam Brownback released his plan for economic growth and development in Kansas. Drawing on free market principles and relying less on government intervention, the plan calls for a departure from present practices, especially the heavy-handed methods cities like Wichita use.

    Brownback’s plan would transform Kansas’ approach to economic development. Currently the approach of the state and most of its cities and counties is to go after the “big deal.” This typically lures a large employer to Kansas through the use of various incentives. Or, as we have seen recently with the Hawker Beechcraft deal, incentives may be used to keep a company from leaving Kansas, even if that company is downsizing.

    This last deal is especially troubling for the state’s future. Wichita State University professor H. Edward Flentje recently sounded a note of caution on deals like Hawker Beechcraft: “The result diverts millions in limited taxpayer funds, primarily state income-tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.” Flentje wrote that there are more than 500 Kansas businesses now eligible for state assistance just like Hawker.

    It is breaking this cycle of dependency on the “deal” that the governor’s plan calls for. Instead of the state targeting industries or specific companies, Kansas should seek to establish a strategy that is simple, fair, and of high capacity. I believe that for this strategy to work, Kansas cities and counties will need to follow the plan, too.

    Productivity and growth, not just jobs

    Right away the governor’s plan calls for prosperity through productivity: “A sound economic development process enhances prosperity through enhanced business-sector productivity.” This is in contrast to the economic development efforts of most governments, including that of the City of Wichita. There, the focus is on jobs, with capital investment a lesser factor.

    The plan identifies two fundamental roles for government to play. First, the state should create an environment that “motivates as much risk-taking and competition as possible in the context of a ‘level playing field.’” Second, it must do this effectively and efficiently, leaving as many resources in the private sector as possible.

    Key concepts in the plan are risk taking, economic competition, business experimentation, and trial and error. These activities are important, the plan says, because they will lead to increased economic productivity, which is what produces prosperity for Kansans. This is what the economic development policies of Kansas need to promote, says the plan: “The more that Kansas’ economic development environment motivates each entrepreneur and business to engage in the trial and error process, the more the Kansas economy will generate economic opportunity for Kansas families.”

    But the state’s policies don’t promote this environment: “Yet Kansas economic development policy tends to work as if only a small sub-set of entrepreneurs or businesses matter.” Current policies attempt to find the right technologies and companies for the state to invest economic development resources in. The criteria for determining winners are often job count and wage levels. Winners are rewarded at the expense of non-winners.

    Instead of this approach — which is common in most states and cities — the plan recommends a different policy: “Dedicate human and financial resources to promoting maximum experimentation through volume and diversity.” Also: “Establish stable policies that treat all investments and businesses equally, thereby liberating resources from the costly and economically dubious task of targeting.”

    The plan is critical of selective efforts and in favor of broad-based strategy, especially in taxation: “A more uniform business tax policy that treats all businesses equally rather than the current set of rules and laws that give great benefit to a few (through heavily bureaucratic programs) and zero benefit to many.”

    The plan emphasizes promoting as much diversity as possible. The current strategy of attracting large employers is not wise: “In fact, research indicates that economic development strategies based on the recruitment of large employers tends to have negative effects over the long run. One of the best predictors of future economic growth for metropolitan areas is the average employment size of business establishments: larger average sizes are typically associated with slower future growth.”

    Measures of success of economic development efforts include jobs, although the plan cautions that “job creation is a result that derives from profitable business births and expansions.” Other factors are income growth, population density and migration, productivity growth, capital investment, and gross business starts and expansions.

    The plan creates a council of economic advisers and coordinate the actions of seven different agencies that work in the field of economic development. It also calls for funding of certain university research programs.

    The plan is not totally free-market in its approach. It retains PEAK, which lets companies that meet criteria retain their employees’ withholding taxes. But are we certain we can identify which companies are worthy of this subsidy? There will also be a fund that can be used to “close a deal on a prime economic growth opportunity.” Brownback’s “rural opportunity zones” are also included, which offer income tax breaks and student loan paydowns for people moving into counties that have experienced large population decline.

    Cities like Wichita will need to change, adapt

    The governor’s plan calls for economic development strategies very different from what most cities and counties pursue. As an example, at the most recent meeting of the Wichita City Council, the council approved forgivable loan agreements for two companies that are adding jobs. These loans amount to grants of money, providing that the companies meet specified employment goals. The loans were not the only form of subsidy. One company is slated to receive forgiveness from paying property tax for up to ten years, and both received grants and tax credits from the state under existing economic development programs.

    At the meeting, Mayor Carl Brewer offered a defense of the city’s economic development policy (click here for video), saying that if Wichita doesn’t offer targeted incentives, other cities will. “If we don’t stay in the game and do whatever is necessary to be able to protect our jobs, protect our citizens, then we’re going to lose out on this entire thing. Times are changing. 20 years ago individuals weren’t even thinking about providing incentives to various different corporations. And now it appears that every place that we go, we seeing that everyone’s doing it. … That’s a reality of things. The dynamics and the field that we all have to play on is continuing to change.” He urged his critics to look at the larger picture, rather than just the action the council is taking today.

    Council member Janet Miller also defended the city’s policy, saying that companies either qualify for incentives or they don’t, based on established criteria. She cited Wichita State University figures that support the incentives as providing an economic return to the city.

    If cities continue to offer targeted incentives that are at odds with the governor’s plan, what will be the outcome? It doesn’t seem as though the two approaches are compatible. Many of the programs that cities use to offer targeted incentives — industrial revenue bonds (IRB), tax increment financing (TIF), community improvement districts (CID), and others — are creations of the legislature. It and the governor have the power to control their use — if there is political will to do so.

  • Wichita city manager Robert Layton on the air

    Yesterday Wichita city manager Robert Layton appeared as a guest on the Gene Countryman Show on KNSS Radio in Wichita and spoke on a number of topics brought up by the host and callers.

    Several times host Gene Countryman referred to Wichita theater owner Bill Warren and his assessment of Layton as “best city manager the city’s ever had,” calling Warren’s assessment “high praise.” Warren has good reason to heap praise on Layton. He and his partners have benefited handsomely from actions the Wichita City Council has taken at Layton’s recommendation. Most recently Warren escaped paying property taxes on a new movie theater, and negotiated a deal in where the property tax on an existing property will increase at an agreed-upon rate that is likely lower than what would happen otherwise. Before Layton’s arrival in Wichita, the council heaped subsidy on Warren too, once bailing out the failing Warren Old Town Theater with an interest-free loan.

    Layton also said criticism causes him to “bristle a little bit,” but dismissed his critics as a small minority, although he said he doesn’t discount it.

    On the possible arrival of Southwest Airlines to Wichita, Layton said he feels “pretty good” about Wichita’s chances in receiving service from the popular discount airline. He said that we need to keep the Affordable Airfares Program to keep Southwest interested in Wichita. But later he said “The Southwest business model doesn’t require subsidies over a long period of time.”

    But as I wrote in 2006, we’ve been told before that the airfare subsidies were meant to be temporary: “From the beginning, we in the Wichita area have been told each year that the AirTran subsidy was intended as a temporary measure, that soon AirTran would be able to stand on its own, and there will be no need to continue the subsidy.” History has shown, however, that the subsidy has grown to the point where the entire state funds the subsidy for Wichita. It appears to be a permanent part of the state’s economic program, with Governor Brownback expressing support for continued funding for the program.

    On downtown, Layton said that the city doesn’t want to place businesses in downtown who will be on tax breaks or tax exempt for ten years. If the city is to achieve this goal, it will take a 180 degree change in the mindset in city hall where the mayor and vice-mayor Jeff Longwell complain that we don’t have enough “tools in the toolbox” to incentive businesses. In his State of the City address last week, one of the achievements Mayor Carl Brewer was proud of was the decision by Cargill to locate a facility in downtown Wichita. According to city documents, “The City has also offered a 100% five-plus-five year tax abatement on the new facility.” This is precisely the type of tax break Layton spoke against. Cargill, by the way, received many other forms of subsidy — let’s be clear — corporate welfare — for its decision.

    On the plan for how to handle Wichita’s trash, Layton said his intent was to start a community dialog on the subject, and that has happened. Layton praised Iowa’s bottle bill, which adds five cents to the price of items sold in bottles. He said it makes it easier for people to recycle.

  • Wichita Mayor Carl Brewer: State of the City 2011

    This week Wichita Mayor Carl Brewer delivered his annual “State of the City” address. While the Wichita Eagle editorial commenting on the mayor’s speech is titled “Cause to boast, hope,” a look at some of the important topics the mayor addressed will lead some to conclude otherwise.

    The text of the mayor’s address may be read at several places, including here.

    Economic development

    Regarding Wichita’s economic development, the mayor said 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 American Community Survey data from the U.S. Census Bureau indicates 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. Additionally, these efforts by the city are counterproductive — if our interest is creating a dynamic economy in Wichita. Analysis by the Kauffman Foundation finds that it is new firms — young firms, in other words — that are the primary drivers of job creation. But the economic development policies of cities like Wichita are definitely biased toward older, established firms. The cost of these economic development efforts, which are paid for by everyone including young businesses firms struggling to grow, means that we prop up unproductive companies at the expense of the type of firms we need to really grow the Wichita economy.

    In particular, the mayor’s proudest achievement — he nearly burst with pride when speaking of it — pours a large amount of state, county, and city funds into Hawker Beechcraft, an old-line company that is shrinking its employment in Kansas. This deal with Hawker Beechcraft should not be viewed as a proud moment for Wichita and Kansas. Instead, we should view this as succumbing to economic blackmail by Hawker, based on a threat that may not have been genuine. We responded by making in investment in an old-line, shrinking company, apparently the first time that the state has invested public funds in a downsizing company.

    Furthermore, the investment in Hawker comes on the heels of an analysis that says Hawker should divest itself of all its lines of business except for one. The analysis paints a grim future for Hawker: “In addition, backlogs are dwindling, R&D budgets are miniscule, employee pensions are underfunded by $296 million and the prospects of paying down its long-term debt are remote. At this point, it would be a monumental task just to roll-over the debt, let alone pay it off entirely. At the root of the problem is the state of Hawker Beechcraft’s business jet product lines. … At the heart of HBC’s current strategy is the assumption that a market recovery will fix what’s ailing the company, and that is just not true. The company’s business aviation products are seriously underperforming with new products relegated to minor upgrades due to a token R&D budgets based on an across-the-board derivative strategy.”

    The mayor also touted an agreement with Bombardier Learjet for the company to produce a new jet in Wichita. This deal required that the state issue bonds to raise money to give to Bombardier. The bonds will be paid off by the company’s employee withholding taxes. That’s money that would normally go to the state’s general fund. Instead, this deal raises the cost of government for everyone else.

    The mayor said of these deals: “As I suggested at the time of the Hawker deal, this was a declaration that Kansas and Wichita will fight to keep its aircraft industry. As I said then, ‘You’re not going to take what’s most important to us, and that’s our aviation industry.’ Simply put, we will not lose these jobs. Period.”

    Unfortunately, the mayor’s declaration is an invitation to Kansas companies of all types to seek public funds just as these two companies did, and as others have across Kansas. The result is increased costs of government and a state and city less inviting to the dynamic and innovative young companies that we now know are the engine of prosperity and job growth.

    The mayor also lauded the use of “revenue bonds” used for the construction of a IMAX movie theater in west Wichita. Focusing on the bonds allowed the mayor to gloss over the large measure of property tax forgiveness — corporate welfare — granted to the Warren Theater. The theater’s owners have received corporate welfare before from the city.

    Plans for downtown

    On the master plan for the revitalization of downtown Wichita, the mayor said the plan will “lead us to a point where ultimately the private investment exceeds public investment by a 15 to 1 ratio.” At the time agitation for a downtown plan started two years ago, research indicated that the ratio of private to public investment in downtown was approximately one to one. It’s quite a stretch for the mayor to promise an eventual 15 to one ratio, especially since the Goody Clancy plan recently adopted by the city council calls for — over the next 20 years — $500 million in private investment supported by $100 million of public investment. That’s a five to one ratio, not the 15 to one mentioned by the mayor. Even then, it will be surprising if anything near a five to one ratio is achieved.

    The mayor also promoted the decision by Cargill to build a new facility downtown as a sign of success. This facility, however, required over $2.5 million in various subsidy from state and local governments. It hardly seems a measure of proud success when companies are able to extract this level of corporate welfare in exchange for locating facilities in Wichita.

    Accountability and transparency

    In his address, Mayor Brewer promoted the city’s efforts in accountability and transparency, telling the audience: “We must continue to be responsive to you. Building on our belief that government at all levels belongs to the people. We must continue our efforts that expand citizen engagement. … And we must provide transparency in all that we do.”

    This an instance in which the actions of the city do not match with Brewer’s rhetoric. A small example is from last fall when the city had a stakeholder meeting to discuss the city’s community improvement district policy. While the term “stakeholder” is vague and means different things to different people, you might think that such a gathering might include representatives from the community at large. Instead, the meeting was stacked almost exclusively with those who have an interest in extracting as much economic subsidy as possible from the city. Often we find that meetings of this type are designed so that no dissenting voices are present.

    More importantly, the City of Wichita has failed to follow a fundamental law that provides accountability and transparency: the Kansas Open Records Act.

    I have made requests for records from three quasi-governmental agencies, two of which are under the city’s direct influence: Wichita Downtown Development Corporation, Go Wichita Convention and Visitors Bureau, and Greater Wichita Economic Development Coalition. Each of these organizations denied that they are public agencies as defined in the KORA, and therefore refused to fulfill my requests.

    Two times last year I appeared before the city council when the city was considering renewal of its contract with Wichita Downtown Development Corporation and Go Wichita Convention and Visitors Bureau. I asked the mayor that as a condition of renewing the contracts, the city ask that the agencies follow the law. But the mayor and the city rely on an incorrect interpretation of the KORA from city attorney Gary Rebenstorf and refused to act on my request. It should be noted that Rebenstorf has been wrong several times before when issuing guidance to the council regarding the Kansas Open Meetings Act, which is similar to the Open Records Act. He’s taken the blame and apologized for these violations.

    The Kansas Open Records Act in KSA 45-216 (a) states: “It is declared to be the public policy of the state that public records shall be open for inspection by any person unless otherwise provided by this act, and this act shall be liberally construed and applied to promote such policy.” Governments in Kansas should be looking at ways to increase availability of information. Instead, the City of Wichita uses a narrow — not liberal — interpretation of the records law restrict citizen access to records. At some time I believe the city’s legal position will be shown to be wrong.

    At any time the mayor could ask — and it could have been written into their contracts — that these agencies comply with the Kansas Open Records Act. The mayor’s refusal to do so indicates an attitude of accountability and transparency on the city’s terms, not on citizens’ terms and the law.

    Citizen response

    At many levels of government, when the chief executive makes an annual address like this, time is provided for someone to make a response, usually someone with a different point of view. This is the practice at the federal level, and also in Kansas when the governor delivers the state of the state address.

    The City of Wichita ought to do the same.