Voice For Liberty

Tag: Downtown Wichita arena

  • Wichita School District: Don’t Give Up Your Tax and Revenue Base

    Remarks to be delivered to the Wichita school board on August 25, 2008.

    On August 5, 2008, the Wichita City Council greatly expanded an existing tax increment financing district. This board has 30 days from then to veto the city’s action. I want to explain why this board should do just that.

    The arithmetic behind TIF districts is simple. The city borrows money and spends it on things that the developers need to make their project work financially. Then, as property values in the district rise, the new additional property tax revenue is used to pay back the city.

    Often it is said that what the city spends the TIF money on is infrastructure, the types of things that cities do routinely. But when developers working outside of TIF districts need things like streets, turn lanes, sewers, water supply lines, street lights, landscaping, and new traffic lights, the developers either pay for these things themselves, or the city builds them and assesses special taxes against the property to pay for these items.

    So while a TIF district doesn’t let developers escape paying increased property taxes, it lets them keep these increased taxes within the TIF district for their own benefit. In non-TIF developments, the new taxes are available for the funding of general government, including USD 259. John Todd will talk about the magnitude of these numbers, but in the case of the expansion of the Center City South Redevelopment District, the numbers are large. Very large.

    It is often said that taxing districts like USD 259 aren’t really giving up anything when they agree to the formation of a TIF district. We’re told by developers and politicians that without the benefit of the TIF district there won’t be any new development. But the reality is usually different. As recently reported in the Wichita Eagle, rarely is the choice between all or nothing. The choice between development in a TIF district or nothing is usually false.

    Also, TIF districts are harmful to the overall community and tax base. Economists tell us that cities that use TIF grow slower than cities that don’t, and that there is no evidence of broad economic or social benefits in light of the costs.

    Just a year ago this board raised the property tax rate. Presently the community is being asked to increase tax rates further by investing in a bond issue. When the City of Wichita allows property to escape the tax rolls and this board agrees with that action, it places an even higher burden on those residents and businesses that can’t take advantage of TIF districts. Plus, it gives up a stream of tax revenue. That’s why this board should veto the creation of this, and other, TIF districts.

  • Wichita School District: Where Do They Think the Funds Come From?

    In a Wichita Eagle article City leaders cut short trip to talk about TIF, reporter Deb Gruver writes: “Susan Arensman, a spokeswoman for the school district, said the project would not affect schools.”

    The context is that the City of Wichita is considering the creation of a large tax increment financing (TIF) district in downtown Wichita. The main feature of the TIF district is that as property values rise, the extra property taxes will be used to pay off bonds the city issued to benefit the TIF district. In non-TIF developments, the rising property taxes would go to the general city fund, as well as the county, school district, and state of Kansas, as well as other bodies that somehow get a share of Wichita property taxes. But with TIF districts, these districts don’t benefit from the rise in property values and the rising tax revenue that should accompany that.

    Ms. Arensman’s statement, therefore, is quite confusing. What, funding doesn’t affect schools? We’re told over and over from many sources that schools don’t have enough money.

    In Wichita, for 2007, the mill levy was 118.050, with 53.238 mills going to USD 259, the Wichita public schools. That’s 45 percent of the property tax paid in Wichita going to the Wichita schools.

    But it’s not quite that simple. Through a complicated mechanism, Kansas allocates tax money to school districts across the state, so there’s not necessarily a direct correlation between the property tax paid by residents of USD 259 and what the Wichita school district actually receives. See K-12 Education Finance: A guide to understanding the school finance formula.

    But some of the property tax generated locally absolutely stays right here to fund Wichita public schools. The “local option budget” does. That’s the tax that the district raised in August 2007. And, I believe the 7 mill capital budget stays right here in Wichita, too.

    So when the City of Wichita grants tax favors and excuses property from the tax rolls through the creation of TIF districts, it absolutely affects the Wichita school district. As the district always feels that it doesn’t have enough money to do its job, here’s a way it could stop the loss of the tax dollars that feed it: don’t agree to the formation of TIF districts in Wichita.

  • Predictions of Downtown Wichita Arena’s Success are Premature

    Several Wichita Eagle editorials in recent weeks have mentioned the success of the Intrust Arena being built in downtown Wichita.

    Success, I might ask, at doing what?

    The fact that the arena structure is rising is evidence of only the smallest measure of competence by Sedgwick County officials. Having entrusted them with some two hundred million dollars, it’s the least we can expect.

    We won’t know the success or failure of this arena for five to ten years.

  • Testimony Opposing Expansion of the Wichita City South Redevelopment Tax Increment Financing District

    From John Todd.

    Mr. Mayor and members of the Wichita City Council, thank you for allowing me this opportunity to speak before you today. My name is John Todd. I stand before you today as a citizen in opposition to the Expansion of the City South Redevelopment District (Tax Increment Financing) (Districts I & VI).

    I testified before you on July 1, 2008 in opposition to the Old Town Warren Theater Loan that you recently approved. The City Council at that time cited the need for taxpayer assistance to prop up an “under-performing” $9.5 million dollar Tax Increment Financing (TIF) subsidy program that a previous city council awarded to Old Town developers in 1998.

    The size of the Old Town TIF project pales in comparison to the $61,772,000 projected in “parking and infrastructure improvements in the Arena Neighborhood Redevelopment Plan area, to be paid for by the TIF” that you are considering today. What vision for a successful TIF in 2008 does this city council have that the 1998 council lacked? What will another “under-performing” TIF cost future taxpayers? Is it the proper role of city government to speculate in real estate ventures using taxpayer money?

    Sedgwick County voters approved the $184.5 (now $205) million dollar downtown arena and have been assured repeatedly by the three county commissioners who originally voted for the arena that adequate parking exists for the arena. I am a little more than suspect when I see the word “parking” in the TIF proposal you are considering today?

    Voters of the arena were told that their approval of the new arena would provide the “economic boost” and the “synergy” needed for effective downtown redevelopment. No mention was made of the need for additional taxpayer subsidy. I believe our new downtown arena project should be given the chance to perform economically as promised before additional taxpayer money is committed to the project.

    If you approve this TIF, please keep in mind that approximately 45% of the $61.8 million dollar proposal or roughly $28 million will be diverted away from The Wichita Public Schools over a 20-year period and another 27% or roughly $16 million from the Sedgwick County taxpayers.

    If you approve this TIF, I believe an excerpt from the July 5, 2008 Wall Street Journal article entitled “Blame Taxes for Baltimore’s Rot” (written by Steve H. Hanke and Stephen J.K. Walters) is on target for Wichita, “True enough, the ability to hand out subsidies gives officials great power. But it also gives them a reason, and incentive, to dismiss the common sense that if tax breaks for the well-connected are a good idea, lower tax rates across the board would lead to broad-based redevelopment.”

    We need to rely on privately funded redevelopment downtown and not on taxpayer-subsidized redevelopment that favors the politically well-connected developers to the exclusion of all other private developers.

    Please vote against the proposed TIF.

  • Downtown Wichita (Intrust) arena groundbreaking

    On Tuesday December 4, 2007, Sedgwick County hosted the formal groundbreaking ceremony for the downtown Wichita arena. While local government leaders and news media hailed the event as a transforming event in the history of Wichita, this writer does not share their enthusiasm.

    The building of this arena is government interventionism at its worst. Stakeholders in the arena, such as Bob Hanson of the Greater Wichita Area Sports Commission, demonstrate the harm of rent seeking, as they seek to obtain, at taxpayer expense, a large and expensive playhouse for their pleasure. Supporters dressed their arguments for the arena in the language of public goods and economic development. But Henry Hazlitt and others have explained that the money spent on the arena is money that wasn’t spent somewhere else, with the attendant loss of jobs and economic activity somewhere else. (See my review of Economics in One Lesson and Prepare for Sales Tax-Induced Job Effects Now, also printed in The Wichita Eagle.) As local governments consider an expensive plan for development of the surrounding area, that money — just like the money collected through the sales tax — is money that citizens won’t be spending somewhere else of their own choosing.

    Even the most basic economic arguments given for the arena were flawed. I found out that the estimated operating budget for the arena was defective, as officials were not aware of, or did not care to disclose, the proper government accounting standards the arena would be required to use. (See Arenas’ Financial Statements Not Complete and WSU Study on Downtown Wichita Arena Not Complete.)

    Government, too, is not qualified to build and own assets like this arena. Consider the status of the Kansas Coliseum, which having opened in 1978 is only 29 years old. Yet three years ago we were told that it required extensive renovation for continued use, that poor condition being the stick used to promote the downtown arena. (Century II, not much older, is often described in the same terms.) So can you spot the irony in Sedgwick County Commission Chairman Dave Unruh’s statement at the groundbreaking? “I think probably most everyone here…will have a story they can tell their children and grandchildren on how they had a part in changing the profile and character of our community.” If this new arena suffers the same fate as the Coliseum, one generation from now we’ll be building another.

    Further, government and its officials are not allowed to campaign for the arena as they did. Kansas Attorney General Opinion 93-125 states: “…public funds may not be used to promote or advocate the position of a governing body on a matter which is before the electorate.” If you examine news media accounts of the debate before the election in November 2004, you will see that our local government officials and their quasi-governmental surrogates were working in full force for the passage of the arena and its tax, in direct violation of this regulation. See Government Funds Promoting Downtown Wichita Arena.

    Finally, by building a government arena, we lose the opportunity to have a privately-owned arena. A private arena, you say? Wouldn’t it have to be owned by greedy capitalists, only seeking to exploit our town just to earn a profit? But in the absence of government coercion or intervention, a business can earn a profit only by meeting customers’ needs, and doing that efficiently. Governments and their bureaucrats do not have this powerful motivating factor. The absence of the computation of profit and loss means that we will never know whether the resources spent on the arena were spent wisely. See A Public or Private Downtown Wichita Arena, Which is Desirable?.

  • Testimony supporting an arena re-vote

    From Karl Peterjohn, Executive Director Kansas Taxpayers Network

    We need to correct the flawed downtown arena proposal’s mistakes. Since the legislature authorized the county sales tax for the downtown arena it has become abundantly clear that the case against proceeding with the flawed arena project has been made. Enclosed with this testimony is a copy of the 2004 flyer used in that election campaign that shows that the critics of this proposal were correct on the key points in this project.

    Here are key points why there should be a revote:

    1) The 2004 cost estimates for the downtown arena project at $184.528 million were inaccurate (see county’s Sept. 1, 2004 arena document). The county now projects $201 million and that is likely to grow. In addition, new reports indicate that there is an effort to have the city fund $108 million in additional infrastructure changes for the arena and the area around it.

    If the 1 cent sales tax was used entirely for property tax relief, the county’s mill levy could be dropped by roughly 20 mills or roughly 65 percent of the current mill levy.

    If you divided the total county and city costs ($201 M + $108 M), that’s almost $700 per person or over $2,700 for a family of four. That’s excessive.

    2) There is no anchor tenant for this facility. The Kansas Coliseum rarely sells out. With the same shows and sports franchises, why build a larger facility?

    3) There is inadequate parking for this facility. Adding necessary parking will drive the cost of this project even higher.

    4) Downtown arena advocates threatened voters with higher property taxes if they did not vote for the sales tax. Sadly, the county property tax mill levy was raised roughly six percent last year and two incumbent commissioners were defeated in their reelection bids as a result.

    5) A privately owned and funded arena in Park City is likely to be built and opened well before the downtown arena project is completed. One of the current users of the coliseum will move to this new private facility.

    In 1993, Wichita city voters rejected a proposed downtown arena project by better than a 2-to-1 margin. In 2004 voters narrowly, by a 52-to-48 percent margin, approved the downtown arena at $184.5 million. Since then, more realistic cost data about the increased price for a downtown arena has become available.

    Let the people vote again on the following four point proposal:

    The county will not proceed with the flawed downtown arena project. The roughly $200 million in sales tax revenue that has been raised will be put to the following uses: 1) The Britt Brown Arena will be remodeled with roughly ¼ of the funds generated by the current 1 cent arena sales tax; 2) The current costs that have been incurred in land acquisition, designs, and other contractual costs will be paid with these funds; 3) The remaining sales tax revenue balances will be used to pay down the county’s mill levy (that should be well over ½ of the entire amount raised so far). In addition, the county will seek state authorization to continue the existing 1 cent countywide sales tax with the proviso that it be used entirely to reduce county property taxes. That would provide a reduction of about 65% of the county’s property tax mill levy; 4) All future county mill levy increases must be submitted to voters and approved at a referendum election in the same way that local sales tax increases are approved.

    Eliminating this large a portion of the county’s mill levy will provide Sedgwick County businesses, taxpayers, and citizens with a significant comparative advantage over other Kansas counties by reducing this tax on assets as well as reducing the uncertainty concerning future property tax hikes. This will take us one step towards becoming more competitive with progressive states where all tax hikes have to receive voter approval: Colorado, Missouri, and Oklahoma.

  • Government funds promoting downtown Wichita arena

    … it is our opinion that public funds may not be used to promote or advocate the position of a governing body on a matter which is before the electorate. However, this does not mean that public funds may not be expended to educate and inform the electorate.

    That’s the opinion of the Kansas Attorney General Robert Stephan from 1993. In this opinion, the Attorney General cited this court opinion:

    It would be establishing a dangerous and untenable precedent to permit the government or any agency thereof, to use public funds to disseminate propaganda in favor of or against any issue or candidate. This may be done by totalitarian, dictatorial, or autocratic governments but it cannot be tolerated, directly or indirectly, in these democratic United States of America. This is true even if the position advocated is believed to be in the best interest of our country. To educate, inform, to advocate or promote voting on any issue may be undertaken, provided it is not to persuade nor to convey favoritism, partisanship, partiality, approval or disapproval . . . of any issue, worthy as it may be.

    Now, look back at the actions of our elected government leaders in the months leading up to the November 2004 election.

    Were they presenting educational material about the benefits of a new arena? Were they promoting an open and honest debate of a new arena’s merits?

    Or were they cheerleading and advocating for the arena, using their offices and government resources?

    I submit that our local governments, our elected officials, and their quasi-governmental surrogates were working in full force for the passage of the arena and its tax.

    That’s not just my opinion. Others noticed it too.

    An editorial by Phillip Brownlee, published in the Wichita Eagle on September 5, 2004, read in part: “If the plan is to pass, city and county elected officials — supported by business leaders — must continue their strong leadership and high-profile support for the arena.”

    After the election, another Wichita Eagle editorial by Rhonda Holman published on November 4, 2004 stated in part: “What made the difference this time, in addition to the effective marketing campaign and all those pennant yard signs, was the unified show of political will on the part of Wichita and Sedgwick County officials. Their willingness to declare the need for such a facility, then argue for raising taxes to meet that need, helped attract necessary support from the businesses that backed the campaign, and finally from voters asked to pay for the arena with a 30-month, 1-percent sales-tax increase.”

    The Wichita Downtown Development Corporation, led by its president Ed Wolverton, was a prominent booster for the arena. Do you know where this organization receives its funds? It is funded through property taxes and its contract with the City of Wichita. Other taxpayer funded institutions, such as the Greater Wichita Convention & Visitors Bureau, the Greater Wichita Area Sports Commission, the Hyatt Regency Wichita, and even the Kansas Turnpike Authority contributed money or in-kind resources to the pro-arena Vote Yea campaign, and most of these institutions campaigned for the arena, too.

    In a television story about Wichita city manager George Kolb, the reporter said: “Some things Kolb says he filled the council in on were … helping get the downtown arena passed.” The clear meaning of this is that city manager Kolb was proud of how he and the Wichita city council worked to help pass the downtown arena tax. Now if Mr. Kolb had talked about how he helped educate the electorate on the issues surrounding the arena tax ballot measure, that would be acceptable. Instead, he and other government leaders are proud of how they worked to ensure passage of the arena tax. That behavior is contrary to how the Kansas Attorney General said they should act.

    I asked our District Attorney to look into this issue of government advocacy for the arena. That office decided, even in light of all this and more evidence, that there was no wrongdoing by our leaders.

    Does this seem a correct conclusion by the district attorney, in light of these facts about the behavior of our local government officials?

    Were local government officials, especially the Sedgwick County Commission, presenting educational material, or were they campaigning for the arena?

    I believe the only conclusion we can make is that they were all campaigning — and campaigning vigorously — for the arena, in spite of what Kansas Attorney General Opinion 93-125 says is acceptable behavior for government officials and the expenditure of public funds.

  • Government vs. private investment and the downtown Wichita arena

    A Wichita businessman proposes building an arena that, while not as large as the downtown Wichita arena being built by Sedgwick County, would provide some competition to the government-owned arena.

    Normally, private investment is welcomed. If you believe in limited government as I do, it is vastly preferred to government spending. But if you’re a Sedgwick County Commissioner getting ready to spend some $200 million in sales tax collections on a government arena, it seems that competition from the private sector isn’t welcome. As reported in The Wichita Eagle:

    Sedgwick County Commission Chairman Dave Unruh said he would prefer Hartman [the Wichita businessman] not go “head to head” with the county. “I am definitely (in favor) of free enterprise and allowing folks to do whatever they think they can do to improve their own financial stature,” Unruh said. “This, however, I think would present some competitive challenges to the downtown arena, and I prefer he not do it.”

    The absurdity in Commissioner Unruh’s statement is eye-catching and revealing of his arrogance. He says, and I believe I am accurate in my interpretation, that free enterprise is good, unless it happens to provide a challenge to a government project!

    Assistant Sedgwick County Manager Ron Holt is a little gentler in his criticism of the proposed private arena, remarking that “overall, it would not be in the best interest of the community.”

    Wichita and Kansas need private investment. When government officials make remarks like these, it a wonder that anyone would choose to invest here. Yet, people do invest here, and the results show the failures of government projects and government-subsidized partnerships. Consider, for example, the government-subsidized Waterwalk vs. the privately developed Waterfront. Consider that the government-owned Kansas Coliseum is not yet 30 years old, but, by most accounts, not suitable for continued use.

    It’s even worse when government is investing in projects of dubious value to the community at large, but is requiring everyone to pay for it. It is telling that in an article about the downtown arena, The Wichita Eagle looks to Greater Wichita Area Sports Commission president and chief executive Bob Hanson for a reaction. It tells how the downtown arena is a gift to special interests, Mr. Hanson being an especially vocal member of this special interest group that will benefit from a taxpayer-supplied arena.

  • Wichita downtown arena project’s failing finances

    Arena Project’s Failing Finances
    Critics And Tax Hike Opponents Were Right

    From Kansas Taxpayers Network

    “The arena critics are being proven right,” said Karl Peterjohn, Executive Director of the Kansas Taxpayers Network, the oldest taxpayer organization in Kansas. “As the leading opponent of the 2004 downtown arena project in Wichita, it is becoming increasingly clear that this project is in major trouble.”

    “In 2004 KTN’s Vote NO flyer warned, ‘Key details about the arena such as location, parking, and design, are not known’,” Peterjohn said. “Our vote NO flyer also warned, ‘With a $184.5 million price tag and no guarantee of events, the arena is a huge gamble with taxpayers money. Half of the events at the Kansas Coliseum (12,000 seats) have less than 3,000 people attend’.” Now the “guaranteed $184.5 million price tag,” is history and the total cost for this deeply flawed project continues to grow and critical details remain up in the air.

    “In our final item urging county voters to reject the sales tax hike to fund the arena, KTN’s flyer warned, ‘The build it and they will come syndrome sounds good but the money spent would be better utilized in YOUR pocket’,” Peterjohn said. “If the county’s sales tax for the arena was used to lower the county’s property tax, we could reduce the county’s mill levy by over 60 percent or roughly 20 mills for the duration of this tax.”

    The arena tax hike was narrowly approved by just over 50 percent of voters in November, 2004. “If the voters had another chance at the arena issue at the ballot box, and taking the tax money that has already been collected and not yet spent, to be used to lower county property taxes and refunded to taxpayers, the downtown arena project would be terminated by the people,” Peterjohn said.

    Arena tax hike advocates succeeded in forcing voters to approve this sales tax increase with the not-so-veiled threat that a property tax hike would otherwise occur. Sedgwick County commissioners unanimously approved a large property tax hike, in August 2006, funding higher county spending in addition to the arena sales tax hike.

    Two of the three incumbent county commissioners seeking reelection in 2006 lost their seats in large part due to their support for raising property taxes in particular and all county taxes in general. The two incumbents, commissioners Burtnett and Sciortino, were defeated by challengers, Parks and Welshimer, who signed KTN’s Taxpayer Protection Pledge promising not to raise county taxes.