Voice For Liberty

Tag: Economic development

  • Letters on Wichita Bowllagio

    Letters recently appeared in the Wichita Eagle regarding the proposed Bowllagio project, a west side entertainment destination. Bowllagio is planned to have a bowling and entertainment center, a boutique hotel, and a restaurant owned by a celebrity television chef.

    The developers of this project propose to make use of $13 million in STAR bond financing. STAR bonds are issued for the immediate benefit of the developers, with the sales tax collected in the district used to pay off the bonds. The project also proposes to be a Community Improvement District, which allows an additional two cents per dollar to be collected in sales tax, again for the benefit of the district.

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    Property rights

    Imagine paying your mortgage and taxes for many years, only to get a knock on your door one day. A real estate developer tells you he wants your land.

    That’s what happened to a couple on South Maize Road in the boundaries of the proposed Bowllagio sales-tax-and-revenue (STAR) bonds district. They were offered the county-appraised value, plus 10 percent, for their home. But they don’t want to move, as they couldn’t find a comparable property for what the developer offered.

    Now the homeowners are concerned they may be forced out of their home through the process of eminent domain. This forceful taking of property by government is one of the worst possible violations of private property rights.

    Wichita Mayor Carl Brewer said that the city does not intend to use eminent domain for the proposed Bowllagio entertainment complex.

    That’s good news. The city can and should affirm this promise by writing it into the Bowllagio authorizing ordinance. Supporting private property rights is essential; the use of public funds for private projects is bad policy.

    Susan Oliver Estes
    Wichita

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    Let developer fill funding gap

    Bowllagio’s representative told the Wichita City Council last week that the developer needed $13 million in public money to fill the projected funding shortfall for the project to be economically feasible. I believe the developer needs to dig deeper into his own pocket to fill this funding gap, or seek private venture capital.

    As an experienced real estate practitioner, I am aggrieved that the Wichita mayor and City Council members lack the necessary experience to properly evaluate these projects. They have proved to be little match in protecting the public treasury against sophisticated developers accustomed to using the public purse as part of their real estate funding formulas.

    The investment of public money in bowling alleys, restaurants, shops and hotels that compete with existing businesses that offer the same services is not a proper role for government to play and is wrong. It creates an unlevel playing field for those businesses that compete in the same market using their own money.

    If the Bowllagio development venture is an economically feasible project, the private developer will find the private money he needs to fund it.

    John R. Todd
    Wichita

  • Wichita economic development official to speak

    This Friday (June 18) Vicki Pratt Gerbino, president of the Greater Wichita Economic Development Coalition, will address members and guests of the Wichita Pachyderm Club.

    The Greater Wichita Economic Development Coalition, also known as GWEDC, is responsible for economic development in the Wichita area, such as recruitment and retention of “economic driver industries” in Wichita and Sedgwick County.

    All are welcome to attend Wichita Pachyderm Club meetings. The program costs $10, which includes a delicious buffet lunch including salad, soup, two main dishes, and ice tea and coffee. The meeting starts at noon, although it’s recommended to arrive fifteen minutes early to get your lunch before the program starts.

    The Wichita Petroleum Club is on the ninth floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway) in Wichita, Kansas (click for a map and directions). You may park in the garage (enter west side of Broadway between Douglas and First Streets) and use the sky walk to enter the Bank of America building. The Petroleum Club will stamp your parking ticket and the fee will be only $1.00. Or, there is usually some metered and free street parking nearby.

  • Wichita Bowllagio hearing produces only delay

    Yesterday’s meeting of the Wichita City Council featured a lengthy public hearing for a proposed west-side entertainment development known as Bowllagio. Bowllagio is planned to have a bowling and entertainment center, a boutique hotel, and a restaurant owned by a celebrity television chef.

    The developers of this project propose to make use of $13 million in STAR bond financing. STAR bonds are issued for the immediate benefit of the developers, with the sales tax collected in the district used to pay off the bonds. The project also proposes to be a Community Improvement District, which allows an additional two cents per dollar to be collected in sales tax, again for the benefit of the district.

    The Kansas STAR bond process calls for several steps: First, a local governing body, like the City of Wichita, must approve the concept and set boundaries for the project. This is what yesterday’s agenda item called for. If approved by the council, the Kansas Secretary of Commerce would examine the project to see if it meets statutory criteria. If the Secretary approves the project, the city is then required to prepare a project plan and hold another public hearing concerning whether to adopt the project plan. The project plan must be passed by a two-thirds supermajority of the council.

    One of the elements of the project plan, according to the 2010 Kansas Legislator Briefing Book, is a “marketing study conducted to examine the impact of the special bond project on similar businesses in the projected market area.” The effect of Bowllagio on existing Wichita-area businesses was a major source of concern for both council members and citizens speaking at the public hearing.

    Speaking during the public hearing, Ray Baty, who is manager of a Wichita bowling center, said Bowllagio is not a new concept, but rather one that would compete with existing programs already in Wichita. The C.A.T.S. system, a training system promoted by Bowllagio developers, is actually a portable system, Baty said.

    He contended that introduction of Bowllagio to the market will not grow the market for bowling, but will further divide the existing market, resulting in a loss of revenue and profit for existing bowling centers. He said that bowling centers lose six percent of their customers each year, a trend that he said is national.

    Frank DeSocio, owner of several bowling centers in Wichita, told the council that the bowling training promoted by Bowllagio developers already happens in Wichita at the present. He mentioned five full-time bowling teachers and coaches already working in Wichita bowling centers.

    He added that Wichita does very well in obtaining and hosting tournaments, mentioning 17 PBA live televised tournaments that took place in Wichita, 10 regional events, a BPA womens’ open, six intercollegiate championships that were televised live, and numerous Kansas state high school championships.

    “Everything the Maxwell Group [developer of Bowllagio] claims they want to do is already being done in Wichita by the current bowling centers,” qualifying that he’s speaking only of the bowling side of the Bowllagio proposal, not the restaurants.

    In my remarks to the council, I mentioned that Wichita has had examples of restaurants or other establishments being announced — sometimes by the mayor in his annual state of the city address — but then the development failed to materialize. I expressed concern that we might commit to a large amount of STAR bond financing based on big plans that never advance beyond some small initial stage.

    Susan Estes told the council that “this is an extremely profound day” for the City of Wichita. She asked will the city help one business owner over another business owner in the same industry? She said that Bowllagio has some unique aspects, but it is a bowling alley. Its other entertainment features are also available in Wichita. We are using tax money to compete against existing businesses, she said.

    In response to a question by a homeowner in the project area, the mayor, indicating he believed he speaks for the council, said the council would not support using eminent domain to remove the homeowner from his home.

    During discussion by council members, a subject of controversy was whether approving project boundaries and forwarding the application to the Secretary of Commerce constitutes an endorsement of the project by the City of Wichita. Some council members wanted to pass an ordinance that would establish the boundaries of the district, and then have the Secretary decide whether the project meets the statutory requirements for a STAR bond project. Wichita economic development director Allen Bell mentioned that the council’s endorsement of the project might be a factor the Secretary would consider in determining whether to approve the project.

    A question from Council Member Lavonta Williams elicited Bell’s further opinion that the Secretary is “looking for a signal from the council” regarding its support for the project. Lack of local support, he added, would be taken in a “negative way.” Council Member Paul Gray agreed with this assessment.

    Vice Mayor Jeff Longwell disagreed, saying that all the Secretary needs is a geographic boundary for the proposed project. He contended that the process starts with setting the boundaries, and that other questions are difficult or impossible to answer without doing this. There are too many unknowns, he added, to give this project a formal endorsement at this time.

    Longwell also mentioned a report that showed that the south-central region of Kansas, which includes Wichita, receives fewer state economic development funds, relative to population, than the northeast Kansas region. He said we needed to “equal the playing field.”

    Longwell said he didn’t want to put together a package that would harm existing businesses, saying he wouldn’t vote for the project if an independent study showed that result would happen.

    Council Member Jim Skelton asked about the property taxes the development would pay. Bell replied that the property taxes should increase by a large amount, as the land is vacant now and is planned to receive $95 million of development. He said that while STAR bonds and Community Improvement District financing is proposed for this development, the plan does not include property tax abatements, industrial revenue bonds, tax increment financing, or any other diversion of property taxes.

    Council Member Janet Miller asked if the Kansas STAR bond statutes prohibited adding these other types of incentives to the project. The answer, according to Bell, is that these programs could be added on to this development, as has been done in some Kansas STAR bond districts.

    Later Miller referred to the “lack of information to make an education decision about the project.” She wondered why the developers would not spend “one-tenth of one percent of their $50 million dollar investment” ($50,000) to produce the studies that would give the council the information it needs to decide whether to send the project to the Secretary of Commerce with its support.

    When City Manager Bob Layton suggested a delay to gather more information from the developers, council members readily agreed. Layton said that city staff will visit with the developers, looking for an approach that will make council members comfortable with proceeding, addressing some of the information needs expressed today.

    Due to scheduling, Layton said that this matter would need to appear on next week’s agenda, or there would be a one month delay before it could be considered at a council meeting.

    The council voted unanimously to defer the item for one week, and to keep open the public hearing.

    Analysis

    An important issue to many council members is the potential harmful affect of Bowllagio on existing businesses, particularly bowling centers. Miller’s suggestion that the developers spend the money to have an independent assessment of this performed is entirely sensible.

    But I don’t think a study of that scope can be performed in one week. As it is now, the city will probably rely on information provided by the developers. It must be recognized that they have a $13 million incentive to produce information favorable to their cause. In his remarks, Gray recognized that proof that Bowllagio will not harm existing businesses will not come from “somebody advocating for the project.” It would require a third-party, independent analysis, he said.

    As of now, it is difficult to see how information that will satisfy council members can be produced by next week’s meeting.

    In my opinion, the local bowling center operators are justifiably concerned that a subsidized competitor will harm their business. They were able to show that many of the purportedly unique aspects of the Bowllagio concept are already available in Wichita, and have been for some time.

    Further, it’s not only direct competitors such as bowling centers that we need to be concerned for. Since the development is proposed to include a Mexican restaurant, what will its impact be on existing Mexican restaurants? And not only restaurants offering that cuisine, but all other restaurants?

    In a broader sense, a subsidized business competes with all other businesses in the market for employees and other goods and services that all business firms purchase.

    Longwell’s contention that we can still “kill” the project at a later date if reports come back showing negative impact on local businesses is, in my opinion, an empty promise. If the Kansas Secretary of Commerce approves this project, it would be very difficult for the council to vote against Wichita receiving $13 million in state tax dollars, especially in light of Longwell’s argument that the Wichita area doesn’t receive nearly enough of this economic development money.

    While council members such as Schlapp say they’re in favor of free markets, she and the other council members nearly always vote in favor of intervention in markets. The fact that the city council members have so many questions about the proposal tells us that this plan is, in fact, a form of centralized planning by government.

    As I remarked to the council, developments such as this are portrayed as a success story, in that someone has confidence in Wichita because they’re investing here. But I wonder why these people won’t invest in Wichita unless they receive millions in payments or tax forgiveness from the city, county, school board, and/or state.

    Aren’t the real heroes in Wichita the people — many of them small business owners — who invest in Wichita without the benefit of TIF districts, tax abatements, STAR bonds, or other forms of subsidy or incentive?

    These people, besides facing subsidized competition, additionally have to pay the taxes that make the subsidies to others possible.

    Regarding the mayor’s statement that eminent domain will not be supported for this project: Kansas law does not prohibit the use of eminent domain to acquire property in a STAR bond district (K.S.A. 12-17,172).

    If the city wants to assure property owners that their property will not be subject to seizure by eminent domain, the city can add language to that effect in the ordinance. With four city council positions — including the mayorship — up for election next spring, it’s possible that a future city council might not be opposed to the use of eminent domain. This change could take place during the time Bowllagio developers are acquiring property. An ordinance would help prevent this from happening.

    Similarly, if it is not the intent of the developers to seek additional forms of subsidy such as tax increment financing or property tax abatements, appropriate language could be added to the authorizing ordinance.

  • Wichita Warren Theater groundbreaking raises policy issues

    Friday’s groundbreaking of a new Warren Theater and renovation of the existing theater in west Wichita provide an opportunity to revisit some of the public policy issues surrounding Wichita city government and its intervention in the economy in the name of economic development.

    Wichita Mayor Carl Brewer and Vice Mayor Jeff Longwell claim that the economic development incentives or subsidies offered to Warren do not cost Wichita taxpayers anything.

    Reading comments left to stories at various media outlets, there is definitely a problem with citizens understanding the nature of the city’s industrial revenue bond program. There is no money being lent by the city, as many citizens seem to believe. Instead, the benefit of the program is the escape from paying property taxes and possibly sales taxes. The fact that tax forgiveness is mixed in with a private loan or bond purchase is definitely a source of confusion. The city should seek to simplify this program, if it intends to continue this practice.

    But what about the claim that tax forgiveness does not cost other taxpayers? Will the new theater make use of city services such as fire and police protection? Will employees of the theater send their children to public schools? Vice mayor Longwell says that the city is not adding new police officers because of the new theater, so there is no additional cost for police protection. At the margin, that may be true — each additional house or building does not require a new policeman be hired. But at some time, additional city services and personnel will be required.

    The city’s practice of liberally granting tax abatements goes against the constant refrain that we must “build up the tax base.” The city’s position is that by “investing” in tax breaks, the city will gain more revenue in the future.

    The fallacy of the city’s investment philosophy can easily be seen. When the city grants tax abatements, there is a cost-benefit analysis that accompanies the proposal. The rationale of this analysis that by giving up tax revenue now, more will flow in at some future time.

    That’s the source of the fallacy. The return to the city and other governmental units is more tax revenue. Is it the purpose of the city to generate more and more tax revenue? Is it productive to grant one taxpayer favored status so that other hapless taxpayers can be soaked instead?

    When a business invests, it does so in order to increase its productive capacity so that it can earn higher future profits, those profits — or losses — being the measure of success of the investment. Government has no ability to calculate profit and loss, and therefore has no way to judge whether its investment has been wise and productive.

    There is also, of course, the concept that private business investment is voluntary, while the action the city takes is not voluntary. Citizens must comply.

    The companies that receive tax breaks are often prominent companies that ask for large tax abatements. It is worth considerable time and effort — and campaign contributions — for these companies to pursue these benefits. Small companies, however, often don’t fit into the various programs the city has. Instead, they face additional taxes to pay for the taxes the city doesn’t collect when it grants incentives and subsidies.

    Recently Alan Cobb wrote of the harm that targeted incentives cause, using Detroit as an example: “While state and local government poured incentives into the Big Three’s trough, the marginal costs of doing business for everyone else crept up.” See Wichita targeted economic development should end.

    An aspect of the incentive or subsidy package granted in this case is a fixed, negotiated, growth in property taxes the renovated theater will pay. There are a few points that deserve discussion. First, the base taxable value for the theater is the present value. The theater owner, however, is spending several million dollars on a renovation of that theater. This, according to the Sedgwick County Appraisers Office, would increase the taxable value of the theater by a large amount.

    But based on the deal struck with the City of Wichita, this increase in value will not figure into the base taxable value and therefore, will not affect the taxes (PILOT, actually) the theater owner will pay.

    Further, the rate of growth in value, 2.3 percent per year, is lower than what might be expected for commercial property to increase in value in many years. This fixed, predictable rate of growth is reminiscent of last year’s Proposition K proposal. The Wichita Eagle rejected this proposal, editorializing: “Over time, this system could result in significant disparities and a disconnect from actual market values, thus likely violating the Kansas Constitution’s requirement of a ‘uniform and equal basis of valuation.’”

    But in this case one politically-favored business was able to receive this benefit. These special deals breed justifiable cynicism and distrust of not only City Hall politicians and bureaucrats but businesses that seek this form of pork-barrel spending through the tax system.

    Finally, the payments the existing theater will make are not taxes, but payment in lieu of taxes, or PILOT. These payments are different in character from regular property taxes. Instead of falling under the Kansas property tax law regarding payment and possible sale of the property to pay taxes if the taxpayer falls behind for long enough, PILOTS are more in the form of a contract between the city and the taxpayer. If the taxpayer were to fail to pay, the city would have to sue for breach of contract. If the city should prevail in such a suit, it would stand in line with other creditors instead of taking a preferred position as in a tax sale.

    This is, of course, assuming the city would choose to pursue such a lawsuit. Nothing would require it to do so. As the city has in the past bailed out this theater owner with a no-interest and low-interest loan, we could easily imagine the city deciding to let these missing or late PILOT payments slide by.

    This too assumes that failure to pay PILOT payments as agreed would become public knowledge. The Sedgwick County Treasurer’s office prints lists of delinquent property taxpayers. There is no corresponding list of delinquent PILOT payments.

  • Southwest Airlines topic of Wichita Eagle article

    Sunday’s Wichita Eagle carried a story featuring local elected officials’ reaction to the possibility that Southwest Airlines would start service to Wichita. (City, county officials cautiously weigh subsidy for Southwest Airlines, May 30, 2010)

    A source of controversy is over the payments of public funds that are thought to be necessary to acquire the service. The Eagle article quotes an unnamed source as saying it would take about $3 million in public funds to “get the service up and running.” It is not disclosed whether this is a one-time requirement, or if this is $3 million per year for some specific period, or perhaps forever.

    Wichitans may want to remember that the subsidy paid to AirTran started small and was promoted as a temporary measure until the airline could establish itself in Wichita. The program, however, has grown to a combined $7 million annual payment from the state, county, and city. It seems unlikely that this number will ever drop.

    At one time Wichita was a city known for its entrepreneurs. But recently the New York Times noted that Wichita is known as a “pioneer in the business of paying airlines to continue service.”

    An interesting tidbit in the Eagle story is Wichita City Council Member Sue Schlapp making a distinction between a “subsidy” and an “incentive.” What we offer to Southwest would be an incentive, not a subsidy, she said.

    The overall tone of the article is that Wichita City Council Members and Sedgwick County Commissioners are making a show of concern, wanting to be “realistic,” desiring more details and something “reasonable and feasible.”

    Despite this show of concern and prudence, if this matter comes before these bodies, I’ll be surprised if even one member votes against it.

    One thing this article did not mention is that Charleston, South Carolina was able to lure Southwest without having to pay a subsidy.

    By way of comparison, the Wichita metropolitan area population is 612,683 (2009 estimate), while the Charleston-North Charleston-Summerville, metropolitan area populations is 659,191. In 2008, there were 780,756 enplanements at the Wichita airport, while there were 1,174,667 at the Charleston airport.

    According to reports, the Charleston Convention and Visitors Bureau estimates a $139 million economic impact with the arrival of Southwest. An economic impact analysis has been prepared for the City of Wichita, but Wichita officials will not release it, citing an exception in the Kansas Open Records Act (KORA).

  • Wichita won’t release Southwest Airlines report

    Research produced for the City of Wichita by a taxpayer-supported university won’t be made available to the public until a later date.

    The report, produced by the Center for Economic Development and Business Research at Wichita State University, may provide analysis of the feasibility and economic impact of Southwest Airlines entering the Wichita market.

    An informal request made by myself for this document, which the city escalated to a formal request under the Kansas Open Records Act (KORA), was denied. The reasoning that city legal staff provided is as follows:

    “The request is denied pursuant to KSA 45-221(a)(20). The reports have not been distributed to a majority of the quorum of any body, have not been cited in a public meeting. These memoranda contain research data in the process of analysis and contain recommendations in which opinions are expressed or actions proposed.”

    The portion of the statute referred to, which is one of many exceptions to the Kansas Open Records Act, reads: “Notes, preliminary drafts, research data in the process of analysis, unfunded grant proposals, memoranda, recommendations or other records in which opinions are expressed or policies or actions are proposed, except that this exemption shall not apply when such records are publicly cited or identified in an open meeting or in an agenda of an open meeting.”

    It is important to recognize that the Kansas Open Records Act does not prohibit the City of Wichita from releasing this document. The law simply does not require the city to release the records.

    But the city can release the document, if it wanted to. It is within the discretion of the city to do so.

    Looking forward, I believe there will be a time when the document will become a public record and the city will have to supply it. I don’t know what the city accomplishes by delaying the release of it until that time. It is true that I am skeptical of the conclusions of the document as reported in the Wichita Eagle, which has obtained a copy of the report through a source other than the city.

    Specifically, I would like to see the reasoning or evidence for the reported claim that the entry of Southwest will result in 7,000 additional jobs — direct and indirect — being added to the Wichita area. As I noted in previous articles, our area’s second-largest employer has just 6,000 employees. These grandiose economic development claims are difficult to believe.

    Other articles on this topic:
    In Wichita, will Southwest save our city?
    Wichita economic development claims deserve scrutiny

  • In Wichita, will Southwest save our city?

    Talk that low-cost carrier Southwest Airlines might enter the Wichita market has the usual cast of government bureaucrats, centralized planning advocates, and their boosters in a tizzy.

    The Wichita Eagle’s Rhonda Holman has Wichita director of airports Victor White saying that if the necessary subsidies are offered, the popular airline will consider serving Wichita.

    (Oops. White actually used the word “incentives,” not “subsidies.” There are some who believe there is a difference in meaning between the two words. These are the types of nuances you have to become comfortable with when politicians and government bureaucrats try to direct and control economic development.)

    Holman’s editorial makes a case for subsidizing another low-cost airline at Wichita’s airport, citing some remarkable economic development statistics:

    Two recent studies supported the view that Southwest would build on the current affordable airfares program in leveraging low fares and boosting ridership at Mid-Continent — forecasting 33.5, 37 and 39 percent increases in airport activity and 7,000 additional direct and indirect jobs over such a carrier’s first three years in Wichita, as well as $29.5 million annually in savings for travelers.

    As I pointed out a few weeks ago, these numbers are not believable. As I wrote two weeks ago, while more air service options are good for Wichita travelers, we need to be suspicious of the lofty claims of thousands of jobs and huge economic impact like the numbers claimed in this case. A few years ago I reported on a whopper of a economic impact figure given for the Wichita airport. It turned it the figures was based on some unrealistic assumptions, and used numbers likely to be counted a second time as part of someone else’s economic impact.

    In the present case, the claim of 7,000 jobs to be created is a very large number. According to figures provided by the Greater Wichita Economic Development Coalition, only one company in the greater Wichita area has over 7,000 employees. The company with an employee count nearest 7,000 is Cessna, with about 6,000 employees.

    Can anyone seriously claim that adding one more airline to the many already serving Wichita will result in the addition of more jobs than what exists at Cessna?

    This is particularly true in that while there is one (or maybe two, depending on your definition) low-cost airlines receiving subsidies to serve Wichita, the other major airlines pretty much meet the discounters’ prices. This was the rational for bringing a low-cost airline to Wichita: by bringing in even one, it would force all other airlines to lower their fares.

    This goal being largely achieved, it’s hard to fathom that adding one more discount airline would have a huge impact.

    These economic development studies deserve scrutiny, and not just by eco-devo boosters and their cheerleaders who believe the government should heap money on anyone or anything that hints they might locate in Wichita — or leave Wichita. I asked Jeremy Hill of Wichita State University’s Center for Economic Development and Business Research if I could see the study that purportedly supports paying for more airline service. He, citing a non-disclosure agreement, would not send me the report or comment on its content. So I have a request pending at city hall.

    There’s another angle to this story that hasn’t been reported in the Wichita Eagle news stories and editorials: Charleston was able to obtain Southwest Airlines service without paying a subsidy. The State, South Carolina’s largest newspaper and owned by the same McClatchy Company that owns the Wichita Eagle, reports that there was a lot of wooing, but there were no economic incentives.

    In the Charleston situation, there evidently won’t be the massive state-supplied subsidy as we have in Kansas. But Southwest will still get a leg up: A USA Today story quotes a Charleston airport official saying “Southwest didn’t want a state subsidy, but was interested in the airport’s incentives a temporary waiver of landing fees, up to $10,000 to market new flights, and up to $150,000 for other start-up costs.”

    Correction: The Wichita Eagle reported in its May 13 article that Southwest service in Charleston is not contingent of state subsidies.

  • Wichita economic development to be topic of meeting

    This Monday (May 17), economic development tools and incentives in Wichita will be discussed at a meeting sponsored by the Kansas chapter of Americans for Prosperity.

    Susan Estes, AFP Field Director and John Todd, AFP Volunteer Coordinator will lead the meeting, whose topic is “Local government economic development incentive tools with particular emphasis on the proposed Bowllagio STAR bonds project.”

    The meeting is from 7:00 pm to 8:30 pm on Monday, May 17. The location is the Alford Branch Wichita Public Library (private meeting room), at 3447 S. Meridian.

    For more information, contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415

  • Wichita economic development claims deserve scrutiny

    Reports that Southwest Airlines may be considering adding service in Wichita have lead to enthusiasm for the economic development that this service would add.

    In the current case, reporting by Molly McMillan of the Wichita Eagle tells of a study produced by Wichita State University’s Center for Economic Development and Business Research. She reports “In a worst-case scenario, the entrance of the airline in the study would add roughly 7,000 direct and indirect jobs in Wichita over a three-year period.”

    An editorial in today’s edition of the Eagle repeats this number.

    While more air service options are good for Wichita travelers, we need to be suspicious of the lofty claims of huge jobs and economic impact like the number claimed in this case.

    In particular, 7,000 jobs is a very large number. According to figures provided by the Greater Wichita Economic Development Coalition, only one company in the greater Wichita area has over 7,000 employees. The company with an employee count nearest 7,000 is Cessna, with about 6,000 employees.

    Can anyone seriously claim that adding one more airline to the many already serving Wichita will result in the addition of more jobs than what exists at Cessna?

    These economic development figures need to be looked at closely. In 2005, I noted in the article Stretching figures strains credibility that the Center for Economic Development and Business Research has overstated the case before. In particular, the center included all the employees of Cessna and Bombardier in calculations of the economic impact of the Wichita airport:

    By reading this study I learned that the employees of Cessna and Bombardier — 12,134 in total — are counted in determining the economic impact of the airport. Why? To quote the study: “While it might appear that manufacturing businesses could be based anywhere in the area, both Cessna and Bombardier require a location with runways and instrumentation structures that allow for flights and flight testing of business jet airplanes.” This is true, but it is quite a stretch to attribute the economic impact of these employees to the airport.

    For one thing, if we count the economic impact of the income of these employees as belonging to the airport, what then do we say about the economic impact of Cessna and Bombardier? We would have to count it as very little, because the impact of their employees’ earnings has been assigned to the airport. This is, of course, assuming that we count the impact of these employees only once.

    Or suppose that Cessna tires of being on the west side of town, so it moves east and starts using Jabara Airport. Would Cessna’s economic impact on Sedgwick County be any different? I think it wouldn’t. But its impact on the Wichita airport would now be zero. Similar reasoning would apply if Cessna built its own runway.