Voice For Liberty

Tag: Downtown Wichita revitalization

Articles about the redevelopment of downtown Wichita and its impact on the economic freedom of Wichitans.

  • Touring a Wichita-owned downtown retail development

    I have often wondered why economists, with these absurdities all around them, so easily adopt the view that men act rationally. This may be because they study an economic system in which the discipline of the market ensures that, in a business setting, decisions are more or less rational. The employee of a corporation who buys something for $10 and sells it for $8 is not likely to do so for long. … A politician who wastes his country’s resources on a grand scale may have a successful career.
    — Ronald Coase

    william-street-parking-garage-2013-09-02-01

    At one time it was thought that the Wichita city-owned parking structure in the 400 block of East William Street would house retail shops along the street. But the results should give us reason to be wary of government economic development efforts.

    As reported by the Wichita Eagle almost twenty years ago on Wednesday, October 20, 1993:

    The council also approved a plan to spend about $76 a square foot to construct roughly 6,000 square feet of retail space on the first floor of the parking garage. The space would lease for an estimated $8.70 a square foot.

    Council member Sheldon Kamen questioned that part of the plan. ”I just can’t visualize spending $76 a square foot,” he said. “If I was a developer I wouldn’t spend $76 a square foot for retail space on William street.”

    Council member Joan Cole disagreed with Kamen, calling $8.70 a “very good price” that would attract tenants. ”It is my feeling there are small operations that would find this kind of small space very attractive,” she said.

    (Adjusted for inflation, these prices would be $122 and $14.)

    But it hasn’t happened. As can be seen in this video, a Wichita city government office occupied some of the space, but the office has moved to another location.

    It’s not as though the building has some advantages. There are hundreds of state employees parking in the garage each workday. It’s adjacent to the block with the Eaton Hotel and the Wichita Downtown Development Corporation, the agency charged with promoting downtown. This retail space is right across the street from the city’s bus transit center. It’s also one block away from the Intrust Bank Arena, which was promoted as a driver of commerce and activity for the surrounding area.

    william-street-parking-garage-2013-09-02-02

    As can be seen in the nearby photos (click them for larger versions), a walk down this block also reveals maintenance issues that might, in some circumstances, be considered as contributing to blight. Maybe that’s why there’s evidently no demand to rent this space — except by a government office, and even it has left.

    The difference

    What is the difference between private ownership of assets and government ownership? A big factor is the accountability provided by markets, along with the profit motive. Private owners of rental property like this have a big incentive to keep it filled with tenants. If the private owners are able to attract tenants and control their costs, they can earn a profit. Markets impose a discipline on these costs, because landlords can charge only what the market will bear for rent. If landlords can’t attract tenants, or can’t control costs, they go out of business. That makes the property available to someone else, perhaps someone who can manage the property successfully.

    Markets and the profit motive are not perfect. But when private landlords are inefficient, no one is harmed except the landlords.

    Government, however, can’t earn a profit or suffer a loss. It can’t even calculate profit and loss in any meaningful sense. Usually government doesn’t account for its capital investment. That’s certainly the case with this empty retail space. A private landlord would realize that this empty space that can’t be rented has an opportunity cost that is very real. That doesn’t appear to be the case with Wichita city management.

    This illustrates the weak accountability that government faces. Despite situations like this, the Wichita city manager received effusive praise from the Wichita City Council this year, along with a large raise in pay. Two years ago the incumbent Wichita mayor didn’t inspire a strong opponent, and only about 12 percent of the people bothered to vote.

    Considering all the advantages this government property has, it’s failing. It has no tenants, and it’s becoming blighted. The best thing the city could do is sell this property so that the benefits of markets and the profit-and-loss system can replace city bureaucrats.

  • Wichita economic development: And then what will happen?

    magnifying-glass-2

    The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
    — Henry Hazlitt

    Critics of the economic development policies in use by the City of Wichita are often portrayed as not being able to see and appreciate the good things these policies are producing, even though they are unfolding right before our very eyes. The difference is that some look beyond the immediate — what is seen — and ask “And then what will happen?” — looking for the unseen.

    Thomas Sowell explains the problem in a passage from the first chapter of Applied economics: thinking beyond stage one:

    When we are talking about applied economic policies, we are no longer talking about pure economic principles, but about the interactions of politics and economics. The principles of economics remain the same, but the likelihood of those principles being applied unchanged is considerably reduced, because politics has its own principles and imperatives. It is not just that politicians’ top priority is getting elected and re-elected, or that their time horizon seldom extends beyond the next election. The general public as well behaves differently when making political decisions rather than economic decisions. Virtually no one puts as much time and close attention into deciding whether to vote for one candidate rather than another as is usually put into deciding whether to buy one house rather than another — or perhaps even one car rather than another.

    The voter’s political decisions involve having a minute influence on policies which affect many other people, while economic decision-making is about having a major effect on one’s own personal well-being. It should not be surprising that the quantity and quality of thinking going into these very different kinds of decisions differ correspondingly. One of the ways in which these decisions differ is in not thinking through political decisions beyond the immediate consequences. When most voters do not think beyond stage one, many elected officials have no incentive to weigh what the consequences will be in later stages — and considerable incentives to avoid getting beyond what their constituents think and understand, for fear that rival politicians can drive a wedge between them and their constituents by catering to public misconceptions.

    The economic decisions made by governing bodies like the Wichita City Council have a large impact on the lives of Wichitans. But as Sowell explains, these decisions are made by politicians for political reasons.

    Sowell goes on to explain the danger of stopping the thinking process at stage one:

    When I was an undergraduate studying economics under Professor Arthur Smithies of Harvard, he asked me in class one day what policy I favored on a particular issue of the times. Since I had strong feelings on that issue, I proceeded to answer him with enthusiasm, explaining what beneficial consequences I expected from the policy I advocated.

    “And then what will happen?” he asked.

    The question caught me off guard. However, as I thought about it, it became clear that the situation I described would lead to other economic consequences, which I then began to consider and to spell out.

    “And what will happen after that?” Professor Smithies asked.

    As I analyzed how the further economic reactions to the policy would unfold, I began to realize that these reactions would lead to consequences much less desirable than those at the first stage, and I began to waver somewhat.

    “And then what will happen?” Smithies persisted.

    By now I was beginning to see that the economic reverberations of the policy I advocated were likely to be pretty disastrous — and, in fact, much worse than the initial situation that it was designed to improve.

    Simple as this little exercise may sound, it goes further than most economic discussions about policies on a wide range of issues. Most thinking stops at stage one.

    We see stage one thinking all the time when looking at government. In Wichita, for example, a favorite question of city council members seeking to justify their support for government intervention such as a tax increment financing (TIF) district or some other form of subsidy is “How much more tax does the building pay now?” Or perhaps “How many jobs will (or did) the project create?”

    These questions, and the answers to them, are examples of stage one thinking. The answers are easily obtained and cited as evidence of the success of the government program.

    But driving by a store or hotel in a TIF district and noticing a building or people working at jobs does not tell the entire story. Using the existence of a building, or the payment of taxes, or jobs created, is stage one thinking, and no more than that.

    Fortunately, there are people who have thought beyond stage one, and some concerning local economic development and TIF districts. And what they’ve found should spur politicians and bureaucrats to find ways to move beyond stage one in their thinking.

    An example are economists Richard F. Dye and David F. Merriman, who have studied tax increment financing extensively. Their article Tax Increment Financing: A Tool for Local Economic Development states in its conclusion:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development that receives the subsidy — not a surprising finding. What about the rest of the city? Continuing from the same study:

    If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

    We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

    In a different paper (The Effects of Tax Increment Financing on Economic Development), the same economists wrote “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not. … These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

    Here we have an example of thinking beyond stage one. The results are opposite of what one-stage thinking produces.

    Some city council members are concerned about creating jobs, and are swayed by the promises of developers that their establishments will employ a certain number of workers. Again, this thinking stops at stage one. But others have looked farther, as has Paul F. Byrne of Washburn University. The title of his recent report is Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth, and in its abstract we find this conclusion regarding the impact of TIF on jobs:

    Increasingly, municipal leaders justify their use of tax increment financing (TIF) by touting its role in improving municipal employment. However, empirical studies on TIF have primarily examined TIF’s impact on property values, ignoring the claim that serves as the primary justification for its use. This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district.

    While this research might be used to support a TIF district for industrial development, TIF in Wichita is primarily used for retail development. And, when thinking beyond stage one, the effect on employment — considering the entire city — is negative.

    It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. But over and over we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

  • A vision for Wichita

    Wichita city hall logoWhy are some in Wichita so insistent on pushing their vision of what our city should look like, and why are they willing and eager to use the coercive force of government to achieve their vision? In the article below, Randal O’Toole, using a work by Thomas Sowell, provides much insight into understanding why.

    Reading this post, I couldn’t help think of Wichita: the “manufactured crisis” of too much driving and too little walking; the desire by many, including several Wichita City Council members — even self-styled conservative members — to expand the power and reach of government; and the denial of responsibility for obvious failures like Waterwalk.

    project-downtown-logoWe should remember that the plan for downtown Wichita developed by Boston planning firm Goody Clancy is a plan developed by and for self-styled elites. We only need to remember when David Dixon, Goody Clancy’s principal, told Wichitans that in the future, Wichitans will be able to “enjoy the kind of social and cultural richness” that is only found at the core. That’s an insult to the vast majority of Wichitans, but the elites in Wichita evidently believe it, or are willing to tolerate this insult in order to achieve their vision.

    O’Toole visited Wichita in 2010 and presented a fascinating lecture.

    The Vision of the Urbanites

    By Randal O’Toole

    As the Antiplanner has traveled and visited people all over the country, I’ve noticed an interesting phenomenon. Though I’ve met thousands of suburban and rural residents who are very happy with their homes and lifestyles, I’ve never met one who thinks the power of government should be used to force others to live in the same lifestyle. Yet I’ve met lots of urban residents who openly admit that they believe their lifestyle is so perfect that government should force more if not most people to live in dense, “walkable” cities.

    Do cities turn people into liberal fascists? Or do liberal fascists naturally congregate into cities, and if so, why?

    A general description of the phenomenon I’ve observed can be found in Thomas Sowell’s 1995 book, The Vision of the Anointed. Sowell says that America’s liberal elites view themselves as smarter or more insightful than everyone else, and thus qualified to impose their ideas on everyone else. The process of doing so, says Sowell, follows four steps (p. 8):

    First, the anointed identify or, more usually, manufacture a crisis. Sowell’s book reviews three such crises: poverty, crime, and teen pregnancy, all of which were declining in the 1960s when the liberals turned them into crises. The crises relevant to this blog include such things as urban sprawl (totally manufactured as in fact it is not a problem at all) and auto driving (while some of the effects of driving are negative, these are easily corrected while the overall benefits of driving are positive).

    Second, the anointed propose a solution that inevitably involves government action. Sowell makes it clear that the the leadership of the elites go out of their way to define or manufacture the crises in ways that make it appear the government action are the only solutions. In other words, their real goal is to make government bigger, not to solve problems. I don’t know if that is true or not, but it doesn’t really matter; what matters is they propose the wrong solutions to problems that often don’t really exist.

    Third, once the solution is implemented, the results turn out to be very different, and often far worse, than predicted by the anointed. Crime, poverty, and teen pregnancy went up, not down, when government stepped in to “fix” these problems in the 1960s. In the case of urban planning, anti-sprawl policies made housing unaffordable and led to the recent mortgage crisis. Anti-automobile policies make congestion worse and therefore waste even more energy and produce more pollution.

    The final stage is one of denial, in which the elites claim that their policies had nothing to do with the worsening results. Other factors were at work, they claim; in fact, the results might have been even worse if their enlightened policies had not been put into effect.

    Sowell notes that the anointed use several tactics to promote their ideas. For example, “empirical evidence itself may be viewed as suspect, insofar as it is inconsistent with that vision” (p. 2). Whenever the Antiplanner uses data to show that there is no urban sprawl crisis or rail transit doesn’t work in a debate with an urban anointed, the inevitable response is some version of “figures don’t lie but liars figure.” “Statistics can be used to show anything you want,” is another version. These comforting words leave the anointed free to dismiss any data and all that conflict with their vision.

    A second fundamental tactic is to presume that they have the moral high ground. “Those who accept this vision are deemed to be not merely factually correct but morally on a higher plane,” says Sowell. “Put differently, those who disagree with the prevailing vision are seen as being not merely in error, but in sin” (pp. 2-3). The term “smart growth” is a classic example of this tactic, used solely to bludgeon any dissenters with the claim that they must favor “dumb growth.”

    Relying on tactics like these, the anointed avoid confronting the fraudulent nature of their crises and the failures of their solutions. “What is remarkable is how few arguments are really engaged in, and how many substitutes for arguments there are,” says Sowell (p. 6).

    While The Vision of the Anointed describes the situation, it doesn’t answer the fundamental question of why people think that way. A partial answer is provided by Sowell’s 1987 book, A Conflict of Visions, in which Sowell traces two different world views back to the late eighteenth century. One view, expressed by Adam Smith, is that humans are imperfect and so we should design institutions that work even if the face of these imperfections. The other view, proposed by William Godwin, is that humans are perfectable, which suggests that the benign hand of government authority should be used to guide people to that perfection.

    Today, the Tea Party represents the descendants of Adam Smith, while urban planners are descendants of Godwin. As University of California planners Mel Webber and Fred Collignon wrote more than a decade ago, urban planners were “heir to the postulates of the Enlightenment with its faith in perfectibility.”

    The question still remains: why are urbanites more susceptible to the vision of the anointed? Perhaps part of the answer is that the constant friction between strangers that cities impose on their residents leads to a desire for government authority to protect people from those frictions. But a larger part of the answer may be that the role of government is far more visible in cities than elsewhere, and far larger in cities today than in the past, so residents of those cities cannot imagine living without it — and those who want more government are attracted to those cities. In any case, everyone in general and urbanites in particular should be wary of any ideas that make government bigger, as they are probably just part of some elitist scheme to coercively impose their vision on everyone else.

    The link to this article at O’Toole’s site is The Vision of the Urbanites.

  • WichitaLiberty.TV August 25, 2013

    WichitaLiberty.TV logo

    In this episode of WichitaLiberty.TV, host Bob Weeks leads viewers through the first two chapters of Henry Hazlitt’s book “Economics in One Lesson,” using cartoons created by Amanda BillyRock. It’s about looking at not only the immediate effects but at the longer effects of any act or policy; and tracing the consequences of that policy not merely for one group but for all groups. Amanda uses the parable of the broken window to illustrate. Then, Bob wonders about an evaluation committee formed by the City of Wichita to vet downtown development partners: Did the committee overlook important information, and why didn’t the city council object as its members had previously? Episode 10, broadcast August 25, 2013. View below, or click here to view on YouTube.

  • 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.

    Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base.

    In his State of the City Address for 2013, Wichita Mayor Carl Brewer told the audience (based on his prepared remarks):

    As you know, revitalizing downtown has been a key part of growing our community in recent years, recognizing that a healthy and thriving downtown improves our ability to attract new business, keep our young people here, and expand our tax base. With $100 million in completed downtown projects in 2012 and another $115 million starting this year, we’ve made extraordinary progress toward having the downtown that Wichitans have dreamed of. … As development continues downtown, we are closer to reaching our goals of increased pride, an increased tax base, and bringing more businesses and jobs to Wichita.

    ssmid-investment-quote-2013

    In its report on the economics of downtown Wichita redevelopment, the Wichita Downtown Development Corporation says:

    The Downtown SSMID (Self Supported Municipal Improvement District — shown above) has seen a ten-year total amount of $396,850,538 in public investment and $564,776,159 in private investment. SSMID property values have increased over $300 million in the last ten years.

    The Wichita Downtown Development Corporation sold the planning process to Wichitans by making the argument that “it will grow existing tax base revenues.”

    Wichita downtown self-supporting municipal improvement district (SSMID) boundary map

    To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.

    Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.

    With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little). This process is the success story that Mayor Brewer and boosters of public investment in downtown trumpet, as the mayor did twice in one paragraph in his State of the City Address.

    So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?

    The answer is that after a period of increasing values, the assessed value of property in downtown has has been declining. The peak was in 2008. The nearby table holds the figures.

    This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.

    Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars in worth, we are told.

    So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?

    Wichita downtown self-supporting municipal improvement district (SSMID) assessed property valuation

    Data can be viewed here.

  • Janet Miller corrects misinformation

    A Wichita City Council member sets out to correct misinformation, but instead makes a number of factual errors.

    At last week’s Wichita City Council meeting, Council Member Janet Miller (district 6, north central Wichita) took an opportunity to correct misinformation she says was presented. It wasn’t the first time she’s done that; see On Wichita’s Exchange Place TIF, Janet Miller speaks, City council members on downtown Wichita revitalization, Wichita Old Town TIF district illustrates cost and harm of subsidy, Wichita fluoridation debate reveals attitudes of government, and At Wichita City Council, facts are in dispute for other examples of Miller attempting to correct misinformation.

    It should be noted that Miller and some other council members make these statements from their perch on the city council bench. There, their statements can’t be questioned or rebutted except by other council members. That happens only rarely. It’s left to others to do that job.

    Here are some examples from the most recent meeting, with video following.

    On the positive economic impact to the city of the project, Miller said “For every dollar that the city invests in any part of this project the return to the public good is two point six two.” But as I detail in In Wichita, economic development policies are questioned, this is not true for this project when the large cost to the city’s debt service fund is considered, as has been the city’s policy for economic development incentives. Except: Apparently new policy has been formulated to suit the special needs of this project.

    Also, the hotel received tax credits that were a cost to the state and the nation, of which Wichita taxpayers are part. These costs were not included in the cost-benefit study that Miller cited.

    In promoting the benefit of the hotel, Miller said that the city retains one hundred percent of the guest tax collected by the hotel. She didn’t tell the audience that this wasn’t her preference. Miller voted for an ordinance that would have re-routed 75 percent of that tax back to the hotel, to be used in any way its owners want. But Kansas law allowed citizens to challenge the special type of ordinance that was used to implement this law. By gathering signatures and winning an election, this guest tax redirection that Miller supported was defeated. Now, she says that having no such redirection is a positive factor.

    Miller also mentioned the retail space lease in the parking garage, saying it’s “being leased to a third party professional management entity who has the expertise to recruit high quality tenants,.” She added that this will result in increased tax revenue to the city.

    This is true, I suppose. But it doesn’t negate what Miller voted to do for one of her long-time campaign supporters. She vote to build, at taxpayer expense, about 8,500 square feet of retail space in the garage. Then she voted to lease it to her campaign contributors for $1 per year. This space can then be rented out for, at minimum, about $127,500 annually. We don’t really know what the public purpose for this is, or why this had to be done. Except for cronyism — we’re sure of that.

    Miller also said that as a council member she earns a salary that is 30 percent of her previous salary. Council members have a salary of around $35,000, which implies that Miller previously earned around $116,000. Good for her to have earned that.

    Miller also carped about the referendum election in February 2012, noting that the “city” could not raise money and campaign for the project. That’s not entirely true. We saw that in November 2004 and November 2008, government officials campaigned “off the books” for the temporary county sales tax and Wichita school bond. Council members could have spoken as private individuals in favor of their position, whatever it was.

    As it turned out, the Ambassador Hotel group spent four times as much as the side that won. Lack of money to get out a message was not a problem.

    As far as misinformation during the campaign, I would ask readers to review the Wichita Eagle’s fact-checking article, as well as my own article Fact checking the Wichita Ambassador Hotel campaign. Additionally, the campaign site I created at dtwichita.com is still available, as are the articles on wichitaliberty.org. If Miller or anyone else is able to find an error, I will post a correction.

  • Wichita downtown tax base: Rising?

    Wichita city leaders have promoted public investment in downtown Wichita as wise because it will increase the tax base.

    In his State of the City Address for 2013, Wichita Mayor Carl Brewer told the audience (based on his prepared remarks):

    As you know, revitalizing downtown has been a key part of growing our community in recent years, recognizing that a healthy and thriving downtown improves our ability to attract new business, keep our young people here, and expand our tax base. With $100 million in completed downtown projects in 2012 and another $115 million starting this year, we’ve made extraordinary progress toward having the downtown that Wichitans have dreamed of. … As development continues downtown, we are closer to reaching our goals of increased pride, an increased tax base, and bringing more businesses and jobs to Wichita.

    The Wichita Downtown Development Corporation sold the planning process to Wichitans by making the argument that “it will grow existing tax base revenues.”

    Wichita downtown self-supporting municipal improvement district (SSMID) boundary map

    To evaluate the success of the city’s efforts, we might look at the change in assessed property valuation in downtown Wichita over past years. A way to do that is to look at the valuations for property in the Wichita downtown self-supporting municipal improvement district (SSMID). This is a region of the city that pays an additional property tax to fund the activities of the Wichita Downtown Development Corporation. Its boundaries are roughly the Arkansas River east to Washington, and Kellogg north to Central.

    Assessed valuation is the basis for levying property tax. The process starts with an appraised value, which is targeted to be fair market value for the property. Then, that is multiplied by 25 percent for commercial property, or by 11.5 percent for residential property. This produces the assessed value. Multiply that by the sum of the several mill levy rates that apply to the property, and you have the total property tax for that property.

    With all the new projects coming online in downtown Wichita, we should expect that the assessed valuation is rising. As someone converts an old, dilapidated property into something more valuable, appraised and assessed values should rise. As new buildings are built, new appraised and assessed value is created where before there was none (or very little). This process is the success story that Mayor Brewer and boosters of public investment in downtown trumpet, as the mayor did twice in one paragraph in his State of the City Address.

    So what has happened to the assessed valuation of property in downtown Wichita, using the SSMID as a surrogate?

    The answer is that after a period of increasing values, the assessed value of property in downtown has has been declining. The peak was in 2008. The nearby table holds the figures.

    This is the opposite of what we’ve been promised. We’ve been told that public investment in downtown Wichita builds up the tax base.

    Some might excuse this performance by noting there’s been a recession. That’s true. But according to presentations, there has been much activity in downtown Wichita. Hundreds of millions of dollars in worth, we are told.

    So why isn’t the assessed valuation rising? Why is it falling during the time of huge successes?

    More research is needed.

    Wichita downtown self-supporting municipal improvement district (SSMID) assessed property valuation

    Data can be viewed 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.

    Wichita Project Downtown Annual Report 2012

    In his questions, Wichita City Council Member Paul Gray (district 4, south and southwest Wichita) asked whether the amount of public investment presented did, in fact, include all public investment.

    In his answer, Scott Knebel, who is Downtown Revitalization Manager, said no, not all forms of public investment were included in the figures presented in the report. He told the council that an analysis is being prepared, perhaps to be available in May.

    Gray urged Knebel to be more forthcoming when reporting on the level of public investment in order to gain a better level of community buy-in: “If you truly want a greater level of community buy-in, being as forthcoming as we can with the financial analysis of these projects and truly demonstrating what we as a community are putting in through all the different public financing mechanisms available. You may not persuade the people who don’t like public participation in projects — you’re not going to change their viewpoints by that and I don’t expect you to — but the difference is you may get more trust and buy-in from the community that thinks you’re not being forthcoming and honest with them.”

    Regarding Wichita news media, Gray said the media may say “‘See, it’s a 90 percent private funded ratio versus 10 percent’ which is not really the case. We’re skewing actual numbers to demonstrate our successes downtown, but I think our successes downtown speak for themselves.”

    Knebel and Wichita Downtown Development Corporation President Jeff Fluhr promised to be more forthcoming with investment figures in the future.

    Gray also asked about the city’s practice of building retail space and practically giving it away to developers, who can then lease the space and earn outsized returns at taxpayer expense. I reported this at the time this lease was under consideration by the city council:

    According to a letter of intent approved by the city council — and sure to become law after a public hearing at a meeting of the Wichita City Council on September 13th — the city is planning to build about 8,500 square feet of retail space in a downtown parking garage. The garage is being built, partly, to serve a hotel Burk and partners are developing.

    Here are the details of the deal Burk and his partners are getting from the taxpayers of Wichita: The city plans to lease this space to Burk and $1.00 per year. Not $1.00 per square foot, but $1.00 for the entire space — all 8,500 square feet.

    That’s the plan for the first five years. For the next 10, the city would charge $21,000 rent per year, which is a rate of about $2.50 per square foot.

    For years 15 through 20, the rent increases to $63,000, or $7.41 per square foot. At the end of this period, Burk will have the option of purchasing the space for $1,120,000, which is a cost of about $132 per square foot.

    That cost of $132 per square foot is within the range of what sources in the real estate industry tell me top-quality retail space costs to build in Wichita, which is from $130 to $140 per square foot. Rents asked for that space would be from $15 to $18 per square foot per year.

    Using the low figure, Burk could expect to collect about $127,500 in annual rent on space he rents for $1.00, leaving a gross profit of $127,499 for him. As the $15 rent is a net figure, Burk’s tenants will pay taxes, insurance, and maintenance.

    Wichita city manager Robert Layton answered Gray by saying that real estate leasing is not an area of the city’s expertise.

    Without Gray’s questions, these important matters of public policy would likely not have been brought to public attention. For mentioning these topics, Gray was — in an attempt at humor by Wichita City Council Member Pete Meitzner (district 2, east Wichita) — branded as “Debby Downer.”

    Citizens might expect that as millions in public funds are invested, someone in city hall is keeping track, and that there is a plan for reporting these numbers. Citizens should ask why Mayor Brewer, City Manager Layton, and current council members are not concerned that there appears to be no such plan for accountability.

    The notion of reporting that there was only $10.7 million in “public projects” in 2012 is absurd. Just one project, the Ambassador Hotel, received $15,407,075 in taxpayer funds to get started, and then was slated to receive $321,499 per year for the first five years, with smaller amounts for 22 years. Wichita voters rejected a small part of the ongoing subsidy, but the rest remained.

    As to city manager Layton’s answer that the city is not experience in real estate leasing, my response is well, why then did you get involved? It’s not the first time the city has made such a sweetheart lease deal with some of the same parties. It’s become almost routine, as I reported at the time this lease was being considered:

    While most citizens might be shocked at the many layers of subsidy offered to Burk, he’s accustomed to such treatment. In 2003, the city offered a similar deal to Burk and his partners for retail space that is part of the Old Town Cinema project. That deal was made with Cinema Old Town, LLC, whose resident agent is David Burk. According to the Wichita Eagle, other partners in this corporation include Wichita theater owner Bill Warren, real estate agent Steven Barrett, Key Construction and seven others.

    David Wells, one of the owners of Key Construction, is a partner with Burk on the new hotel project, and Key is slated to build the garage under a process that doesn’t require competitive bidding, even though city money is used to pay for it. Note: Later the garage was put out for competitive bid.

    The Old Town project let Burk and his partners lease 17,500 square feet of retail space from the City of Wichita for $1.00 per year for the first five years. Like the proposed project, that’s not $1.00 per square foot, but $1.00 per year for all 17,500 square feet.

    I wonder: Is the fact that these parties — Burk, Key Construction, Bill Warren — are reliable campaign contributors to Wichita Mayor Carl Brewer and many other Wichita City Council members, does that mean anything?

    Wichita Eagle reporting on this meeting is at City Council member Paul Gray questions numbers by Wichita Downtown Development.

  • Lavonta Williams: ‘You don’t have to go there’

    Do not enter signAt a Wichita City Council meeting last August, Council Member Lavonta Williams (district 1, northeast Wichita) advised taxpayers on what to do if they disagree with action taken by the council: Just don’t go there.

    The topic that day was whether the council should decide to add fluoride to the city’s water, or should it let citizens vote on the matter. Williams expressed concern that if the council were to decide to fluoridate Wichita’s water, citizens would not be able to avoid ingesting the added fluoride. They wouldn’t have a choice.

    By way of analogy, Williams counseled the concerned citizens: “Did you like the art that went down to WaterWalk? Maybe you didn’t. But you don’t have to go there.”

    She also said we don’t have to go to the apartments that were built at WaterWalk, and we don’t have to stay at the Ambassador Hotel.

    True, we can avoid these government-sponsored and subsidized places if we want to. But what Williams may have forgotten is that we can’t avoid being forced to pay for them.

    Besides that, what does it say about a government where if we disagree with its actions, we’re told “you don’t have to go there”?