Voice For Liberty

Tag: Cronyism

Wichita economic development, a few issues
What should we conclude when the incoming chair of the Wichita Metro Chamber of Commerce uses the threat of moving his company out of Wichita to extort tax breaks from the Wichita City Council?
What lesson should we learn when the Wichita Metro Chamber of Commerce is likely to recommend higher taxes for Wichitans, but its incoming chair asks to be excused from paying these taxes?
What example do we establish when the incoming chair of the Wichita Metro Chamber of Commerce asks for tax breaks on office space he will rent, thereby giving him an advantage over other downtown landlords that do pay their full share of taxes?
Should we ask how Wichita Mayor Carl Brewer will achieve his goal of building the tax base when people ask to be excused from contributing to that base?
These are some of the issues the council should weigh tomorrow. For more on this matter, see In Wichita, the case for business welfare.
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November 18, 2013
In Wichita, the case for business welfare
On Tuesday the Wichita City Council will consider granting an exemption from paying property and sales tax for High Touch Technologies, a company located in downtown Wichita. Let’s take a look at some of the aspects of this company’s application and the city’s agenda packet material (available here).
In its application letter, High Touch argues as follows (emphasis added):
To demonstrate our commitment to Wichita, as well as accommodate our expected growth plans, High Touch Technologies would like to purchase a 106,000 sq. ft. building in Downtown Wichita.
At this time, High Touch Technologies is requesting your support for the issuance of approximately $2,000,000 City of Wichita, Kansas, Taxable Industrial Revenue Bonds. High Touch greatly appreciates any support we can receive on the purchase of this office building through the City’s participation of Industrial Revenue Bonds and the property tax savings associated with this financing method. We intend to continue our growth and expansion over the next several years and these benefits would be helpful in offsetting the substantial capital requirements associated with this project.
High Touch Technologies believes in Wichita and support the community and its economy through corporate stewardship programs. We look forward to working with you and Members of the Council on this project and are always available to answer questions regarding this project or any of our business activities.
Later in the letter:
The applicant agrees to enter into an agreement for Payment in Lieu of Taxes (PILOT) equal to the ad valorem property tax payment amount for the 2013 tax year. The applicant respectfully requests that the payments be capped at that rate for a period of ten (10) years. The tax abatement will permit the applicant to proceed with the anticipated project, allow for its anticipated growth, and result in the public benefits otherwise outlined herein.
The issuance of Industrial Revenue Bonds will be used to lower the cost of office space in the acquired building. The lower costs will give High Touch, Inc. incentive to grow its presence in the corporate office in Wichita. New employees will be added to this Wichita office instead of other offices across the U.S. The savings in office space will allow High Touch, Inc. to use those savings for expansion.
Some remarks:
To demonstrate our commitment to Wichita: This is ironic because High Touch is asking to be excused from paying the same property taxes that most other people and business firms have to pay. Instead of commitment, this demonstrates hostility to the taxpayers of Wichita, who will have to pay more so that this company can pay less.
helpful in offsetting the substantial capital requirements: Well. Who wouldn’t appreciate help in offsetting the cost of anything? I think we can categorize this as unpersuasive.
corporate stewardship programs: Underlying this argument is that because High Touch makes charitable contributions, it should be excused from the same tax burden that most of us face. Here’s a better argument: Be a good corporate citizen by paying your fair share of taxes, don’t ask the city government to force be to subsidize your business, and let me make my own charitable contributions.
answer questions regarding this project or any of our business activities: This refers to how the members of the city council will make a judgment that this business is worthy of subsidy, and that others may not be. The notion that the City of Wichita can decide which companies are worthy of tax exemptions and investment is an illustration of what economist Frederich Hayek called a “conceit.” It’s so dangerous that his book on the topic is titled “The Fatal Conceit.” The failure of government planning throughout the world has taught that it is through markets and their coordination of dispersed knowledge that we learn where to direct capital investment. It is simply impossible for this city government to effectively decide which companies Wichitans should invest their tax dollars in. It will still make that decision, however.
Payment in Lieu of Taxes (PILOT): High Touch is not proposing to totally escape its tax burden. Only partially so, through the PILOT. But the proposed payment is quite generous to the company. A few quick (and probably incorrect) calculations shows how small the PILOT is compared to what taxes would be. City documents indicate the proceeds of the IRBs will be used to pay for $2,000,000 of improvements. This amount of commercial property times 25% assessment ratio times 120.602 mill levy rate equals $60,301 in taxes. High Touch, through the PILOT, is proposing to pay $33,250, just a little more than half of what the taxes might be.
But the true value of the taxes being avoided is probably much higher. As an example, nearby office space is listed for sale at $28 per square foot, and that’s a distress-level price. Applying that price to this building, its value would be almost $3 million. If we look at market capitalization rates, which are generally given as from nine to eleven percent for class A space, we arrive at a much higher value: If we say $10 per square foot rental rate times 106,000 square feet at nine percent cap rate, the value would be almost $12 million. Taxes on that would be about $300,000 per year.
These are back-of-the-envelope calculations using assumed values that may not be accurate, but this gives an idea of what’s actually happening in this transaction: High Touch is seeking to avoid paying a lot of taxes, year after year.
payments be capped at that rate for a period of ten (10) years: High Touch proposed that what it’s paying in lieu of taxes not be subject to increases. Everyone else’s property taxes, of course, are subject to increases due to either assessed value increases or mill rate increases, or both. High Touch requests an exemption from these forces that almost everyone else faces.
lower the cost of office space: Again, who wouldn’t enjoy lower business or personal expenses? The cost of this incentive spreads the cost of government across a smaller tax base than would otherwise be, raising the cost of government for almost everyone else.
added to this Wichita office instead of other offices across the U.S.: The threat of relocation or expansion elsewhere is routinely used to leverage benefits from frightened local governments. These threats can’t be taken at face value. There is no way to know their validity.
use those savings for expansion: Implicit in this argument is that Wichita taxes prevent companies from expanding. True or not, this is a problem: If taxes are too high, we’re missing out on economic growth. If taxes are not too high, but some companies seek exemption from paying them nonetheless, that’s a problem too.
A prosperous company, establishing the template for seeking business welfare
In a December 2011 interview with the Wichita Eagle, the High Touch CEO bragged of how well the company is doing. The newspaper reported “Ask Wayne Chambers how business is, and he’s going to tell you it’s good. Very good. … Chambers said this week that after two years of robust growth, he’s looking for another one in 2012. ‘We have every reason to believe we’ll continue that growth pattern,’ he said.”
In February 2013 the Wichita Business Journal reported “It should be a great year for High Touch Inc. That’s the initial prediction of CEO Wayne Chambers, who says actions the company took during and leading up to 2012 have positioned High Touch to become a true ‘IT solutions provider.’”
If we take Chambers at his word, why does High Touch need this business welfare? Economic necessity is usually given as the justification of these incentives. Companies argue that there is no way the proposed investment is economic without taxpayer participation and subsidy. I don’t see this argument being advanced in this case.
Interestingly, Chambers is currently co-chair of Visioneering Wichita, which advocates for greater government involvement in just about everything, including the management of the local economy. One of the benchmarks of Visioneering is “Exceed the highest of the annual percentage job growth rate of the U.S., Omaha, Tulsa, Kansas City and Oklahoma City.” As shown in this article and this video, Wichita badly lags the nation and our Visioneering peer cities on this benchmark. Visioneering officials didn’t want to present these results to government officials this year, perhaps on the theory that it’s better to ignore problems that to confront them.
Now Chambers is slated to be the next chair of the Wichita Metro Chamber of Commerce. It’s quite likely that the Chamber, under his leadership, will soon recommend that Wichitans pay higher sales and/or property taxes to support the Chamber’s goals.
These are the same taxes that Chambers’ company is asking to be excused from paying. Will this blatant cronyism be the template for next year’s management of economic development in Wichita? Let’s hope not, as the working people of Wichita can’t tolerate much more of our sub-par economic growth.
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November 15, 2013
Spirit Aerosystems applies for tax relief
The Wichita City Council will consider excusing a large company from property and sales taxation. Is this action wise for the city’s economy?
Tomorrow the Wichita City Council will consider granting Industrial Revenue Bonds to Spirit Aerosystems, the city’s largest employer.
The amount of the proposed bond issue is $49,000,000. The purpose of the IRBs is to allow the recipient to escape the payment of property taxes, and often sales taxes too. This action by the council may exempt up to $49,000,000 of property from taxation, both ad valorem (property) and sales. A 100 percent exemption is proposed for five years, plus a second five years if conditions are met.
The city uses benefit-cost ratios to justify its expenditures on economic development incentives. The reasoning is that by spending cash (such as on a forgivable loan) or forgiving taxes (as in the current case), the city (and county, state, and school district) gain even more than they give up. Generally, Wichita requires a benefit-cost ratio of 1.3 to 1 or better, although there are many exceptions and loopholes that are used if a potential deal doesn’t meet this criteria.
The council’s agenda packet gives benefit-cost ratios for the various taxing authorities, but it doesn’t list the dollar amounts of the tax abatements. Usually these dollar amounts are supplied.
One of the taxing jurisdictions affected by this proposed action is USD 260, the Derby school district, as the property is within its boundaries. In this case, the benefit-cost ratio given for the Derby school district is 1.00 to 1. Since the City of Wichita requires 1.3 to 1 or better for itself, by what right does the city impose a burden on a school district that it would not accept for itself? (The tax rate for Derby schools is 59.3 mills; while for the City of Wichita the rate is 32.5 mills.)
It’s important to note that the benefits claimed from the IRBs are in the form of increased taxes paid.
The harm of this incentive is that the taxes not paid by Spirit Aerosystems are shifted to other taxpayers. The money these taxpayers would have spent or invested is instead spent on taxes. Instead of people and businesses firms deciding how to spend or invest, Wichita City Hall does this for them. This brings into play a whole host of problems. These include the deficit of knowledge needed to make good investment decisions, decisions being made for political rather than economic reasons, and the corrosive influence of cronyism.
There is something the city could to do alleviate this problem. Would the city consider reducing its spending by the amount of tax being abated? In this case, the cost of these tax abatements will not be born by others.
Wichita’s management of incentives
Recent reporting told us what some have suspected: The city doesn’t manage its economic development efforts. One might have thought that the city was keeping records on the number of jobs created on at least an annual basis for management purposes, and would have these figures ready for immediate review. But apparently that isn’t the case.
We need to recognize that because the city does not have at its immediate disposal the statistics about job creation, it is evident that the city is not managing this effort. Or, maybe it just doesn’t care. This is a management problem at the highest level. Shouldn’t we develop our management skills of tax abatements and other economic development incentives before we grant new?
Wichita’s results in economic development

Despite the complaints of many that Wichita doesn’t have a rich treasure chest of incentives, the city has been granting tax abatements for years. What is the result? Not very good. Wichita is in last place in job creation (and other measures of economic growth) among our Visioneering peer cities. See here Wichita and Visioneering peers job growth.
If we believe that incentives have a place, then we have to ask why Wichita has done so poorly.
Particularly relevant to this applicant today: Boeing, its predecessor, received many millions in incentives. After the announcement of Boeing leaving in 2012, a new report contained this: “‘They weren’t totally honest with us,’ said [Wichita Mayor Carl] Brewer of Boeing, which has benefited from about $4 billion of municipal bonds and hundreds of millions of dollars in tax relief. ‘We thought the relationship was a lot stronger.’” Has anything changed?
A diversified economy

The mayor and council members have said that we need to diversify our economy. This action contemplated this week reduces diversification. It gives special benefits worth millions to the largest company in our most concentrated industry. The costs of these incentives are born by other companies, especially entrepreneurs and start up companies. It’s these entrepreneurs and young companies that must be the source of diversity and dynamism in our economy.
(If we really believe that these incentives have no cost, why don’t we offer them more often? Think of how many companies go out of business each month. Many of them could be saved with just a little infusion of cash. Why doesn’t the city rescue these firms with incentives?)
Do incentives work?
The uncontroverted, peer-reviewed research tells us that targeted economic development incentives don’t work, if we consider the entire economy. See: Research on economic development incentives. Some of the conclusions of the studies listed there include:
“No evidence of incentive impact on manufacturing value-added or unemployment”
“Small reduction in employment by businesses which received Ohio’s tax incentives”
“No evidence of large firm impacts on local economy”
“No permanent employment increase across a quasi-experimental panel of all Cabela’s stores”
“Employment impact of large firms is less than gross job creation (by about 70%)”
These research programs illustrate the fallacy of the seen and the unseen. It is easy to see the jobs being created by economic development incentives. It’s undeniable that jobs are created at firms that receive incentives, at least most of the time. But these jobs are easy to see. It’s easy for news reporters to find the newly-hired and grateful workers, or to show video footage of a new manufacturing plant.
But it’s very difficult to find specific instances of the harm that government intervention produces. It is, generally, dispersed. People who lose their jobs usually don’t know the root cause of why they are now unemployed. Businesses whose sales decline often can’t figure out why.
But uncontroverted evidence tells us this is true: These incentives, along with other forms of government interventionism, do more harm than good.
Can officials manage growth?
Alan Peters and Peter Fisher wrote an academic paper titled The Failures of Economic Development Incentives, published in Journal of the American Planning Association. A few quotes from the study, with emphasis added:
Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.
On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.
In 2008 Kansas Legislative Division of Post Audit investigated spending on economic development. It found about the same as did Peters and Fisher.
Going forward
Politicians and bureaucrats promote programs like this tax abatement as targeted investment in our economic future. They believe that they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by the state that shapes the future direction of the Wichita and Kansas economy.
These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies receiving grants or escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.
Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”
In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”
In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”
There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs is an example of precisely the wrong policy.
We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.
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November 4, 2013
WichitaLiberty Podcast, episode 1
In this first episode of WichitaLiberty Podcasts: A Kansas City Star editorial makes a case for higher school spending in Kansas, but is based on a premise that doesn’t exist in fact. There’s a new episode of WichitaLiberty.TV. Eureka! Tea partiers know science. The John J. Ingalls Spirit of Freedom Award. Cronyism and other problems in Wichita. Is the City of Wichita concerned that its contracts contain language that seems to be violated even before the contract is signed? Obama’s debt speech, not really a speech. Episode 1, October 20, 2013.
[powerpress]
Shownotes
Kansas schools do not have rigorous standards, despite newspaper editorials. A Kansas City Star editorial makes a case for higher school spending in Kansas, but is based on a premise that doesn’t exist in fact.
WichitaLiberty.TV October 20, 2013
Eureka! Tea partiers know science
John J. Ingalls Spirit of Freedom Award
Cronyism and other problems in Wichita
Wichita contracts, their meaning (or not). Is the City of Wichita concerned that its contracts contain language that seems to be violated even before the contract is signed?
Obama’s debt speech, not really a speech
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October 20, 2013
Cronyism and other problems in Wichita
Someone asked for a collection of articles about cronyism and other problems with Wichita city government. Here are a few.
Exchange Place still not good for Wichita, others
The Wichita City Council will consider a redevelopment plan for the Exchange Place project in downtown Wichita. Despite having shed the problems with the former owners, the project has become an even worse deal for the taxpayers of Wichita, Kansas, and the nation. Those looking for jobs and for investment capital to meet consumer demands are worse off, too. Article here.
Wichita performs a reference check, sort of
Citizens of Wichita are rightly concerned about whether our elected officials and bureaucrats are looking out for their interests, or only for the interests and welfare of a small group of city hall insiders. Read here or watch video here.
Wichita City Council makes an economic decision
Last year the Wichita City Council was faced with a decision regarding a program designed to stimulate the sales of new homes. Analysis revealed that even though the city had an opportunity to make an investment with a purportedly high return on investment, it would be better off, dollar-wise, if it did not make the investment. What did the city council do? This video explains the decision the council faced. More information is at Wichita new home tax rebate program: The analysis and Wichita HOME program has negative consequences.
Fish, sauce, and the law: You make the call
Should Wichita Mayor Carl Brewer vote on an upcoming issue before the Wichita City Council? The City of Wichita code seems to say he should not vote, but the Wichita City Attorney says the law doesn’t apply. This short video explains the issues. For more on this issue, see Wichita city code seemingly ignored.
Where is the downtown Wichita tax base?
There’s been much investment in downtown Wichita, we’re told, but the goal of increasing the tax base is farther away rather than closer. Assessed value is falling despite hundreds of millions of public and private investment. Article here.
The speck and the logs
What can we say about a mayor who is concerned about the appearance of impropriety when shopping for his personal automobile, but is not able to understand the problems with his own behavior in office? Article here.
Wichita mayor said to be ‘under lockdown’
When Wichita ABC affiliate KAKE Television ran a news story critical of Wichita Mayor Carl Brewer, reporter Jared Cerullo wasn’t able to interview Brewer to get his reaction to his critics. The mayor refused to talk to Cerullo. Former KAKE news anchor Jeff Herndon said that KAKE has “repeatedly” tried to get an on-camera interview with Brewer. But the mayor is always busy, Herndon said: “They’ve got him on lockdown. He’s not going to answer that.” Article and audio here.
Without government, there would be no change: Wichita Mayor
It’s worse than President Obama saying “You didn’t build that.” Wichita Mayor Carl Brewer tells us you can’t build that — not without government guidance and intervention, anyway. Article and video here.
Wichita: No such document
When asked to provide documents that establish the city’s proclaimed policy, Wichita city hall is not able to do so, leaving us to wonder just how policy is made. Article here.
Wichita Mayor Carl Brewer on public trust in government
If you ask Wichita Mayor Carl Brewer to live up to the policies he himself promotes, you might be threatened with a lawsuit. Video here.
Is graft a problem in Wichita?
In his paper “History and Constitutionality of Pay-to-Play Campaign Finance Restrictions in America” Greg Schmid explains the problems that result from the “soft corruption” that pay-to-play laws combat. Is this a problem in Wichita? Is it possible that “Graft takes the collective wealth of working taxpayers and transfers that wealth to the benefit of corrupt government officials and their private sector accomplices” in Wichita? Article here.
Downtown Wichita economic development numbers questioned
When the Wichita City Council recently received the 2012 Project Downtown Annual Report, a city council member took the opportunity to question and clarify some of the facts and figures presented in the report. Article and video here.
In Wichita, Jeff Longwell has the solution to cronyism
At a recent Wichita City Council meeting, Council Member Jeff Longwell (district 5, west and northwest Wichita) was critical of topics broached by two speakers, admonishing them to “take a different approach.” Article and video here.
Campaign contributions show need for reform in Wichita
Candidates for Wichita City Council have filed campaign finance reports, and the filings illustrate the need for campaign finance reform in Wichita and Kansas. Article here.
In Wichita, a quest for campaign finance reform
Actions of the Wichita City Council have shown that campaign finance reform is needed. Citizen groups are investigating how to accomplish this needed reform, since the council has not shown interest in reforming itself. Article here.
Wichita WaterWalk apartment deal not good for citizens
In 2009, after DeBoer took over the management of WaterWalk, the Wichita Eagle reported: “‘I’m not going down to City Hall with my hand out,’ DeBoer said. ‘I can’t. The city has put their money in it, and I’m happy with that. We’ve put a lot of our own money in and that’s OK. Now, time to deliver.’” Leasing land worth $479,000 or $1,153,344 for one dollar per year: To me, that smells like a handout. It doesn’t sound like delivering on promises. Article here.
In Wichita, a problem with government ethics
I appeared on the KAKE Television public affairs program This Week in Kansas and explained the recent incidents that ought to cause Wichitans and Kansans to insist on reform regarding government ethics. Article and video here.
Wichita’s bailout culture
The Wichita City Council will consider a bailout of a real estate development. If the council takes this action, it is one more step in a series of bailouts granted by the city, and it sets up expectations that the city will continue bailouts, creating a severe climate of moral hazard. Article here.
In Wichita, pushing back against political cronyism
Usually, winning an election is a happy time. In most elections the winning side is happy because they elected a candidate to office who they feel has the better ideas. I’m glad we won. But my happiness is tempered by the realization that we simply prevented something bad from happening in Wichita. Article here.
No-bid contracts a problem in Wichita
Wichita Eagle reporting by Bill Wilson uncovers a problem with no-bid contracts for construction projects in Wichita. Fortunately, the city manager recognizes the problem and will propose a partial solution. Article here.
Kansas needs pay-to-play laws
In the wake of scandals some states and cities have passed “pay-to-play” laws. These laws may prohibit political campaign contributions by those who seek government contracts, prohibit officeholders from voting on laws that will benefit their campaign donors, or the laws may impose special disclosure requirements. Article here.
For Wichita city hall, ethics again an issue
Reports that the Wichita city manager’s fiancee is involved with a group seeking approval from the city for a project indicate that the city’s perspective on ethics could use reform. Article here.
Wichita TIF: Taxpayer-funded benefits to political players
It is now confirmed: In Wichita, tax increment financing (TIF) leads to taxpayer-funded waste that benefits those with political connections at city hall. Article here.
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October 11, 2013
Wichita contracts, their meaning (or not)
Is the City of Wichita concerned that its contracts contain language that seems to be violated even before the contract is signed?
This week the Wichita City Council approved a development agreement for the apartments to be built on the west bank of the Arkansas River. The development agreement the council contemplated included this language in Section 11.06, titled “Conflicts of Interest.”
No member of the City’s governing body or of any branch of the City’s government that has any power of review or approval of any of the Developer’s undertakings shall participate in any decisions relating thereto which affect such person’s personal interest or the interests of any corporation or partnership in which such person is directly or indirectly interested.
At Tuesday’s meeting I read this section of the contract to the council. I believe it is relevant for these reasons:
1. Wichita Mayor Carl Brewer is a member of a governing body that has power of approval over this project.
2. Bill Warren is one of the parties that owns this project.
3. Bill Warren also owns movie theaters.
4. Wichita Mayor Carl Brewer owns a company that manufactures barbeque sauce.
5. Brewer’s sauce is sold at Warren’s theaters.
The question is this: Does the mayor’s business relationship with Warren fall under the prohibitions described in the language of section 11.06? Evidently not. After I read section 11.06 I asked the mayor if he sold his sauce at Warren’s theaters. He answered yes. But no one — not any of the six city council members, not the city manager, not the city attorney, not any bureaucrat — thought my question was worthy of discussion.
(While the agreement doesn’t mention campaign contributions, I might remind the people of Wichita that during 2012, parties to this agreement and their surrogates provided all the campaign finance contributions that council members Lavonta Williams and James Clendenin received. See Campaign contributions show need for reform in Wichita. That’s a lot of personal interest in the careers of politicians.)
I recommend that if we are not willing to live up to this section of the contract that we strike it. Why have language in contracts that we ignore? Parties to the contract rationalize that if the city isn’t concerned about enforcing this section, why should they have to adhere to other sections?
While we’re at it, we might also consider striking Section 2.04.050 of the city code, titled “Code of ethics for council members.” This says, in part, “[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”
That language seems pretty clear to me. But we have a city attorney that says that this is simply advisory. If the city attorney’s interpretation of this law is controlling, I suggest we strike this section from the city code. Someone who reads this — perhaps a business owner considering Wichita for expansion — might conclude that our city has a code of ethics that is actually observed by the mayor and council members and enforced by its attorneys.
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October 11, 2013
Wichita does it again
Wichita never seems to learn. Its government, that is.
The last time Key Construction was awarded a no-bid contract for building a parking garage in Wichita, it almost cost Wichita taxpayers an extra 27 percent. Now the Wichita City Council has done it again, awarding Key another no-bid contract for a project paid for by taxpayers.
In August 2011 the Wichita City Council voted to award Key Construction a no-bid contract to build the parking garage that is part of the Ambassador Hotel project, now known as Block One. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.
Today the council voted to award Key another no-bid contract. City officials said that the garage is too intertwined with the rest of the project to be put out to bid. They said that in 2011, too.
After the 2011 incident, Wichita city manager Robert Layton told the Wichita Eagle that he would seek a policy change against no-bid contracts. But that didn’t happen today.
So taxpayers are likely to overpay again, and for a project benefiting a politically-connected firm.
There is hope for the taxpayers, however. After the 2011 award to Key, then-council member Michael O’Donnell objected. It’s said that Wichita City Council Member and Vice Mayor Pete Meitzner (district 2, east Wichita) also objected. That’s when the city decided to put the garage out to competitive bid and saved taxpayers $1.3 million.
It’s possible this could happen again. Meitzner was absent for today’s vote. New council member Jeff Blubaugh now represents the same district that O’Donnell did two years ago. Maybe Wichita taxpayers can ask O’Donnell to talk to Blubaugh about this. Perhaps as Meitzner prepares his bid to be the next mayor, he could use this as an opportunity to exercise leadership in favor of taxpayer stewardship instead of protecting the system of cronyism.
Key Construction and Mayor Carl Brewer
Should Mayor Carl Brewer have participated in voting on this matter? Here’s a section from the Wichita city code as passed in 2008:
“[Council members] shall refrain from making decisions involving business associates, customers, clients, friends and competitors.”
Wichita mayor Carl Brewer with major campaign donor Dave Wells of Key Construction.
This no-bid contract for the garage is just one of many subsidies and grants given to Key Construction and its partners at taxpayer expense. Key, its executives, and their spouses are heavy campaign contributors to nearly all city council members. Brewer and the head of Key Construction are apparently friends, embarking on fishing expeditions.
What citizens need to know is that Brewer and the Wichita City Council were willing to spend an extra $1.3 million of taxpayer money to reward a politically-connected construction firm that makes heavy campaign contributions to council members. Only one council member, Michael O’Donnell, voted against this no-bid contract. At the time, no city bureaucrats expressed concern about this waste of taxpayer money.
Then, in July 2012 Brewer participated in a decision to award the large contract for the construction of the new Wichita airport to Key Construction, despite the fact that Key was not the low bidder. The council was tasked to act in a quasi-judicial manner, to make decisions whether discretion was abused or whether laws were improperly applied. Brewer’s judgment was in favor of Key Construction, even though its bid had the same defect as the lower bid. This decision cost taxpayers and airport users an extra $2 million, to the benefit of a major campaign donor and fishing buddy.
In a Wichita Eagle story that reported on “city-financed downtown parking garages that spiraled well over budget” we learned this: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.”
Despite this personal experience, Brewer wrote a letter recommending Key Construction (and only Key) for a project, observing “Key is known for their consistent quality construction, budget control and on schedule delivery.” The mayor’s recommendation is not consistent with the reality of Key’s experience with the City of Wichita.
Lavonta Williams and James Clendenin
Although city code has no prohibition against council members voting to enrich their significant campaign contributors with no-bid contracts, there ought to be such a law. And when the recipient company is a very significant contributor, we can’t help but wonder about the wisdom and stewardship exhibited by the council.
In 2012, as incumbent council members Wichita City Council Member James Clendenin (district 3, southeast and south Wichita) and Wichita City Council Member Lavonta Williams (district 1, northeast Wichita) were preparing to run for re-election, their campaigns, that year, were financed entirely by two sources. One of these was a group of principals and executives of Key Construction.
Those associated with Key Construction gave a total of $7,000. Williams received $4,000, and $3,000 went to Clendenin. For Williams, this was the only campaign money she received in 2012.
With relationships like these, can we have and confidence that the mayor and council are looking out for the interests of the citizens of Wichita, or for the interests of the significant campaign contributors and fishing buddies?
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October 1, 2013
Wichita performs a reference check, the video
Citizens of Wichita are rightly concerned about whether our elected officials and bureaucrats are looking out for their interests, or only for the interests and welfare of a small group of city hall insiders. The video below explains, or click here to view in HD on YouTube. For an article on this topic, see Wichita performs a reference check, sort of.
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September 19, 2013
Wichita performs a reference check, sort of
For a video presentation of this material, click on Wichita performs a reference check, the video.
Citizens of Wichita are rightly concerned about whether our elected officials and bureaucrats are looking out for their interests, or only for the interests and welfare of a small group of city hall insiders. Cronies, if you will.
A recent application filed with Wichita City Hall regarding the West Bank Development Project raises two questions: Did the government officials listed as references give their permission, and were any of the references contacted to learn what they knew about the applicants?
The application filed by the River Vista development team shows this: The team, consisting of George Laham, Dave Wells, Dave Burk, and Bill Warren listed numerous local, state, and federal officials as references. Here’s the list of officials that appeared one or more times:
Wichita city manager Robert Layton
Wichita Mayor Carl Brewer
Wichita City Council Member Jeff Longwell (district 5, west and northwest Wichita)
Wichita City Council Member and Vice Mayor Pete Meitzner (district 2, east Wichita)
Sedgwick County District Attorney Marc Bennett
Sedgwick County Sheriff Jeff Easter
Sedgwick County Commissioner Dave Unruh
Sedgwick County Commissioner Tim Norton
Kansas Governor Sam Brownback
U.S. Representative Mike Pompeo
Except for Jeff Easter, none of these officials gave permission for their names to be used in this way. (We didn’t get a response regarding Tim Norton.)
Furthermore, none of these officials were contacted by the evaluation committee whose job it is to vet these potential city partners.
A few questions: First, do you think it is appropriate for the city manager to be listed as a reference, given that anyone who reads this document would take it as an endorsement? No, of course it is not appropriate.
Related: Do you think it’s appropriate for the city manager to endorse one of the applicants? We don’t know if the presence of the city manager’s name as a reference implies an endorsement, because George Laham did not ask the city manager if he could be listed as a reference. We know this because we asked.
Further, the committee that evaluated the development teams did not call the city manager to inquire about George Laham. We asked about this, too. But making inquiries of references: Isn’t that what an evaluation committee or vetting team should do? But we know that the evaluation committee did not contact even one of these officials that were listed as references.
These applicants likely knew that the evaluation committee would not contact these references. Therefore, they freely listed these government officials. Which makes us wonder — what is the point of having an evaluation committee?
Even further: Is it appropriate for the city to partner with people who think it’s proper to list the city manager as a reference without asking if that was permissible, knowing that the manager wouldn’t be contacted? Same question regarding the mayor, governor, our U.S. Congressman, and district attorney?
In light of this — numerous government officials listed as references without their permission or knowledge, an evaluation committee that never contacted these officials, and the information that these references could have provided: Do you think the evaluation committee fulfilled its duty to perform due diligence on behalf of the interests of the people of Wichita?
What the evaluation committee might have learned
If the evaluation committee had contacted these references, here’s what might have been learned.
Dave Wells: Wells is president of Key Construction. Last year the Wichita Eagle reported on “city-financed downtown parking garages that spiraled well over budget.” Noting the cost overruns, reporter Bill Wilson wrote: “The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.” (Wichita city manager proposes eliminating no-bid construction projects.)
Also, two years ago Key Construction proposed — and was awarded by the city council — a no-bid contract for a parking garage. But the city later put the contract to competitive bid. Key, which first bid $6 million, later bid $4.7 million. If the desire of the majority of the city council, including Mayor Carl Brewer, had been realized, Wichita taxpayers would have sent an extra — and unnecessary — $1.3 million to a politically-connected construction company.
By the way, the mayor’s relationship with Wells means he should not have voted on this matter.
Dave Burk, Dave Wells: These two were original partners in WaterWalk, which has received over $40 million in subsidy, with little to show for results.
Dave Burk: He’s received many millions from many levels of government, but still thinks he doesn’t get enough. This is what we can conclude by his appeal of property taxes in a TIF district. Those taxes, even though they are rerouted back to him for his benefit, were still too high for his taste, and he appealed. The Wichita Eagle reported in the article (Developer appealed taxes on city-owned property): “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.’”
In a separate article by the Eagle on this issue, Wichita 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. Now he wants more city taxpayer subsidy.
Bill Warren: In 2008 the Old Town Warren Theater was failing and its owners — Bill Warren being one — threatened to close it and leave the city with a huge loss on a tax increment financing (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. Reported the Wichita Eagle: “Wichita taxpayers will give up as much as $1.2 million if the City Council approves a $6 million loan to bail out the troubled Old Town Warren Theatre this week. That’s because that $6 million, which would pay off the theater’s debt and make it the only fully digital movie theater in Kansas, would otherwise be invested and draw about 3 percent interest a year.”
Besides Warren, you may — or may not — be surprised to learn that the theater’s partners included Dave Wells and Dave Burk, the same two men mentioned above. Also, Mayor Brewer’s relationship with Warren means he should not have voted on this matter.
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September 19, 2013