Tag: Eminent domain

  • 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

  • Jeff Fluhr updates status of downtown Wichita

    Last Friday, Jeff Fluhr, president of the Wichita Downtown Development Corporation, addressed members and guests of the Wichita Pachyderm Club. His topic was the future of downtown Wichita and its revitalization.

    “It’s very important that we have a downtown that is very clear and very concise on where it wants to go,” he said. He likened the development of downtown to the planning of an automobile trip, so that we don’t make major investments that we later regret.

    The potential of increased private investment is an important goal for downtown. Predictability will help the private sector invest, he said.

    As to the importance of downtown, he said that is where the distinctive quality of a city is found — its history, cultural arts, and other institutions that represent the community. Tourism is another goal of a revitalized downtown Wichita, along with an improved perception in the global market as a great place to do business.

    Old Town is an example of success in Wichita, he said, an example of what can be done when people are creative and purposeful. He said that Wichita’s transit center, being located near the new Intrust Bank Arena, provides the potential to use mass transit.

    As to the economics of downtown Wichita redevelopment, he showed a chart, nearly a year old, that compares public and private investment in downtown over the past ten years. The two amounts are nearly equal to each other. Fluhr said that Goody Clancy, the firm hired to to plan the revitalization of downtown Wichita, has offered the opinion that the way Wichita has measured investment in downtown — using capital investment only — is not an accurate picture. We should also take into account companies that may have moved into the downtown area because of the improvements that have been made. What types of jobs have been created, and what is the spin-off from them?

    Addressing the WaterWalk project, he said that an important event took place last November, when people started moving in to the residential building. Now we see human activity in the development. The landscaping is being installed at this time.

    Along Douglas, Fluhr said that gaps in the buildings are a problem. We need to bring storefronts back to downtown. This creates an atmosphere of walkability, which helps to bring residential back to downtown, an important thing he said we must continue to work on.

    Mentioning the Q-Line, the free trolley bus service, Fluhr said that “we’ll literally have a couple thousand people that can be on this thing in a given night.”

    Besides downtown, Fluhr said that they’re also looking at “first-ring” neighborhoods, the areas that surround downtown. In response to a question, he said we need a healthy city throughout. The first-ring neighborhoods may provide housing that is more affordable than in downtown proper.

    Analysis

    In comparing the planning of downtown Wichita to a car trip, Fluhr made the same presumption that Wichita city council member Lavonta Williams made when she compared downtown planning to planning her lessons as a schoolteacher. The planning of even a small portion of a city is an immensely more complicated task. That these two figures make such comparisons leads me to believe that we don’t understand the monumental scope of the task we’ve decided to undertake.

    Regarding predictability being important to private sector investors: the planning process right now has created huge uncertainty as to the future of downtown. Who is likely to invest in downtown at this time, when so much is up in the air?

    Further, the potential use of eminent domain to take property creates uncertainty, too. This is why it is important for the city to swear off the use of eminent domain, and even the threat of its use.

    There’s also this concern I have about the predictability Fluhr said is needed for private investment to flourish: For the future to be certain, someone has to enforce the plans that have been made. All the methods that government has to enforce or encourage human behavior lead to loss of economic freedom: incentives, grants, tax abatements, subsidies, regulation, zoning, eminent domain, preferred treatment. All are contrary to economic freedom.

    It’s also troubling that now we’re going to be measuring the economic impact of public investment in a new way, using — if I can read between the lines a bit — things like “multipliers” and other economic development jargon and devices to exaggerate the impact of public investment. It’s important to remember that when left to their own devices, Wichitans have made investments that have produced tremendous economic impact with their own multiplier effects. These investments, however, have not always been made in the politically-favored downtown area. Instead, they’re been made where people wanted them to be made, so their economic impact, in terms of creating wealth and things that people really want, has been greater than if directed by government planners.

    As to the Q-Line claim of thousands of riders in a night, I hope Fluhr meant the potential capacity of the Q-Line system, as its actual ridership is much less and very expensive on a per-rider basis. See Wichita’s Q-Line an expensive ride for ridership numbers, which have been less than 1,500 per month.

    It’s impossible not to appreciate Mr. Fluhr’s enthusiasm for his work and his genuine concern and vision for the future of downtown Wichita. I’m concerned, however, that Fluhr and the downtown Wichita revitalization boosters — let’s call them the “planners” — have fallen victim to what Randal O’Toole and others call the design fallacy.

    O’Toole explains in his book The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future:

    These planners are guilty of believing the design fallacy, the notion that architectural design is a major determinant in shaping human behavior. While design does play a role at the margins of certain things — for example, certain patterns can make housing more vulnerable to crime — the effects that planners project are often highly exaggerated.

    Later O’Toole writes:

    The worst thing about having a vision is that it confers upon the visionary a moral absolutism: only highly prescriptive regulation can ensure that the vision overcomes an uncaring populace responding to a free market that planners do not really trust. But the more prescriptive the plan, the more likely it is that the plan will be wrong, and such errors will prove extremely costly for the city or region that tries to implement the plan. … Problems such as these stem from the design fallacy that is shared by so many planners and the architects who inspire them.

    Do the Wichita planners suffer from the design fallacy? Fluhr mentioned “engagement of the river” as he has in past talks. Referring to a conversion of an old school building into residential use, he used language like “a dynamic living space in a renovated school,” “each of the units is unique,” and “taking distinctive architecture to us and bringing it to new use.”

    Referring to our Carnegie Library, he said that its architecture is unique to Wichita, and wouldn’t be found in other cities. Projects like this, along with the Broadview Hotel and Union Station, should “remain in our fabric” as part of the “distinctive qualities that make us who we are.”

    This focus on the architecture of buildings in a city is characteristic of past talks by Fluhr. So yes, I believe that he and the planners are influenced by the design fallacy. It’s something we’ll have to watch out for as we proceed with the planning process.

  • Kelo abandonment holds lesson for Wichita

    In New London, Connecticut, developers wanted to build a new business complex on land owned by a number of homeowners, including Suzette Kelo. She didn’t want to sell, and the case eventually wound its way to the United States Supreme Court. In the decision, the court ruled in favor of the ability of cities to use eminent domain to take property from one party and give to another private party for economic development.

    Locally, at least one Wichita bureaucrat was relieved. According to Wichita Eagle reporting:

    City economic development director Allen Bell lauded the Supreme Court decision.

    “I’m relieved to know that we’ll continue to have an important tool for implementing economic development and urban redevelopment projects here in Wichita,” Bell said. “But this is a tool we do not use lightly. The city of Wichita has never sought to use eminent domain except in very rare cases when there is no alternative to keep a project alive and further the overall needs of the city.”

    So what has happened in New London? Nothing. In fact, worse than nothing, as the planned development has been abandoned. Paul Jacob of the Citizens on Charge Foundation gives an excellent wrap-up of the situation in The politics of government usurpation, post-Kelo.

    Eminent domain was used to assemble the property where the WaterWalk development stands in downtown Wichita. This development is emblematic of the failures of public-private partnerships. Is its failure the result of its foundation built on eminent domain?

    As Wichita prepares its plans for downtown revitalization, freedom-loving citizens need to insist that the city forgo the use of eminent domain, especially the threat of its use. On its face, it appears that Kansas has a strong law prohibiting the type of eminent domain takings that the Supreme Court authorized in the Kelo decision. Kansas law says that the legislature must pass a law allowing the use of eminent domain on a specific parcel of property, if the purpose is to give it to another private party.

    But it is the threat of the use of eminent domain that remains the real problem. We can easily imagine a scenario where the City of Wichita decides it needs a parcel of property for some public-private use. Mayor Carl Brewer may make the case that the property is needed so that Wichita can create hundreds, perhaps thousands of jobs. The economic future of our city hangs in the balance, he’ll say. Dale Goter, Wichita Governmental Relations Manager, will make the case to legislators that Wichita really needs the property. By the way, legislator from Overland Park, won’t your city also want to use eminent domain someday?

    The poor property owner, who in the past would have been faced with a small battle in the Kansas district court, now has to lobby the entire Kansas legislature to protect his property.

    This is why it is important for Wichitans to insist the the plans for downtown Wichita revitalization specifically state that eminent domain — not even its threat — will be used.

    This summer I traveled to Anaheim, California to learn about a redevelopment district where the city decided not to use eminent domain. The article Anaheim’s mayor wrote about this planning effort is titled “Development Without Eminent Domain: Foundation of Freedom Inspires Urban Growth.” It’s very informative.

  • Wichita planning puts freedom, prosperity at risk

    Remarks to be delivered to the October 13, 2009 meeting of the Wichita City Council.

    Mr. Mayor, members of the council,

    I’m here today to ask this council to put aside consideration of this proposal. My reasons are not particular to this proposal or planning firm, but rather I am concerned that we believe we have the ability to successfully plan at all.

    Here’s just one reason why I’m concerned: Wichita’s favorite method of financing developments is the TIF district. Recognizing this, the Goody Clancy proposal under the heading “Opportunities” mentions “Continue to employ established TIF funding mechanisms.”

    But as documented by the Wichita Eagle last year, our city has a poor record of financial performance with TIF districts.

    Another reason I’m concerned is that our attempts at downtown redevelopment so far have produced mixed results. In particular, the WaterWalk project in downtown Wichita has so far consumed $41 million in public subsidy, and we have very little to show for it. Shouldn’t we see if we can nurture this project to success before we take on projects that are much larger?

    Then there’s the presumption expressed by city leaders that downtown must be revitalized for the sake of our entire city. Several months ago I asked Mr. Williams to supply me with references that provide evidence for the claimed benefit of downtown redevelopment. At first he referred me to the mayor’s vision statement. But with all due respect, Mr. Mayor, your visions and dreams aren’t evidence.

    We do have a document that describes what’s been built in several cities. But the mere fact that buildings were built or renovated is not evidence of success. In these descriptions there’s no discussion of the cost, or the public subsidy needed to redevelop these downtowns, and importantly, no discussion of the effect on the entire city.

    When we look at the effect of things like TIF districts on an entire city, we find evidence like economists Richard F. Dye and David F. Merriman found. They concluded that yes, development happens in the subsidized TIF district. But it’s often at detriment to the entire city.

    Besides TIF districts, I’m also concerned about the use of other public subsidy, including a sales tax that some are talking about. I’m also concerned about the potential for eminent domain abuse. This summer I traveled to Anaheim, California to learn about a redevelopment district where the city decided not to use these techniques. The article Anaheim’s mayor wrote about this planning effort is subtitled “Foundation of Freedom Inspires Urban Growth.”

    That’s what I’m really concerned about: freedom.

    Why aren’t we satisfied with letting people live where they want to live? Why aren’t we satisfied with letting developers’ capital flow to where they think it finds its most valued use? Why do we think that centralized government planning can do a better job of making decisions and allocating resources than the dispersed knowledge of all the people of Wichita?

    Randal O’Toole has written about the impossibility of the planning task. In his book The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, he writes this about urban planners: “Because they can build a house, planners think they can design an entire urban area.”

    He expands on the difficulty of the planning task at length in his book.

    These difficulties can be summed up like this: If we think that we can plan the revitalization of downtown Wichita, we ought to heed this quote from Friedrich Hayek’s book The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

    Mr. Mayor and members of the council, our efforts at downtown redevelopment have produced mixed results at best. Yet we have a lot of development — commercial and residential — taking place in Wichita. It’s just not happening downtown. Instead, it’s happening where people want it to happen. It’s happening without TIF districts, public subsidy, or the use of eminent domain.

    Why can’t we be happy with that?

  • Wichita city council: more travel on tap

    At tomorrow’s meeting of the Wichita City Council, approval of more travel is on the agenda.

    Tomorrow’s agenda item is this: “Approval of travel expenses for Mayor Brewer, Council Member Schlapp, Council Member Gray, and Council Member Williams to attend the NLC Congress of Cities in San Antonio, Texas, November 10-15, 2009.” This is all the information that is available.

    The reaction of citizens to council member Janet Miller’s junketeering to France has been overwhelmingly against this type of wasteful travel. Now we have four members of the council traveling for five days to a National League of Cities event.

    What is the value of this conference? Citizens might be excused for assuming that an organization with such a lofty name acts only in the interest of citizens. In reality, the NLC is a special interest group, and its interests are not always in line with citizen concerns. For example, this position paper outlines its stance on the use of eminent domain for economic development. It’s a position, as you can imagine, in favor of cities’ rights to take property for economic development.

  • Wichita downtown revitalization discussed on Kansas Week

    Bob Weeks discusses planning for downtown Wichita revitalization and what he learned on his trip to the Platinum Triangle in Anaheim, California. Host Tim Brown and guest Randy Brown also appear. From the KPTS Television show Kansas Week, August 14, 2009.

    The article referred to is Wichita’s getting ready to plan.

  • Wichita’s getting ready to plan

    As the City of Wichita develops a grand plan for downtown revitalization, can we have a process that is freedom-friendly and respects property rights? I went to Anaheim to find out.

    Leaders in Wichita — both private and public sector — believe that Wichita needs a plan for downtown. To support this, the city is seeking to develop a Downtown Revitalization Master Plan, a “a twenty-year vision for its thriving downtown.” Right away I want to ask: if downtown is thriving, why does it need revitalization?

    The document Wichita used to lure planning firms to apply for the planning job is full of ambitious and colorful language: “a community synergy that is contagious,” “casting a grand vision to realize our potential,” “the bold vision the community is seeking.”

    The danger we face is that Wichita’s plan will end up like almost all other urban plans — a top-down effort micromanaged by politicians and bureaucrats, people whose incentives are all wrong. We already have the structure in place, with our mayor promoting the plan for downtown as his signature achievement, and a tax-supported downtown development organization headed by a young and energetic planning professional.

    There is a different way to go about redevelopment, a way that respects freedom and property rights, while at the same time promising a better chance of success.

    Last month I visited Anaheim, California, to learn more about the Platinum Triangle. This is an area of low-rise warehouses and industry that the city thought would be a good place for redevelopment. (Anaheim’s old downtown was redeveloped starting in the 1970s, is fairly nondescript, and has not met expectations.)

    What Anaheim decided to do with the Platinum Triangle is to employ “freedom-friendly” principles in the district’s development. Or, as the subtitle to an article written by Anaheim Mayor Curt Pringle states, a “Foundation of Freedom Inspires Urban Growth.”

    Here are the important things that Anaheim has done that are out of the ordinary:

    No use of eminent domain to take property. The forceful taking of property by government for the purposes of giving it to someone else is one of the worst violations of property rights and liberty that we can imagine. But it’s a prime tool of redevelopment, one that the planning profession says is essential to their efforts to reshape cities.

    In Kansas, we have a relatively new eminent domain law that, on its face, should provide strong protection to property owners. It’s unknown whether this protection will be effective when a city such as Wichita asks the legislature to allow the use of eminent domain, which is what the law requires. If a city makes the case that the success of Wichita and thousands of jobs depend on the use of eminent domain, will legislators go along?

    Overlay zoning that respects existing land use. Instead of replacing existing zoning, the city added an “overlay zone.” This meant that while the land had new permissible uses and restrictions, existing rights were protected. It’s only if existing property owners wanted to pursue new development that they would have to conform to the new development standards contained in the overlay zoning.

    No public subsidies or incentives. In California, they’re called redevelopment districts. In Kansas, we call them tax increment financing or TIF districts. In either case, this mechanism allows property owners to, in effect, retain their own increased property taxes for the benefit of their developments, something that the average taxpayer — or real estate developer not working in a politically-favored area — can’t do.

    The City of Wichita views TIF districts as a powerful tool for development. The city has many existing TIF districts, and we can expect that others will be created to support downtown revitalization. While many people recognize and agree that the taking of land through eminent domain for economic development is bad, the taking of tax revenues through TIF is subtle. Most citizens don’t know this is happening.

    Anaheim did a few other things: it streamlined the permitting process, reduced parking regulation, developed a broad-based environment impact report, and relaxed requirements for balancing commercial and residential uses.

    It also used a “first-come, first served” housing permit allocation process. Instead of allocating housing permits to each parcel, permits were allocated to a much larger district. Developers could claim them through a competitive process and use them flexibly.

    What’s been the result in the Platinum Triangle? After the district was formed in 2004, development started at a fast pace. But the housing crisis in California has definitely put a damper on the pace of development. An illustration: In a loft project in the Platinum Triangle, condos originally priced at $400,000 are now offered at $250,000. It’s expected that as the housing crisis eases, developers will go ahead with their plans.

    The Platinum Triangle offers a distinctly different model for redevelopment than that practiced in most cities. A few other cities in California have noticed and are adopting Platinum Triangle-style, freedom-friendly, principles.

    The question we in Wichita now face is this: Will Wichita adopt a freedom-friendly approach to downtown revitalization?

  • Sedgwick County needs to slow down, deliberate land purchase

    Sedgwick County seems to be in a rush to make a huge decision that will have far-reaching and long-lasting effects on our county. We don’t have, however, anywhere near all the information we need to make this decision. We need to slow down and decide what role we want to have county government play in economic development.

    The stated goal of Sedgwick County’s purchase of the Bel Aire industrial park is to have a site ready for companies of 1,000 or more employees. The Wichita Eagle article Sedgwick County seeks to attract industry with land plan tells us, though, that there are just five or six deals like this each year. Research by the Eagle reporter found more than 100 sites already exist, from all across the country, that meet the necessary criteria. So we’re entering a contest with pretty long odds.

    On top of that, according to Sedgwick County, the goal of the industrial park is “to welcome only companies in the composites and alternative-energy fields.” This limits the companies the county would pursue to a number smaller than the five or six deals each year mentioned above.

    (It’s worth noting that alternative-energy companies, such as wind turbine companies, exist only because of government subsidy aimed at curing a problem that can’t be fixed. Last year, as the production credit for wind power was about to expire, Congress was told that no further wind power would be developed unless the subsidy was restored.)

    If the county asks “do you need rail access?” and it is provided for free, why wouldn’t any company say they need it? I’ve been told, however, that it’s not uncommon for companies to list rail access as part of their requirements, but then never need any rail cars once the facility opens. Some of the industries that composites may be used in are industries like medical devices. These products aren’t shipped by rail.

    The issue of needing water and sewer utilities in place before the park can be marketed doesn’t make sense. These utilities could, if government wanted to, be installed very quickly, much faster than a building can be built.

    That brings up another point — what about electricity and natural gas service? Depending on the type of industry, these utilities are vitally important. We don’t hear about the lack of these utilities being a problem. The likely reason for this is that electricity and gas are provided by private sector companies (even though most are highly regulated).

    If a private utility can provide complicated and expensive electrical service infrastructure quickly to a building, why can’t a government quickly provide water and sewer?

    It’s also claimed that the reason Wichita didn’t get the Target Distribution Center a few years ago was the lack of land ready to go. “Shovel ready,” so to speak. But according to reporting in the Topeka Capital-Journal, that city had to use eminent domain to forcibly acquire some of the land needed to assemble the tract.

    Topeka used purchase options to secure the availability of land, too. I am told that when this strategy was presented to county staff, they had no idea of what this meant. This is evidence that Sedgwick County is not experienced and equipped to be in the land development business.

    If Sedgwick County is determined to proceed and acquire the industrial park, we need to find some way to mitigate the damage to existing real estate developers in the Wichita area. That’s because when government can give away land, when it can dish out tax exemptions and other perks, the private sector is at a severe disadvantage.

    Some ideas that have surfaced are these:

    • Limit the industrial park to large — very large — buildings only. Don’t allow smaller buildings that compete with what the private sector already has made available.
    • Restrict tenants to companies from outside the Wichita metropolitan area.
    • When existing Wichita-area companies see the perks — free land, etc. — lavished upon companies that move to the industrial park, they will want the same incentives. These incentives could be made available to companies in all industrial parks in the county. After all, we need to retain existing jobs.

    There seems to be a great deal of haste towards making a decision on purchasing this land and the county being in the industrial park development business. This decision process is moving much too quickly. Finding a stable set of facts from which to conduct debate is a problem too, as some of the details in the Sunday Wichita Eagle story are different from what was presented at the commission meeting less than one week before.

    A project of this scope would take from four to six months for experienced land developers to consider and perform due diligence. Sedgwick County has been considering this deal for about two weeks. As we’ve seen, the county is in no way experienced in this type of business.

  • Eminent domain abuse, then economic failure

    The Cato Institute has a new video that details the history of Kelo v. City of New London, in which Suzette Kelo’s house was taken from her using eminent domain and given to a private developer for purposes of economic development.

    “As it happens, the space where Kelo’s house and others once stood is still an empty dustbowl generating zero economic impact for the town.”

    View the video by clicking here.