Voice For Liberty

Tag: Downtown Wichita revitalization

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

  • WichitaLiberty.TV: Sedgwick County and Wichita issues

    WichitaLiberty.TV: Sedgwick County and Wichita issues

    In this episode of WichitaLiberty.TV: The end of a Sedgwick County Commission election, the Wichita Eagle editorializes on school spending and more taxes, and Wichita Mayor Jeff Longwell seems misinformed on the Wichita economy. View below, or click here to view at YouTube. Episode 207, broadcast August 26, 2018.

    Shownotes

  • Wichita Eagle calls for a responsible plan for higher taxes

    Wichita Eagle calls for a responsible plan for higher taxes

    A Wichita Eagle editorial argues for higher property taxes to help the city grow.

    In a recent op-ed, the Wichita Eagle editorial board writes: “It’s hard to make the argument that Wichitans are overtaxed by their city government. It’s time for the community to look at how it helps the city grow. A responsible plan that asks Wichita families to chip in the cost of a family meal should be part of the conversation.” 1

    First, note that some factual elements of the editorial board’s argument are incorrect, as I show in Wichita Eagle argues for higher taxes.

    The argument that a tax increase is only “the cost of a family meal” is weak. (From the editorial: “A 1-mill increase would cost a property owner $11.50 annually for every $100,000 of appraised value of a home.”) In other words, it’s just a little bit. Just one dollar each month. You won’t even notice it.

    This is a standard argument made by those who want higher taxes and those who oppose tax cuts. The problem is just that: Everyone makes this argument, and when added together, the nickels and dimes add up to real money.

    Besides, there are families in Wichita who have trouble paying for family meals.

    Then, there’s the effect on business. An ongoing study reveals that generally, property taxes on commercial and industrial property in Wichita are high. Specifically, taxes on commercial property in Wichita are among the highest in the nation. Commercial property is taxed at 2.180 times the rate as residential property. (The U.S. average is 1.683.) Because Wichita’s ratio is high, it leads to high property taxes on commercial property. 2

    Raising taxes on commercial enterprise shifts economic activity from the private sector to government. Citizens may want to ask where money is spent most beneficially.

    The Eagle editorial board says higher property taxes could help the city grow. There’s no doubt the city needs help growing. But given the record of our local government leaders — both elected and bureaucratic — it’s difficult to see how giving them more money to spend will help.

    WaterWalk, downtown Wichita, September 30, 2014. There has been little change since then, except for the loss of Gander Mountain.
    As an example of government helping the city grow, consider the Waterwalk development in downtown Wichita. Despite some $41 million in taxpayer subsidy, the development languishes. On top of that, the city doesn’t enforce agreements that might benefit taxpayers. 3

    The Wichita Eagle editorialized “Seven years into a project that was supposed to give Wichita a grand gathering place full of shops, restaurants and night spots as well as offices and condos, some City Council members and citizens remain skeptical at best about WaterWalk’s ability to deliver on its big promises. … True, the skepticism to date is richly deserved.” 4

    Oh. That editorial was written in 2009, nine years ago. Since then, there has been some improvement, like the Marriott Fairfield Inn and Suites Hotel and the fountain. But, Gander Mountain — the development’s retail anchor — closed.

    The present Eagle editorial board calls for a “responsible plan.” But when we see the city spending on things like Waterwalk and then failing to uphold agreements designed to protect taxpayers — well, the city hasn’t been acting responsibly.

    Contrast downtown’s Waterwalk with Waterfront, a development at 13th and Webb Road in east Wichita that started around the same time as Waterwalk. There, developers spent millions of their own money to build a beautiful parkway, sewers, traffic lights, and the like. 5

    Merchants at Wichita’s Waterfront. Click for larger.
    It is at Waterfront where we see large first-class office buildings and small executive offices. It is there we find desirable nationally-known restaurants like Abuelo’s Mexican Food Embassy, Bonefish Grill, PF Chang’s China Bistro, and Red Robin. We also see fine local restaurants like Chester’s Chophouse & Wine Bar. It is at Waterfront we find lodging like Homewood Suites by Hilton, retail stores like Ethan Allen, and the city’s only Whole Foods Market.

    All this at Waterfront was done without help from the taxpayers, unlike downtown’s Waterwalk consuming our $41 million. Other popular developments like Bradley Fair and New Market Square were developed with little or no government help.

    Trends of business activity in downtown Wichita. Click for larger.
    Even the subsidized “development” that most people agree is a success is not all it’s cracked up to be. That is downtown Wichita, where there has been hundreds of millions in private and public investment over the past decade. The result is that over the same time, business activity in downtown Wichita has been on a downhill trend. The data for 2016 (the most recent year for data) is a bit of good news, with the decline stopping and business activity remaining mostly unchanged. It isn’t the vibrant growth we’ve been told is happening in downtown Wichita, but at least things are not getting worse. 6

    So: Do we trust Wichita’s political and bureaucratic leaders to develop a “responsible plan?” Give this record, do we want to shift more resources from the private sector to the government sector?

    Competing tax hikes

    It’s surprising that the Eagle editorial board would recommend higher property taxes right now. That’s because it’s likely we’ll be asked to approve more taxation, probably soon. There is support among the city’s elite for a renovated or new performing arts and convention center, something that probably can’t be done without more tax revenue. Project Wichita is seen by many as an effort to persuade the region for higher taxes.

    Also: In 2014 the steering committee for the Wichita/Sedgwick County Community Investments Plan delivered a report to the Wichita City Council. This report told the council that the “cost to bring existing deficient infrastructure up to standards” is an additional $45 to $55 million per year over current levels of spending. 7

    I’m not aware of the city directing additional spending to cure this maintenance gap. As time passes, the gap becomes larger. Although: The city decided to spend an additional $10 million on street repair. But that was a one-time infusion made available when the city sold a capital asset.

    This backlog of maintenance is a manifestation of the city not being responsible with assets Wichita taxpayers paid for. And if it is true that we need to spend an additional $45 to $55 million per year, where will the city get those funds? The Eagle urges a one mill property tax increase, which it says means the “city budget would gain $3.5 million to $4 million.” To fix our maintenance backlog would require a property tax increase of over ten mills, if that is how the city decides to raise the funds.

    —
    Notes

    1. Wichita Eagle editorial board. Wichita, it’s time to consider a tax increase. It’s past time, actually. August 17, 2018. Available at https://www.kansas.com/opinion/editorials/article216790960.html. ↩
    2. Weeks, Bob. Wichita business property taxes still high. Available at https://wichitaliberty.org/wichita-government/wichita-business-property-taxes-still-high/. ↩
    3. Weeks, Bob. Wichita WaterWalk contract not followed, again. Available at https://wichitaliberty.org/wichita-government/wichita-waterwalk-contract-not-followed/. ↩
    4. Weeks, Bob. Wichita’s Waterwalk failure breeds skepticism. Available at https://wichitaliberty.org/wichita-government/wichitas-waterwalk-failure-breeds-skepticism/. ↩
    5. Weeks, Bob. Many Wichita developers pay for infrastructure. Available at https://wichitaliberty.org/wichita-government/many-wichita-developers-pay-for-infrastructure/. ↩
    6. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends-2016/. ↩
    7. Weeks, Bob. Wichita sales tax does little to close maintenance gap. Available at https://wichitaliberty.org/wichita-government/wichita-sales-tax-little-close-maintenance-gap/. ↩
  • Project Wichita survey

    Project Wichita survey

    The Project Wichita survey is about to end. Will it have collected useful data?

    Project Wichita is “a community engagement process to identify the future we want for our home and the steps necessary to achieve it.” 1 So far it has held focus groups that collected ideas for the future of Wichita, in which “an astounding 3,800+ people 2 shared their vision in 239+ focus groups,” according to the project’s Facebook page. The survey, which is ending on July 6, is another component of the “listen” phase of the project, with “focus” and “share” phases still to come.

    The survey may be taken on-line or by paper. The online survey is implemented as a number of pages, each concerning a topic. The first page is titled “Vision for Our Region: Please indicate your level of agreement with the following for developing a vision for the Wichita region. Our region should be a place that:” Following are several items like “all children have the chance to succeed.” Respondents are asked to select one of these responses for each item:

    • Strongly Disagree
    • Disagree
    • Undecided
    • Agree
    • Strongly Agree

    The second page is titled “Strong Neighborhoods. Please indicate the importance of investing resources (time, human resources, money) in the following for developing and supporting safe and strong neighborhoods throughout our region.” A sample item is “Repair deteriorating homes to improve neighborhoods.” Respondents may choose from these responses:

    • Not important investment
    • Slightly important investment
    • Moderately important investment
    • Very important investment
    • Essential investment

    There is no opportunity to answer in any way other than these responses. There is no possibility of leaving a comment.

    The question of the importance of investment continues with slight variation for six more pages on these topics:

    • Economic Advantage and Opportunity
    • Transportation
    • Cultural Arts
    • Attractions and Entertainment
    • Education; Community Wellness
    • Wichita Riverfront and Downtown Development

    Then a page titled Regional Perspectives: “Please tell us your thoughts about the following regional questions” where participants are asked to indicate their degree of agreement or disagreement with the following:

    • I think an increase in population would make the Wichita region thrive.
    • I am optimistic about the future of the Wichita region.
    • I think the Wichita region has to be willing to change to keep and attract the next generation.

    Then there are some demographic questions.

    Problems

    First, the responses that the project will collect are from a self-selected group of respondents. There is no way to guarantee or know that the respondents are a representative sample of area residents. The focus groups had the same problem. This has been a problem with Wichita’s outreach in the past. In 2014 the city was quite proud of its engagement and positive response regarding the proposed city sales tax. Then, on election day, 62 percent of voters said no. 3 (Of course, those who vote are also a self-selected group of respondents. On the sales tax question, 103,290 people cast a vote. 4 For that year, the Census Bureau estimated there were 283,780 people of voting age in Wichita. 5 So 36.4 percent of the eligible voters made the decision for the rest, voters and non-voters, and also for those too young or ineligible to vote. But when we ask to settle issues by voting, voters are the people who make the decisions.)

    Another problem has to do with the preface to the many questions asking about the importance of making investments in various things. What is missing is whose resources are to be invested? Yours? Mine? Someone we don’t know?

    Related is that almost all the items participants are asked to rate are things that almost everyone agrees are good. Who could not strongly agree with investing so that “all children have the chance to succeed?” I suppose that some people might select “Very important investment” instead of “Essential investment” for some items. That might produce a shade of difference in the importance of items.

    What would really be useful, however, is asking participants to rank the importance of investing in each item, from most important to least important, with no ties allowed. Instructions might be worded like “Rank the importance of investing in the following five areas. 1 is the most important investment, while 5 is the least important. You must assign a rank to each item, and there may be no ties.”

    Then, to make things really useful: Ask participants to produce rankings for the importance of public sector investment, and separate rankings for the importance of private sector investment.

    Understanding and distinguishing the difference between public and private investment is vital. When people believe that others will be paying, there is no limit to what people want. Milton Friedman knew this: “When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else’s money to buy something for himself, he is very careful about what he buys, but doesn’t care at all how much he spends. And when a man spends someone else’s money on someone else, he doesn’t care how much he spends or what he spends it on. And that’s government for you.” (For more, see Friedman: The fallacy of the welfare state.)

    People recognize this. Remarks left on Facebook on the Project Wichita page 6 included this by one writer:

    Just took survey! One would think “they” want to convert Wichita or Kansas to socialism. I’m a liberal conservative Democrat and yet questions are very concerning and disturbing.

    Following up, the same person wrote:

    Applaud the effort however many of the questions concerning me as it relates to governments role in community and well-being of such. … At what point should community and individuals be primarily responsible for many of the topics you address in your survey?

    Another Facebook user wrote:

    Your survey is great but you left out a very important piece of information. WHO is going to provide the money for the investments that are queried in your survey? A lot of areas need investment of funds but, those funds should come from the private sector, not public sector. As a result of the inability to discern a difference in the source of required investments, the survey is somewhat useless.”

    Yet another from Facebook:

    Each of your questions should be followed by the question, “How much are you personally willing to pay for this line item” or “Which government service should be eliminated to pay for this line item”. Your list will get quite short when people are asked to spend their own money rather than other people’s money.

    These basic defects preclude this effort as being serious social science research. Yet, that is likely how it will be presented, especially since a university agency is involved.

    Of note: Project Wichita has no official opinion as who should pay for these investments. Cynics — that is, realists — believe that programs like Project Wichita are designed to convince citizens to support increased taxes or debt issues to be repaid with future taxes, with those future taxes undoubtedly higher.

    One reason for this suspicion is that portions of the Project Wichita process are being managed by Wichita State University’s Public Policy and Management Center. 7 Its director and its associated academics have a clear preference for higher taxes, at one time writing a paper advising cities to create “more willing taxpayers.” 8

    Other people and companies that Project Wichita identifies as part of the “Vision Team” (or “funders”) also made large contributions to the campaign for a Wichita City sales tax in 2014:

    • Allen Gibbs & Houlik, L.C.
    • Jon Rolph and his company Sasnak
    • The Chandler family and Intrust Bank
    • GLMV Architecture
    • Emprise Bank
    • Spirit Aerosystems
    • Commerce Bank
    • Equity Bank
    • Cox Machine
    • Westar Energy
    • Professional Engineering Consultants
    • Star Lumber
    • Bothner & Bradley and its principals
    • Envision
    • Lubrication Engineers
    • Jeff Fluhr, head of Downtown Wichita and now also Greater Wichita Partnership

    Some of these companies regularly receive economic development incentives from the City of Wichita or do business with the city. Some are subject to the city’s regulations such as zoning and permitting.

    It’s difficult to digest all this without concluding that Project Wichita project is designed to develop a case — an appetite — for higher taxes. That’s even before realizing that the driving force behind Project Wichita — according to word on the street — is Jon Rolph, who was the chair of the campaign for the Wichita city sales tax in 2014. Further, Project Wichita is sharing offices with the Greater Wichita Partnership and Downtown Wichita, two organizations always in favor of the expansion of government.

    Individual questions

    Besides general problems with the survey instrument, there are these problems with individual items:

    “Improve the current public transit system (e.g. expand routes, expand hours).” There may be support for spending public funds on this, even if it means raising taxes. This was one of the uses for the proposed Wichita city sales tax in 2014. It was bundled with other items, and voters defeated the tax.

    “Make flights from Wichita Eisenhower National Airport more affordable.” We’ve spent a lot doing this. The city and the airport say the programs have been successful.

    “Increase direct flights from Wichita Eisenhower National Airport.” This is an area that could use improvement. The number of departures and the number of available seats on departing flights has been underperforming the nation, despite much investment in the forms of tax-funded subsidies for airlines. There is also a new airport terminal.

    “Offer more diverse entertainment options (e.g. music festivals, restaurants, theme parks).” There are many people trying to figure out what type of restaurants are wanted in Wichita, and where. These people are motivated by profit. It’s difficult to believe that government could do a better job of deciding upon, and operating, restaurants.

    “Support entrepreneurial opportunities.” There is an organization doing this, e2e. More broadly, when the city offers economic development incentives, it makes it harder for young, entrepreneurial companies to survive as they must bear the cost of incentives and compete with incentivized companies for labor and capital. 9

    Under education, a topic that is glaringly omitted is school choice. Parents like having the possibility of school choice, especially parents who can’t afford private school tuition. Plus, school choice, like charter schools, could help control “sprawl,” something that is often seen as a negative factor. If parents who want to live in central Wichita could have access to school choice in nearby schools, it might counter the commonly-held perception that if you want good schools for your children, you must buy a home outside the Wichita school district.

    “Provide modern performing arts center (e.g. symphony, music theater, opera) that meets the region’s needs.” and “Provide a modern convention center that attracts more conventions and events.” These are topics that Wichita will likely be grappling with soon, and in a real way. Wichita has already hired a consultant to study this issue. (More information is at Century II resource center.) A task force is studying the issue. Soon, it is quite likely that residents of Wichita or Sedgwick County may be asked to approve a sales tax to fund a convention center and possible a performing arts center. Or, citizens suffer the implementation of Design Build Finance Operate and Maintain (DBFOM), or P3. In this model as applied to Wichita, a third party would do all the work of designing, financing, building, and operating a convention center and possibly a performing arts center. Then, the city simply pays a fee each year to use the center, called an “availability payment.” This is simple a way to disguise long-term debt. See Wichita about to commit to more spending. Bigly. for more about this.

    Cynics — that is, realists — believe that programs like Project Wichita are designed to convince citizens to support these taxes or debt issues. (By the way, the convention center business is a poor way to build a city’s economy. See Should Wichita expand its convention facilities?.)

    —
    Notes

    1. Project Wichita. Available at https://www.projectwichita.org/. ↩
    2. With the population of the city of Wichita at about 388,000, (U.S. Census Bureau. 2012-2016 American Community Survey 5-Year Estimates), nearly one percent participated. ↩
    3. Sedgwick County Election Office. Available at https://www.sedgwickcounty.org/elections/election-results/2014-general/. ↩
    4. Ibid. ↩
    5. U.S. Census Bureau. 2010-2014 American Community Survey 5-Year Estimates. ↩
    6. Available at https://www.facebook.com/ProjectWichita/. ↩
    7. “Volunteers wanted the regional 10-year vision and action plan Project Wichita process to include big discussions from as many people as possible. So Wichita State University’s (WSU) Public Policy and Management Center team built a custom process for gathering input across the region. The process includes focus groups with individuals and organizations, gathering feedback at diverse community events, online surveys and robust social media engagement.” Project Wichita. Process. Available at https://www.projectwichita.org/process. ↩
    8. Misty Bruckner is the Director. A few years ago Brucker she and her colleagues co-authored a paper titled “Citizen Attachment: Building Sustainable Communities. See http://www.gfoa.org/sites/default/files/GFR_OCT_10_24.pdf. My reporting on it was titled Wichita needs more, and willing, taxpayers. An excerpt: “Increasingly, citizens are retreating from their responsibilities to community and demanding more from government than they are willing to pay for. But changes in local government behavior can be instrumental in reversing this trend, by strengthening citizens’ commitment to the well-being of their communities. Citizens who are committed to community are more willing to accept responsibility for the well-being of their fellow citizens and are also more likely to join with government and other parties to improve their communities. Citizens who are committed to community are also more willing taxpayers — that is, when government demonstrates that it can be trusted to invest public resources in ways that strengthen the community. The central thrust of this model is getting citizens and governments to work together, but realistically, many communities will require new revenue — including additional tax dollars — if they are to assemble the critical mass of resources necessary for meaningful change. Accordingly, citizens who are willing to pay increased taxes are an important component of building sustainable communities.” (emphasis added) ↩
    9. See Weeks, Bob. Job creation at young firms declines. https://wichitaliberty.org/economics/job-creation-at-young-firms-declines/. Also: “Part of the cost of these companies’ investment, along with the accompanying risk, is spread to a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. But we can’t identify which firms will be successful. So we need an economic development strategy that creates an environment where these young entrepreneurial firms have the greatest chance to survive. The action the Wichita city council is considering this week works against entrepreneurial firms.” Weeks, Bob. Wichita to grant property and sales tax relief. Available at https://wichitaliberty.org/wichita-government/wichita-grant-property-sales-tax-relief/. ↩
  • Downtown Wichita business trends

    Downtown Wichita business trends

    Click for larger.
    There has been much public and private investment in Downtown Wichita. What has been the trend in business activity during this time?

    According to the 2017 report from Wichita Downtown Development Corporation (now known as Downtown Wichita), over the past decade there has been $593,868,858 in private investment, $160,522,002 in public investment, and $171,087,276 investment in Intrust Bank Arena. That’s $925 million of investment in downtown over this period, with more before. 1

    What has been the result of this investment? If you expected business growth in downtown Wichita, you may be disappointed. For the past decade business activity in downtown Wichita has been on a downhill trend. The data for 2016 is a bit of good news, with the decline stopping and business activity remaining mostly unchanged. It isn’t the vibrant growth we’ve been told is happening in downtown Wichita, but at least things are not getting worse.

    The data

    Click for larger.
    The United States Census Bureau tracks business data by zip code. 2 The data that is available includes the number of business establishments, the number of employees, and the annual payroll, expressed in thousands of dollars not adjusted for inflation. It includes private-sector workers only, so it does not count all workers.

    Nearby are results for zip code 67202, which has nearly the same boundaries as the Self-Supporting Municipal Improvement District (SSMID). This is a district that pays extra property tax for supporting the WDDC. Its boundaries, roughly, are from Kellogg north to Central, and the Arkansas River east to Washington. It is greater Downtown Wichita plus Old Town.

    The results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In nearly all cases for nearly all years, the trend is lower — except for 2016.

    For 2016 the numbers are nearly unchanged, with only small changes from the previous year. The number of business establishments is down slightly, while the number of employees and annual payroll rose, also slightly.

    Except for 2016, this is movement in the wrong direction, the opposite of progress. And 2016 represents merely a stop in the downhill slide, not growth. There may be good news in that the number of people living downtown may be rising. But in estimating the population of downtown Wichita, economic development officials use a circuitous method. The result of their calculations is a population much higher than Census Bureau estimates, far outside the range of probable results. 3

    But business activity has been declining.

    Click for larger.

    —
    Notes

    1. Downtown Wichita. State of Downtown Report, 2017. https://downtownwichita.org/user/file/2017-state-of-downtown-report-download.pdf. ↩
    2. U.S. Census Bureau. County Business Patterns (CBP). https://www.census.gov/programs-surveys/cbp/data.html. ↩
    3. Weeks, Bob. Living in downtown Wichita. Available at https://wichitaliberty.org/wichita-government/living-downtown-wichita/. ↩
  • Wichita in ‘Best Cities for Jobs 2018’

    Wichita in ‘Best Cities for Jobs 2018’

    Wichita continues to decline in economic vitality, compared to other areas.

    NewGeography.com is a joint venture of Joel Kotkin and Praxis Strategy Group. Its annual “Best Cities for Jobs” project ranks metropolitan areas according to growth in employment.

    Of 422 metropolitan areas considered, Wichita ranked 383, dropping 28 spots since the previous year.

    Among 100 medium size metropolitan areas, Wichita ranked 93, dropping 5 spots from the previous year.

    NewGeography.com uses employment data from the United States Bureau of Labor Statistics from November 2006 to January 2018. 1 Last year’s publication contains a more detailed explanation of how the rankings capture current year-growth, mid-term growth, and momentum. 2

    In the analysis for 2017, Wichita had also fallen in ranking.

    Wichita has momentum, they say

    Despite this news, Wichita leaders are in denial. Recently Greater Wichita Partnership president Jeff Fluhr told a group of young people this:

    From the innovation campus at Wichita State University and development along the Arkansas River in downtown, including a new baseball stadium, to the conversations happening now about a new convention center and performing arts facility, Fluhr said the momentum is pushing to keep Wichita on par with the development of other communities around the country.

    That development, which has in recent years expanded to incorporate the entire region, is a critical component to attracting and retaining talent — the exact kind of talent in the ICT Millennial Summit crowd. 3

    In January Wichita Mayor Jeff Longwell said, “It’s hard to find a time when we’ve had more momentum.” 4

    In March Sedgwick County Commissioner David Dennis penned a column for the Wichita Eagle praising the county’s efforts in economic development. 5 Dennis is also chair of the commission this year. In his column, the commissioner wrote: “Economic development is a key topic for the Board of County Commissioners and for me in particular. Right now we have a lot of momentum to make our community a more attractive place for people and businesses.”

    At the same time, the Wichita Eagle editorialized: “Wichita’s economy struggled to rebound from the last recession, which held the city back. But there have been positive economic signs of late, including a renewed focus on innovation and regional cooperation. … There also is a sense of momentum about Wichita. Yes, challenges remain, but the city seems to have turned a corner, with even greater things ahead.”6

    In announcing his candidacy for Sedgwick County Commission, Wichita city council member Wichita City Council Member Pete Meitzner (district 2, east Wichita) said, “We have enjoyed great progress and growth during my two terms as a City Council member and I plan to do my part to assure Sedgwick County is part of this continued success.” 7

    Given all this, it ought to be easy to find economic data supporting momentum, progress, and growth. Besides the NewGeography.com report cited above, let’s look at some other indicators.

    Personal income. For the Wichita metropolitan statistical area, personal income in 2016 rose slightly from the 2015 level, but is still below the 2014 level. In real (inflation-adjusted) dollars, personal income fell in 2016. 8

    Personal Income Summary, Wichita, through 2016. Click for larger.

    Population. In 2000 Wichita was the 80th largest metropolitan area. In 2017 its ranking had fallen to 89. See Wichita metropolitan area population in context for more on this topic.

    Trends of business activity in downtown Wichita. Click for larger.
    Downtown Wichita. There’s been a lot of investment in downtown Wichita, both public and private. But since 2008 the trend is fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. Almost every year these numbers are lower than the year before. This is movement in the wrong direction, the opposite of progress. There may be good news in that the number of people living downtown may be rising, but business activity is declining. 9

    Employment. While officials promote the low Wichita-area unemployment rate, there is an alternative interpretation. First, the good news: The unemployment rate for the Wichita metro area declined to 3.9 percent in March 2018, down from 4.2 percent in March 2017. The number of unemployed persons declined by 8.3 percent for the same period. 10

    Is Wichita’s declining unemployment rate good news, or a byproduct of something else? The unemployment rate is the ratio of the number of unemployed persons to the labor force. While the number of unemployed persons fell, so too did the labor force. It declined by 3,367 persons over the year, while the number of unemployed persons fell by 1,056. This produces a lower unemployment rate, but a shrinking labor force is not the sign of a healthy economy.

    A further indication of the health of the Wichita-area economy is the number of nonfarm jobs. This number declined by 1,200 from March 2017 to March 2018, a decline of 0.4 percent. This follows a decline of 0.7 percent from February 2017 to February 2018.

    Of the metropolitan areas in the United States, BLS reports that 308 had over-the-year increases in nonfarm payroll employment, 72 (including Wichita) had decreases, and 8 had no change.

    Growth in output. The worst news, however, is that the Wichita-area economy shrank from 2015 to 2016. In real (inflation-adjusted) dollars, the Wichita metropolitan area gross domestic product fell by 1.4 percent. For all metropolitan areas, GDP grew by 1.7 percent. Since 2001, GDP for all metropolitan areas grew by 29.3 percent, while Wichita had 12.3 percent growth. 11

    Wichita MSA employment, annual change. Click for larger.
    The GDP figures are for 2016, and figures for 2017 won’t be available until September. So what happened in 2017? Could 2017 be the genesis of momentum to drive our economy forward?

    While GDP figures aren’t available, jobs numbers are. For the year 2016, total nonfarm employment in the Wichita metropolitan area grew by 0.62 percent. For 2017, the growth rate was 0.56 percent — a slowdown in the rate of job growth. These job growth figures are far below the rate for the nation, which were 1.79 and 1.58 percent respectively.

    Annual change in job growth, Wichita and USA through 2017. Click for larger.

    Furthermore, Wichita’s job growth rate in 2016 was lower than 2015’s rate of 1.07 percent. This is momentum in the wrong direction. Nearby charts illustrate. 12

    What to do?

    The failure of the Wichita-area economy to thrive is a tragedy. This is compounded by Wichita leaders failing to acknowledge this, at least publicly. While we expect people like the mayor, council members, and the chamber of commerce to be cheerleaders for our city, we must wonder: Do these people know the economic statistics, or do they choose to ignore or disbelieve them?

    From private conversations with some of these leaders and others, I think it’s a mix of both. Some are simply uninformed, while others are deliberately distorting the truth about the Wichita economy for political or personal gain. The people who are uninformed or misinformed can be educated, but the liars are beyond rehabilitation and should be replaced.

    —
    Notes

    1. “The methodology for our 2018 ranking largely corresponds to that used in previous years. We seek to measure the robustness of metro areas’ growth both recently and over time, with some minor corrections to mitigate the volatility that the Great Recession has introduced into the earlier parts of the time series. The ranking is based on three-month rolling averages of the U.S. Bureau of Labor Statistics’ ‘state and area’ unadjusted employment data reported from November 2006 to January 2018.” 2018 How We Pick The Best Cities For Job Growth. Available at http://www.newgeography.com/content/005973-2018-how-we-pick-best-cities-job-growth. ↩
    2. 2017 How We Pick The Best Cities For Job Growth. Available at http://www.newgeography.com/content/005618-2017-how-we-pick-best-cities-job-growth. ↩
    3. Daniel McCoy. ICT Millennial Summit: Wichita is having a moment. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2017/11/30/ict-millennial-summit-wichita-is-having-a-moment.html. ↩
    4. Heck, Josh. Emerging Leaders panel offers insight into eco-devo strategies. Available at https://www.bizjournals.com/wichita/news/2018/01/11/emerging-leaders-panel-offers-insight-into-eco.html. ↩
    5. David Dennis. Sedgwick County part of drive to strengthen area workforce. Wichita Eagle, March 5, 2018. Available at http://www.kansas.com/opinion/opn-columns-blogs/article203559734.html. ↩
    6. Wichita is moving forward. March 1, 2018. Available at http://www.kansas.com/opinion/editorials/article135573253.html. ↩
    7. Bill Wilson. Wichita council member unveils bid for county commission. Wichita Business Journal, November 30, 3017. Available at https://www.bizjournals.com/wichita/news/2018/02/13/wichita-council-member-unveils-bid-for-county.html. ↩
    8. Weeks, Bob. Wichita personal income up, a little. Available at https://wichitaliberty.org/wichita-government/wichita-personal-income-up-2016/. ↩
    9. Weeks, Bob. Downtown Wichita business trends. Available at https://wichitaliberty.org/wichita-government/downtown-wichita-business-trends/. ↩
    10. Weeks, Bob. Wichita unemployment rate falls. Available at https://wichitaliberty.org/economics/wichita-unemployment-rate-falls-2018-03/. ↩
    11. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/. ↩
    12. In some presentations these figures may differ slightly due to data revisions and methods of aggregation. These differences are small and not material. ↩
  • Intrust Bank Arena loss for 2017 is $4,222,182

    Intrust Bank Arena loss for 2017 is $4,222,182

    As in years past, a truthful accounting of the finances of Intrust Bank Arena in downtown Wichita shows a large loss.

    The true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters cite a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and it hides the true economics of the arena. What’s missing is depreciation expense.

    There are at least two ways of looking at the finance of the arena. Nearly all attention is given to the “profit” (or loss) earned by the arena for the county according to an operating agreement between the county and SMG, a company that operates the arena. 1

    This agreement specifies a revenue sharing mechanism between the county and SMG. For 2107, the accounting method used in this agreement produced a profit, or “net building income,” of $1,000,829 to be split (not equally) between SMG and the county. The county’s share was $300,414. 2

    While described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations in conformity with accounting principles generally accepted in the United States of America.” 3

    Intrust Bank Arena Payments to Sedgwick County. Click for larger.
    That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

    A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2017 Comprehensive Annual Financial Report for Sedgwick County. 4 This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially last year. In that respect, it is a report card of our ability to manage our financial resources.”

    Regarding the arena, the CAFR states:

    The Arena Fund represents the activity of the INTRUST Bank Arena. The facility is operated by a private company; the County incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any, and naming rights fees. The Arena Fund had an operating loss of $4.3 million. The loss can be attributed to $4.5 million in depreciation expense.

    Financial statements in the same document show that $4,522,596 was charged for depreciation in 2017.

    Trends of events and attendance at Intrust Bank Arena. Click for larger.
    If we subtract SMG payment of $300,414 from depreciation expense, we learn that the Intrust Bank Arena lost $4,222,182 in 2016.

    Depreciation expense is not something that is paid out in cash. That is, Sedgwick County did not write a check for $4,522,596 to pay depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

    But not many of our civic leaders recognize this, at least publicly. We — frequently — observe our governmental and civic leaders telling us that we must “run government like a business.” The county’s financial report makes mention of this: “Sedgwick County has one business-type activity, the Arena fund. Net position for fiscal year 2017 decreased by $4.3 million to $156.3 million. Of that $156.3 million, $146.0 million is invested in capital assets. The decrease can be attributed to depreciation, which was $4.5 million.” 5 (emphasis added)

    At the same time, these leaders avoid frank and realistic discussion of economic facts. As an example, in years past Commissioner Dave Unruh made remarks that illustrate the severe misunderstanding under which he and almost everyone labor regarding the nature of spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

    The contention — witting or not — is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) in the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to this view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds. Since Kansas is one of the few states that adds sales tax to food, low-income households paid extra sales tax on their groceries to pay for the arena — an arena where they may not be able to afford tickets.

    Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct that depreciation expense is not a cash expense that affects cash flow, it is an economic reality that can’t be ignored — except by politicians, apparently. The Wichita Eagle and Wichita Business Journal aid in promoting this deception.

    The upshot: We’re evaluating government and making decisions based on incomplete and false information, just to gratify the egos of self-serving politicians and bureaucrats.

    Reporting on Intrust Bank Arena financial data

    In February 2015 the Wichita Eagle reported: “The arena’s net income for 2014 came in at $122,853, all of which will go to SMG, the company that operates the facility under contract with the county, Assistant County Manager Ron Holt said Wednesday.” A reading of the minutes for the February 11 meeting of the Sedgwick County Commission finds Holt mentioning depreciation expense not a single time. Neither did the Eagle article.

    In December 2014, in a look at the first five years of the arena, its manager told the Wichita Eagle this: “‘We know from a financial standpoint, the building has been successful. Every year, it’s always been in the black, and there are a lot of buildings that don’t have that, so it’s a great achievement,’ said A.J. Boleski, the arena’s general manager.”

    The Wichita Eagle opinion page hasn’t been helpful, with Rhonda Holman opining with thoughts like this: “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.” (For some years, the county paid to create a large “check” for publicity purposes.)

    That followed her op-ed from a year before, when she wrote: “And, of course, Intrust Bank Arena has the uncommon advantage among public facilities of having already been paid for, via a 30-month, 1 percent sales tax approved by voters in 2004 that actually went away as scheduled.” That thinking, of course, ignores the economic reality of depreciation.

    Even our city’s business press — which ought to know better — writes headlines like Intrust Bank Arena tops $1.1M in net income for 2015 without mentioning depreciation expense or explaining the non-conforming accounting methods used to derive this number.

    All of these examples are deficient in an important way: They contribute confusion to the search for truthful accounting of the arena’s finances. Recognizing depreciation expense is vital to understanding profit or loss, we’re not doing that.

    —
    Notes

    1. Management Agreement between Sedgwick County and SMG. August 1, 2007. Available here. ↩
    2. Minutes of the Sedgwick County Commission, February 14, 2018. ↩
    3. Management Agreement between Sedgwick County and SMG. ↩
    4. Sedgwick County. Comprehensive Annual Financial Report of the County of Sedgwick, Kansas for the Year ended December 31, 2017. Available at https://www.sedgwickcounty.org/media/39501/2017-cafr.pdf. ↩
    5. Ibid. ↩
  • Project Wichita, remember Visioneering Wichita

    Project Wichita, remember Visioneering Wichita

    As Project Wichita gets ready to gather information and set goals, let’s be aware that we’ve done this before, and not long ago.

    Project Wichita is a new initiative to do something about the future of Wichita. I hope it works. But we’ve been down this road before, and I don’t know of anything created that has been of lasting value.

    That past effort was Visioneering Wichita. I’d supply a link to its website, but the site went stale from lack of updates. Eventually it was abandoned, although its remnants may be found at archive.org. (Visioneering Wichita does have a Facebook page, although it hasn’t been updated for eight years.)

    Here’s one of the goals that Visioneering Wichita created for the city:

    Income Growth: The Wichita MSA must increase its focus on those non-manufacturing job sectors that generate higher pay. Since 2002, the Wichita per capita income as a percent of the United States per capita income has slowly increased, and in 2006 and 2007, the value exceeded 100%, for the first time since 1987.16 In spite of the recent uptick in Wichita’s per capita income as a percentage of the United States, it is expected that it will continue the longer term decline c until: a) the decline in manufacturing jobs stops b) the gap between the United States and Wichita in non-manufacturing earnings per job begins to decrease and c) the gap in minority income is decreased. 1

    Charts from Visioneering Wichita, May 2009. Click for larger.

    Per Capita Personal Income, Wichita and Visioneering Peers. Click for larger.
    I’ve gathered data on per capita personal income through 2016, the latest year for a full year of data, and prepared charts similar to those Visioneering used. Wichita per capita personal income continues to be lower than the cities identified as Visioneering peers, except for Oklahoma City. In fact, Wichita per capita personal income was lower in 2016 than in 2014.

    Wichita and United States Per Capita Personal Income. Click for larger.
    Comparing Wichita to the nation, we see that Wichita took a downturn the past few years.

    Personal Income, Wichita and Visioneering Peers. Click for larger.
    Per capita measures, while useful, are not without caveats that need to be understood and considered. For example, if half the people of Wichita moved to other cities, the per capita income would not change if the income of those who left was evenly distributed compared to the original distribution.

    Staff of the Visioneering Wichita project used to provide updates on these statistics from time to time. The last update provided to officials that I can recall was in 2013.

    Wichita civilian labor force through January 2018. Click for larger.
    Speaking of moving from Wichita, one of the things our region needs to address is the shrinking labor force. Data from the Bureau of Labor Statistics shows that the Wichita labor force is on the decline, while it is rising for the nation.

    Of the declining labor force, Wichita government and civic leaders use this in two different, and conflicting, ways. First, the declining labor force means that even though job growth is very low, the unemployment rate has dropped, and by a lot. This improved unemployment rate is trumpeted by politicians and bureaucrats. Second, we see concern that Wichita may not have the workers necessary to fill jobs in expanding companies like Spirit Aerosystems. This is used to promote increasing spending on incentives and training infrastructure.

    Wichita manufacturing jobs, through January 2018. Click for larger.
    By the way, the Visioneering report mentioned the decline in manufacturing jobs. The data shows that since the end of the Great Recession, the number of manufacturing jobs in the Wichita area is slowly declining, while rising for the nation at the same time.

    Perhaps the best thing Project Wichita could do is to reveal the truth about the Wichita economy and the economic development infrastructure we’ve built. The Chung Report has done a bit of this. But I don’t think our civic leaders act as through they know and understand. It is against their self-interest to admit that what they’ve done hasn’t been working.

    —
    Notes

    1. Visioneering Wichita Revised Vision Document, May 2009. ↩
  • Project Wichita right to look ahead at city’s future

    Project Wichita right to look ahead at city’s future

    We can understand self-serving politicians and bureaucrats. It’s what they do. But a city’s newspaper editorial board ought to be concerned with the truth.

    In February the Wichita Eagle editorialized about Project Wichita, a ramping-up effort to do something about the future of Wichita. 1 It’s worthwhile to take a look at the op-ed, if only to learn something about the quality of Wichita Eagle editorial writing.

    I understand civic boosterism; the desire to paint a positive image of the future. But this rosy outlook has to be based, at least loosely, on facts. Following, a look at a few claims made in the editorial.

    “Our downtown is becoming more of a destination and place to live.”
    The problem is this: Wichita economic development officials use a circuitous method of estimating the population of downtown Wichita, producing a number much higher than Census Bureau estimates. Downtown Wichita, the city’s economic development agency responsible for downtown, says the population of downtown is 2,138, which is far — really far — outside the range the Census Bureau gives. For more about this, see Living in downtown Wichita.

    As far as a destination for business, the U.S. Census Bureau tracks business trends by zip code. For zip code 67202, which is downtown Wichita, results since 2007 show fewer business establishments, fewer people working downtown, and lower earnings generated in downtown Wichita. In all cases, the trend is lower. For more about this, see Downtown Wichita business trends.

    Further, Wichita leaders have exaggerated the number of people working in downtown. For years our leaders told us there were 26,000 daytime workers in downtown Wichita. But this claim is based on misuse of data so blatant it can be described only as malpractice. In fact, this figure is now omitted from the state of downtown reports. No one will accept responsibility for this mistake. See Downtown Wichita jobs, sort of and Downtown Wichita report omits formerly prominent data.

    “But Wichita feels pretty good about itself, which suggests the community is at the perfect time to think about its future.”
    I have to say, we’ve been hoodwinked, and by our top leaders. Recently both the mayor of Wichita and chair of the county commission penned upbeat editorials praising our economy. See Mayor Longwell’s pep talk and Sedgwick County’s David Dennis on economic development.

    But the reality is quite different. See:

    Given this, why do the mayor, county commission chair, and our newspaper’s editorial board say what they do? The first two are politicians, but we ought to ask that our newspaper seek the truth, not personal political gain.

    “It will get more serious in March, when students and volunteers from Wichita State University’s Public Policy and Management Center …”
    This is the same organization on which the city relies for many services, including the gathering of public input in past campaigns like the 2014 sales tax election. The city seemed sure that tax would pass, but voters rejected it by a wide margin. 2

    “Public Policy director Misty Bruckner and her group will deliver feedback and conclusions to Project Wichita’s four co-chairs.”
    A few years ago Bruckner co-authored a paper titled “Citizen Attachment: Building Sustainable Communities.” 3 My reporting on it was titled Wichita needs more, and willing, taxpayers. An excerpt: “Increasingly, citizens are retreating from their responsibilities to community and demanding more from government than they are willing to pay for. But changes in local government behavior can be instrumental in reversing this trend, by strengthening citizens’ commitment to the well-being of their communities. Citizens who are committed to community are more willing to accept responsibility for the well-being of their fellow citizens and are also more likely to join with government and other parties to improve their communities. Citizens who are committed to community are also more willing taxpayers — that is, when government demonstrates that it can be trusted to invest public resources in ways that strengthen the community. The central thrust of this model is getting citizens and governments to work together, but realistically, many communities will require new revenue — including additional tax dollars — if they are to assemble the critical mass of resources necessary for meaningful change. Accordingly, citizens who are willing to pay increased taxes are an important component of building sustainable communities.” (emphasis added)

    Please don’t fault me for being cynical when I suspect that this entire operation is designed to prepare Wichitans (or the region) for a tax increase.

    “Community input will be as wide as the city limits.”
    Wait a moment. I thought we were supposed to think regionally.

    “Project Wichita seems similar to Visioneering Wichita …”
    I wonder if anyone remembers anything positive that resulted from Visioneering Wichita. After a few years, the organization’s website went stale, and staff discontinued making presentation to the city council and county commission See Visioneering asks for money. Let’s ask these questions.

    “Unlike Visioneering, Project Wichita isn’t headed by city or county government.”
    Visioneering Wichita was led by the Chamber of Commerce, not government. Local governments made financial contributions to Visioneering, just as they are also contributing to Project Wichita. 4

    —
    Notes

    1. Wichita Eagle Editorial Board. Project Wichita right to look ahead at city’s future. Available at http://www.kansas.com/opinion/editorials/article198178899.html. ↩
    2. Ryan, Kelsey. Voters soundly defeat Wichita sales tax proposal. Available at http://www.kansas.com/news/politics-government/election/article3567045.html. ↩
    3. See http://www.gfoa.org/sites/default/files/GFR_OCT_10_24.pdf. ↩
    4. Wichita Business Journal. Sedgwick County Commission approves Visioneering Wichita funding. Available at https://www.bizjournals.com/wichita/blog/2012/12/sedgwick-county-commission-approves.html. ↩
  • In Wichita, spending semi-secret

    In Wichita, spending semi-secret

    The Wichita City Council authorized the spending of a lot of money without discussion.

    At its March 27, 2018 meeting, the Wichita City Council passed a resolution authorizing the spending of funds for the River Vista development on the west bank of the Arkansas River in downtown.

    The agenda packet for the meeting gave the details: “The overall project budget is $7,862,999 with STAR Bonds financing $4,750,000 of the costs and the City financing $1,050,000. The balance of the project costs will be assessed against the Improvement District.”

    (STAR bonds are a mechanism whereby future sales tax revenue is routed to the project developer, rather than paying for the cost of state and Sedgwick County government. The “Improvement District” is the development itself, and the “City” is, of course, the taxpayers of Wichita.)

    All this was approved by the city council at its meeting on July 21, 2015, under the item “Amendment to Amended and Restated Development Agreement – River Vista, L.L.C. (West Bank Apartments) and issuance of Sales Tax Special Obligation Revenue (STAR) Bonds (District VI).” It appeared on the March 27, 2018 agenda so that a resolution formalizing the arrangement could be passed.

    Was the council’s action of public business and interest? The city council didn’t think so. The item was passed as part of the meeting’s consent agenda. This is a bundle of agenda items that are voted on in bulk, with one single vote, unless a council member requests an item be “pulled” for discussion and possibly a separate vote. If no council member asks to pull an item, there is no discussion.

    No one asked to “pull” this agenda item for a discussion and vote.

    Generally, items on consent agendas are not controversial, at least according to the city’s reasoning. I suppose that applies to this item, as the spending was approved in the past.

    It might have been useful, however, to remind Wichitans of the taxpayer-supplied subsidy going to this project. Just so we’re reminded now and then of where our money is going.

    But: The principals of the apartment project are frequent seekers of taxpayer subsidy, and likely plan to ask for more — much more — in the future. Some are also big funders of campaigns, in particular that of Wichita Mayor Jeff Longwell. We call this cronyism.

    So the consent agenda provides a handy place to pass laws without discussing them, hoping that no one will notice. Semi-secret.

    As it turns out, the Wichita Business Journal noticed this item and wrote the article West bank Arkansas River upgrades on City Council agenda. The article starts with “Wichita’s City Council on Tuesday is scheduled to discuss …” But because of the consent agenda and no council member believing the spending deserved attention, that discussion never happened.