Voice For Liberty

Tag: Featured

  • In Wichita, open records relief may be on the way

    In Wichita, open records relief may be on the way

    A new law in Kansas may provide opportunities for better enforcement of the Kansas Open Records Act.

    This year the Kansas Legislature passed HB 2256, captioned as “An act concerning public bodies or agencies; relating to the state of Kansas and local units of government; providing certain powers to the attorney general for investigation of violations of the open records act and the open meetings act; attorney general’s open government fund …”

    The good part of this law is that it provides additional enforcement options when citizens feel that government agencies are not complying with the Kansas Open Records Law. Before this law, citizens and news organizations had — effectively — two paths for seeking enforcement of KORA. One is private legal action at their own expense. The other is asking the local district attorney for an opinion.

    Now the Kansas Attorney General may intervene, as noted in the summary of the new law: “The bill allows the Attorney General to determine, by a preponderance of the evidence after investigation, that a public agency has violated KORA or KOMA, and allows the Attorney General to enter into a consent order with the public agency or issue a finding of violation to the public agency prior to filing an action in district court.”

    Not all aspects of this bill are positive, as it also confirms many exceptions to the records act and adds to them. It also adds to the authority of the Attorney General, as have other bills this year.

    The City of Wichita has been obstinate in its insistence that the Kansas Open Records Act does not require it to fulfill certain requests for records of spending by its subordinate tax-funded agencies. The city believes that certain exceptions apply and allow the city to keep secret records of the spending of tax funds. The city may be correct in its interpretation of this law.

    But the law — even if the city’s interpretation is correct — does not prohibit the city from releasing the records. The city could release the records, if it wanted to.

    Fulfilling the legitimate records requests made by myself and others would go a long way towards keeping promises the city and its officials make, even recent promises.

    The city’s official page for the mayor holds this: “Mayor Longwell has championed many issues related to improving the community including government accountability, accessibility and transparency …”

    During the recent mayoral campaign, Longwell told the Wichita Eagle that he wants taxpayers to know where their money goes: “The city needs to continue to improve providing information online and use other sources that will enable the taxpayers to understand where their money is going.”

    In a column in the Wichita Business Journal, Wichita Mayor Jeff Longwell wrote: “First off, we want City Hall to be open and transparent to everyone in the community.”

    Following, from 2012, discussion of problems with the City of Wichita and open government.

    Wichita, again, fails at open government

    The Wichita City Council, when presented with an opportunity to increase the ability of citizens to observe the workings of the government they pay for, decided against the cause of open government, preferring to keep the spending of taxpayer money a secret.

    The occasion was consideration of renewing its contract with Go Wichita Convention and Visitors Bureau. I asked, as I have in the past for this agency and also for Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition, that they consider themselves to be what they are: public agencies as defined in the Kansas Open Records Act.

    In the past I’ve argued that Go Wichita is a public agency as defined in the Kansas Open Records Act. But the city disagreed. And astonishingly, the Sedgwick County District Attorney agrees with the city’s interpretation of the law.

    So I asked that we put aside the law for now, and instead talk about good public policy. Let’s recognize that even if the law does not require Go Wichita, WDDC, and GWEDC to disclose records, the law does not prohibit them from fulfilling records requests.

    Once we understand this, we’re left with these questions:

    Why does Go Wichita, an agency funded almost totally by tax revenue, want to keep secret how it spends that money, over $2 million per year?

    Why is this city council satisfied with this lack of disclosure of how taxpayer funds are spent?

    Why isn’t Go Wichita’s check register readily available online, as it is for Sedgwick County?

    For that matter, why isn’t Wichita’s check register online?

    It would be a simple matter for the council to declare that the city and its taxpayer-funded partner agencies believe in open government. All the city has to have is the will to do this. It takes nothing more.

    Only Wichita City Council Member Michael O’Donnell (district 4, south and southwest Wichita) gets it, and yesterday was his last meeting as a member of the council. No other council members would speak up in favor of citizens’ right to open government.

    But it’s much worse than a simple failure to recognize the importance of open government. Now we have additional confirmation of what we already suspected: Many members of the Wichita City Council are openly hostile towards citizens’ right to know.

    In his remarks, Wichita City Council Member Pete Meitzner (district 2, east Wichita) apologized to the Go Wichita President that she had become “a pawn in the policy game.” He said it was “incredibly unfair that you get drawn into something like this.”

    He added that this is a matter for the Attorney General and the District Attorney, and that not being a lawyer, she shouldn’t be expected to understand these issues. He repeated the pawn theme, saying “Unfortunately there are occasions where some people want to use great people like yourself and [Wichita Downtown Development Corporation President] Jeff Fluhr as pawns in a very tumultuous environment. Please don’t be deterred by that.”

    Mayor Brewer added “I would have to say Pete pretty much said it all.”

    We’ve learned that city council members rely on — as Randy Brown told the council last year — facile legal reasoning to avoid oversight: “It may not be the obligation of the City of Wichita to enforce the Kansas Open Records Act legally, but certainly morally you guys have that obligation. To keep something cloudy when it should be transparent I think is foolishness on the part of any public body, and a slap in the face of the citizens of Kansas. By every definition that we’ve discovered, organizations such as Go Wichita are subject to the Kansas Open Records Act.”

    But by framing open government as a legal issue — one that only lawyers can understand and decide — Wichita city government attempts to avoid criticism for their attitude towards citizens.

    It’s especially absurd for this reason: Even if we accept the city’s legal position that the city and its quasi-governmental taxpayer-funded are not required to fulfill records request, there’s nothing preventing from doing that — if they wanted to.

    In some ways, I understand the mayor, council members, and bureaucrats. Who wants to operate under increased oversight?

    What I don’t understand is the Wichita news media’s lack of interest in this matter. Representatives of all major outlets were present at the meeting.

    I also don’t understand what Council Member Lavonta Williams (district 1, northeast Wichita) suggested I do: “schmooze” with staff before asking for records. (That’s not my word, but a characterization of Williams’ suggestion made by another observer.)

    I and others who have made records requests of these quasi-governmental taxpayer-funded organizations have alleged no wrongdoing by them. But at some point, citizens will be justified in wondering whether there is something that needs to be kept secret.

    The actions of this city have been noticed by the Kansas Legislature. The city’s refusal to ask its tax-funded partners to recognize they are public agencies as defined in the Kansas Open Records Act is the impetus for corrective legislation that may be considered this year.

    Don’t let this new law be known as the “Wichita law.” Let’s not make Wichita an example for government secrecy over citizens’ right to know.

    Unfortunately, that bad example has already been set, led by the city’s mayor and city council.

  • Kansas sales tax has disproportionate harmful effects

    Kansas sales tax has disproportionate harmful effects

    Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households.

    While Kansas legislative leaders and the governor praise the shift from income taxes to sales taxes, they ignore the severely regressive effect of sales taxes in Kansas. That is, a sales or consumption tax affects low-income families in greatest proportion relative to their incomes. The primary reason for the harshness of the Kansas sales tax is its application to food purchased in grocery stores. Few states tax food, and many of those that do apply a lower tax rate to food.

    During the debate over a proposed sales tax increase in Wichita last year, I gathered data from the U.S. Census Bureau regarding expenditures on various categories for five different levels of household income. My findings were that if the city raised sales tax by one cent per dollar, the lowest income class of families would experience an increase nearly four times the magnitude as would the highest income families, measured as a percentage of after-tax income. Others produced similar results. This is the regressive nature of sales taxes.

    At the national level the Fair Tax is a program whereby income taxes are replaced by consumption taxes. Proponents believe it would be a positive factor for economic growth. In recognition of the regressive nature of sales taxes, the Fair Tax plan includes a “prebate” to compensate households for the sales tax paid on necessities like food. In effect, there would be no tax on food and other necessities, up to the poverty level.

    During the legislative session this year, Kansas Legislative Research told legislators that increasing the sales tax from 6.15 percent to 6.50 percent would generate $164,200,000 in additional revenue to the state. This implies that a one percent increase in the sales tax rate would generate about $469 million in revenue. (This is based on static analysis, and therefore does not account for the changes in behavior that the higher sales tax would induce, however large or small the effect.)

    Effect of sales tax on consumers of different income levels. Click for larger version.
    Effect of sales tax on consumers of different income levels. Click for larger version.
    It’s thought that the present sales tax on food results in about $390 million in tax collections. While these two values — 469 and 390 — are not equal to each other, the $469 million figure is close to the gap between revenues and expenses. (The tax bill the legislature passed will raise about $400 million, but it is widely believed the governor will have to make an additional $50 million in cuts.)

    So what would have happened if the legislature had raised the sales tax by one cent per dollar and eliminated the sales tax on food? The answer is the sales tax in Kansas would be less regressive.

    I modified my worksheet to allow for adjustment of the sales tax rate for general purchases, and for food separately. I gathered the results for three scenarios and present the results in a chart. I use the sales tax rates that Sedgwick County residents would experience. This includes a one cent per dollar county-wide tax in addition to the statewide rate. (Most counties and cities add to the statewide rate. The unweighted average sales tax rate for Kansas cities is 7.835 percent, based on Kansas Department of Revenue figures.)

    Kansas sales tax effects by income quintile, three scenarios. The vertical distance between the lines is a measure of the degree of regressivity. It is larger for lower income households. Click for larger version.
    Kansas sales tax effects by income quintile, three scenarios. The vertical distance between the lines is a measure of the degree of regressivity. It is larger for lower income households. Click for larger version.
    The blue line, labeled “Sales tax at 7.15% on all purchases” is the current tax in effect in Sedgwick County. Note that the lowest quintile of households pay nearly seven percent of their after tax income in sales taxes. For the highest quintile the value is less than two percent.

    The gold line (“Sales tax at 7.50% on all purchases”) represents the rates that will be in effect after July 1. Note that the vertical distance between the blue and gold lines is larger for low-income households than for high-income households, again illustrating the regressive nature of sales taxes.

    The red line (“Sales tax at 8.15%, food at 0%”) illustrates the situation had the legislature raised the sales tax by one cent per dollar and eliminated the sales tax on food. Notice that the vertical distance between the red and gold lines is greatest for lower-income households, and becomes less as income increases. This means that under this policy, the sales tax is less regressive. But the Kansas Legislature did not do this. Instead, it implemented a sales tax changes that increases its regressive nature.

    Kansas has a food sales tax refund program. It has been altered several times in recent years. Even if households can — and do — claim it, it doesn’t cover their likely cost of sales tax on food. At a rate of 7.50 percent, the lowest quintile of households pay an estimated $263 in sales tax, which is far above the maximum refund.

    Kansas legislative leaders have said that food sales tax could be an issue to tackle next year. One proposal this year had the tax on food falling to 4.90 percent. That is welcome, and would reduce the harsh regressive nature of Kansas taxation. But Kansas would still have a high tax rate on food. Kansas legislative and executive leaders must realize that a shift to consumption taxes must be accompanied by relief from its disproportionate harm to low-income households.

  • How to turn $399,000 into $65,000 in downtown Wichita

    How to turn $399,000 into $65,000 in downtown Wichita

    Once embraced by Wichita officials as heroes, real estate listings for two floors of a downtown Wichita office building illustrate the carnage left behind by two developers.

    Broadway Plaza Building, Wichita, KSA decade ago the “Minnesota Guys” were the darlings of downtown Wichita. With a controversial form of real estate ownership — tenancy in common — they promised to revive downtown Wichita. City officials and civic leaders praised them. The city council found them so endearing that it awarded the Minnesota Guys over $10 million in tax increment financing — later increased at their request — although the developers were never able to tap into those funds. Now the two developers are facing numerous felony charges relating to securities violations.

    This week the Wichita Business Journal reports that two floors of a prominent downtown office building are for sale at very low prices. The building is Broadway Plaza at 105 S. Broadway.

    In 2007 the fourth floor of this building had an appraised value of $388,000, according to Sedgwick County records. The value fell to $210,900 the next year and stayed at that value for five years. Now the appraised value is $98,000.

    The value of the eleventh floor followed a similar trajectory, being valued at $399,000 in 2007, falling to $160,100 for four years, and now appraised at $82,300.

    Now the asking price for each floor is $65,000. At attempt at sale at auction earlier this year failed to produce any bids. The asking price represents a cost of about $13 per square foot. That’s less than the annual rent for class A office space in Wichita, downtown and suburban.

    In 2011 I reported on how some downtown Wichita properties are plummeting in value:

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    blockquote>A strategy of Real Development — the “Minnesota Guys” — in Wichita has been to develop and sell floors of downtown office buildings as condominiums. Some of these floors have been foreclosed upon and have come back on the market. Some once carried mortgages of $400,000 or more, meaning that at one point a bank thought they were worth at least that much. But now four floors in the Broadway Plaza Building, three floors of the Petroleum Building, two floors of Sutton Place, and one floor of the Orpheum Office Center are available for sale at prices not much over $100,000, ranging from $14 to $25 per square foot. Other downtown office buildings — very plain properties — are listed at much higher prices. For example, one downtown property is listed at $82 per square foot. … Some of these floors have had declining appraisals. According to the Sedgwick County Treasurer, the fifth floor of Sutton Place, which is listed for sale at $135,000, was appraised in 2008 for $530,900. In 2009 the appraised value dropped to $215,000.

  • Tax rates and taxes paid

    Tax rates and taxes paid

    Those who call for a return to 90 percent tax rates should be aware that few people actually paid tax at those rates.

    Progressives are calling for higher income tax rates on the rich. The top marginal tax rate — that’s the rate that applies to high income earners on most of their income — was above 90 percent during most of the 1950s. From 2003 to 2012 it was 35 percent, and is now 39.6 percent. Some see that as a lost opportunity. If we could return to the tax rates of the 1950s, they say, we could generate much more revenue for government.

    The top marginal tax rate is the rate that applies to income. It’s not the same as what is actually paid. This fact is unknown or ignored by those who clamor for higher taxes on the rich.

    The mistake the progressives make is equating tax rates with the tax actually paid. For many people, there is a direct relationship. For workers who earn a paycheck, there’s not much they can do to change the timing of their income, find tax shelters, or shift income to capital gains. When income tax rates rise, they have to pay more. But people with high incomes can use these and other strategies to reduce the taxes they pay. In fact, there is an entire industry of accountants and lawyers to help people reduce their tax. Often — particularly in the past — investments and transactions were made solely for the purpose of avoiding taxes, not for any other economic benefit.

    But: High tax rates make the middle class feel better about paying their own taxes. With top tax rates of 90 percent, they may believe that the rich are paying a lot of tax. The middle class may take comfort in the fact that someone else is worse off. But that is based on the misconception that high tax rates mean rich people actually pay correspondingly higher tax.

    Top tax rates and taxes actually paid

    Figure 1. The top marginal income tax rate has varied widely, but since World War II, tax revenue collected as a percent of GDP is remarkably constant.
    Figure 1. The top marginal income tax rate has varied widely, but since World War II, tax revenue collected as a percent of GDP is remarkably constant.
    A series of charts illustrate the lack of a relationship between the top marginal income tax rate and the income taxes actually paid. (Click charts for larger versions.)

    Figure 1 shows that that top marginal tax rate has varied widely. But since World War II, the taxes actually collected, expressed as a percentage of gross domestic product, has been fairly constant. In 1952 the top tax rate was 92.0 percent, and income taxes paid as a percent of GDP was 13.5 percent. In 2012 the top rate was 35.0 percent, and income taxes paid as a percent of GDP was 11.2 percent.

    Figure 2. The top marginal income tax rate has varied widely, but the average federal tax rates paid by top earners has varied less.
    Figure 2. The top marginal income tax rate has varied widely, but the average federal tax rates paid by top earners has varied less.
    Figure 2 shows how the top marginal income tax rate has varied widely, but the average federal tax rates paid by top earners has varied less. Data for this series is available only back to 1979.

    Figure 3. The top marginal income tax rate has varied widely and has mostly fallen, and the share of federal taxes paid by top income earners has risen.
    Figure 3. The top marginal income tax rate has varied widely and has mostly fallen, and the share of federal taxes paid by top income earners has risen.
    Figure 3 shows how the top marginal income tax rate has varied widely and has mostly fallen, and the share of federal taxes paid by top income earners has risen.

    Sources of data for these charts are the Internal Revenue Service, Bureau of Economic Analysis, and Congressional Budget Office.

    Hauser’s Law

    In 2010 W. Kurt Hauser explained in The Wall Street Journal: “Even amoebas learn by trial and error, but some economists and politicians do not. The Obama administration’s budget projections claim that raising taxes on the top 2% of taxpayers, those individuals earning more than $200,000 and couples earning $250,000 or more, will increase revenues to the U.S. Treasury. The empirical evidence suggests otherwise. None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues. Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this ‘Hauser’s Law.’”

    Incentives matter, economists tell us. People react to changes in tax law. As tax rates rise, people seek to reduce their taxable income. A common strategy is to make investments in economically unproductive tax shelters. There is less incentive to work, to save and build up capital stocks, and invest. These are some of the reasons why tax rate hikes usually don’t generate the promised revenue.

    The subtitle to Hauser’s article is “Tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised. Better to cut rates and get 19% of a larger pie.” Figure 1 illustrates. The top line, the top marginal tax rate in effect for each year, varies widely. The other two lines show total taxes and federal income taxes as a percent of gross domestic product. Since World War II, these lines are fairly constant, even as the top marginal tax rate varies.

  • WichitaLiberty.TV: Radio show host Joseph Ashby

    WichitaLiberty.TV: Radio show host Joseph Ashby

    In this episode of WichitaLiberty.TV: Radio talk show host Joseph Ashby joins host Bob Weeks to discuss his interview with Kansas Governor Sam Brownback, the end of the legislative session, and Republican presidential candidates. Episode 87, broadcast June 21, 2015. View below, or click here to view at YouTube.

  • Corporate income tax rates in U.S. and other countries

    Corporate income tax rates in U.S. and other countries

    Over the past two decades most large industrial countries have reduced their corporate income tax rates. Two countries, however, stand out from this trend: France and The United States.

    In Abolish the Corporate Income Tax economist Laurence J. Kotlikoff writes “I, like many economists, suspect that our corporate income tax is economically self-defeating — hurting workers, not capitalists, and collecting precious little revenue to boot.”

    Top Marginal Corporate Income Tax Rate in G7 CountriesHigh taxes in America cause companies to invest overseas in order to escape these high American taxes. For example, Apple takes steps to minimize the income tax it pays, as do most companies. In Calculating Apple’s True U.S. Tax Rate law professor Victor Fleischer explains and estimates what rate Apple pays:

    The whole point of the Senate hearing was to show how Apple shifts substantial amounts of its economic profits from the United States to Ireland, where they are taxed at a rate close to zero. Those profits are then sheltered in Ireland and untaxed unless Apple decides to bring the cash back to the United States.

    These overseas profits create deferred tax liabilities that will not be taxed until the cash is repatriated. But Apple is reluctant to repatriate its overseas cash; it would rather lobby for another tax holiday and bring the cash back tax-free. An added benefit of a tax holiday for Apple is that it would provide a quick jump in reported earnings when the accounting entry for the deferred tax liability is reversed. …

    Thus, Apple’s “true U.S. tax rate,” according to my own calculation, was 8.2 percent.

    The corporate income tax rate in the United States is 35 percent. So how does Apple pay such a lower rate to the U.S? It locates operations overseas. It earns profits overseas, and pays taxes there.

    Using the visualization.
    Using the visualization.
    If corporate tax rates were lowered, we’d see more economic activity here rather than overseas. That would help workers in America, as they can’t easily move their capital and investments overseas to take advantage of lower tax rates. But the wealthy — like Apple’s shareholders — can do that, and they have.

    Using data gathered by Tax Policy Center at Brookings Institution, I’ve prepared an interactive visualization of corporate income tax rate trends over time. Click here to open the visualization in a new window.

  • With tax exemptions, what message does Wichita send to existing landlords?

    With tax exemptions, what message does Wichita send to existing landlords?

    As the City of Wichita prepares to grant special tax status to another new industrial building, existing landlords must be wondering why they struggle to stay in business when city hall sets up subsidized competitors with new buildings and a large cost advantage. From June 2014.

    Tomorrow the Wichita City Council considers whether to grant property and sales tax exemptions to a proposed speculative industrial building in north central Wichita. If approved, this will be the second project undertaken under new economic development policies that allow for this type of tax exemption.

    Those with tax abatementsCity documents estimate that the property tax savings for the first year will be $312,055. This exemption will be granted for five years, with a second five year period possible if performance goals are met.

    The city documents also state that the project will also apply for a sales tax exemption, but no estimate of these tax savings are given. It’s common for a project of this type to have about half its cost in purchases subject to sales tax. With “site work and building” at $10,350,000, sales tax in Wichita on half that amount is $370,012. Undoubtedly a rough estimate, it nonetheless gives an idea of how much sales tax the developers will avoid paying.

    (If city hall has its way, the sales tax in Wichita will soon increase by one cent per dollar, meaning the developers of this project would save $421,762 in sales tax. While others will hurry to make purchases before the higher sales tax rate takes effect — if it does — these developers will be in no hurry. Their sales tax is locked in at zero percent. In fact, once having a sales tax or property tax exemption, these developers are now in a position to root for higher sales and property tax rates, as that increases costs for their competitors, thereby giving these tax-exempt developers a competitive advantage.)

    City documents give the benefit-cost ratios for the city and overlapping jurisdictions:

    City of Wichita General Fund 1.30 to one
    Sedgwick County 1.18 to one
    USD 259 1.00 to one
    State of Kansas 12.11 to one

    It’s not known whether these ratios include the sales tax forgiveness.

    Wichita City Budget Cover, 1992While the City of Wichita insists that projects show a benefit-cost ratio of 1.3 to one or better (although there are many exceptions), it doesn’t apply that standard for overlapping jurisdictions. Here, Sedgwick County experiences a benefit-cost ratio of 1.18 to one, and the Wichita school district (USD 259) 1.00 to one. These two governmental bodies have no input on the decision the city is making on their behalf. The school district’s share of the forgiven taxes is 47.4 percent.

    When the city granted a similar tax exemption to a speculative warehouse in southwest Wichita, my estimates were that its landlord has a cost advantage of about 20 percent over other property owners. Existing industrial landlords in Wichita — especially those with available space to rent and those who may lose tenants to this new building — must be wondering why they struggle to stay in business when city hall sets up subsidized competitors with new buildings and a large cost advantage.

    Wichita property taxes

    Property taxes in Wichita are high for industrial buildings, and even higher for commercial buildings. See Wichita property taxes compared. So it’s difficult to blame developers for seeking relief. But instead of offering tax relief to those who ask and to those city hall approves of, it would be better to have lower taxes for everyone.

    Targeted economic development incentives

    The targeted economic development efforts of governments like Wichita fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. In the case of the Wichita, do we really know which industries should be targeted? Is 1.3 to one really the benchmark we should seek, or would we be better off by insisting on 1.4 to one? Or should we relax the requirement to 1.2 to one so that more projects might qualify?

    This assumes that these benefit-costs ratios have validity. This is far from certain, as follows:

    1. The benefits that government claims are not really benefits. Instead, they’re in the form of higher tax revenue. This is very different from the profits companies earn in voluntary market transactions.

    2. Government claims that in order to get these “benefits,” the incentives must be paid. But often the new economic activity (expansion, etc.) would have happened anyway without the incentives.

    3. Why is it that most companies are able to grow without incentives, but only a few companies require incentives? What is special about these companies?

    4. If the relatively small investment the city makes in incentives is solely responsible for such wonderful outcomes in terms of jobs, why doesn’t the city do this more often? If the city has such power to create economic growth, why is anyone unemployed?

    Do incentives work?

    The uncontroverted peer-reviewed research tells us that targeted economic development incentives don’t work, if we consider the entire economy. See: Research on economic development incentives. Some of the conclusions of the studies listed there include:

    “No evidence of incentive impact on manufacturing value-added or unemployment”

    “Small reduction in employment by businesses which received Ohio’s tax incentives”

    “No evidence of large firm impacts on local economy”

    “No permanent employment increase across a quasi-experimental panel of all Cabela’s stores”

    “Employment impact of large firms is less than gross job creation (by about 70%)”

    These research programs illustrate the fallacy of the seen and the unseen. It is easy to see the jobs being created by economic development incentives. It’s undeniable that jobs are created at firms that receive incentives, at least most of the time. But these jobs are easy to see. It’s easy for news reporters to find the newly-hired and grateful workers, or to show video footage of a new manufacturing plant.

    But it’s very difficult to find specific instances of the harm that government intervention produces. It is, generally, dispersed. People who lose their jobs usually don’t know the root cause of why they are now unemployed. Businesses whose sales decline often can’t figure out why.

    But evidence tells us this is true: These incentives, along with other forms of government interventionism, do more harm than good.

  • Wichita water statistics update

    Wichita water statistics update

    Updated statistics show that the Wichita ASR water project has not been producing water at the projected rate, even after projections were halved.

    An important part of Wichita’s water supply infrastructure is the Aquifer Storage and Recovery program, or ASR. This is a program whereby water is taken from the Little Arkansas River, treated, and injected in the Equus Beds aquifer. That water is then available in the future as is other Equus Beds water.

    With a cost so far of $247 million, the city believes that ASR is a proven technology that will provide water and drought protection for many years. Last year the city recommended that voters approve $250 million for its expansion, to be paid for by a sales tax. Voters rejected the tax.

    Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR Phase II, cumulative
    Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR Phase II, cumulative
    According to city documents, the original capacity of the ASR phase II project to process water and pump it into the ground (the “recharge” process) was given as “Expected volume: 30 MGD for 120 days.” That translates to 3,600,000,000 (3.6 billion or 3,600 million) gallons per year. ASR phase II was completed in 2011.

    At a city council workshop in April 2014, Director of Public Works and Utilities Alan King briefed the council on the history of ASR, mentioning the original belief that ASR would recharge 11,000 acre feet of water per year. But he gave a new estimate for production, telling the council that “What we’re finding is, we’re thinking we’re going to actually get 5,800 acre feet. Somewhere close to half of the original estimates.” The new estimate translates to 1,889,935,800 (1.9 billion) gallons per year.

    Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR Phase II, cumulative since July 2013
    Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR Phase II, cumulative since July 2013
    Based on experience, the city has produced a revised estimate of ASR production capability. What has been the actual experience of ASR? The U.S. Geological Survey has ASR figures available here. I’ve gathered the data and performed an analysis. (Click charts for larger versions.)

    I’ve produced a chart of the cumulative production of the Wichita ASR project compared with the original projections and the lower revised projections. The lines for projections rise smoothly, although it is expected that actual production is not smooth. The second phase of ASR was completed sometime in 2011, but no water was produced and recharged that year. So I started this chart with January 2012.

    Since 2013 was a drought year, perhaps we shouldn’t evaluate the production of ASR that year. So to present ASR in the best possible light, I’ve prepared a chart starting in July 2013. That was when it started raining heavily, and data from USGS shows that the flow in the Little Arkansas River was much greater. Still, the ASR project is not keeping up with projections, even after goals were lowered.

    Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase II
    Gallons of Water Recharged Through Recharge Basins and Wells during Wichita ASR phase II
    On the chart of monthly production, the horizontal line represents the revised (lowered) annual production projection expressed as a constant amount each month. This even rate of production is not likely, as rainfall and river flow varies. In the three years that ASR phase II has been in production, that monthly target been exceeded in just one month.

    In May 2015, the ASR project recharged 114 million gallons of water. Its design capacity is 30 million gallons per day, so the work done in May represents four days of design capacity. The ASR project is able to draw from the Little Arkansas River when the flow is above 30 cfs. As can be seen in the chart of the flow of the river, the flow was above this level for the entire month.

    Flow of the Little Arkansas River at Valley Center. The ASR project is able to draw from the river when the flow is above 30 cfs.
    Flow of the Little Arkansas River at Valley Center. The ASR project is able to draw from the river when the flow is above 30 cfs.
    At one time the city was proud enough of the ASR project that it maintained an informative website at wichitawaterproject.org. That site no longer exists.
    At one time the city was proud enough of the ASR project that it maintained an informative website at wichitawaterproject.org. That site no longer exists.
  • Wichita has cut waste, officials say

    Wichita has cut waste, officials say

    Wichita city officials say they have worked hard to eliminate waste. Well, except for this.

    Looking south on Topeka from Broadway, May 29, 2015 at 11:25 am. Four burning street lights are seen here. There were dozens more further south.
    Looking south on Topeka from Broadway, May 29, 2015 at 11:25 am. Four burning street lights are seen here. There were dozens more further south.
    It’s been an ongoing problem in downtown Wichita. Not only are bench lights apparently permanently switched on, we find the tall street lights also burning in the middle of the day.

    This is especially problematic given these two Fridays — with street lights switched on near noon — were Riverfest Fridays. Many visitors, both natives and tourists, may have been downtown to see the waste on display. It doesn’t promote a good image for our city and its leaders.

    A Downtown Wichita street light struggles to compete with the midday sun. June 5, 2015.
    A Downtown Wichita street light struggles to compete with the midday sun. June 5, 2015.
    The wasteful spending on illuminating street lights in the middle of the day is an indication of the attitude of the city as explained in Forget the vampires. Let’s tackle the real monsters. Through public service announcements on television and Facebook, Wichita city officials have urged citizens to do things like unplugging microwave ovens when not in use. This saves a very small — vanishingly small — amount of electricity at a huge cost of inconvenience.

    So while the city advises you to unplug alarm clocks and cell phone chargers when not using them, note that the city cares nothing about running the street lights in the middle of the day.

    The lights illustrated in these photographs are, undoubtedly, a small portion of the city’s spending. But you don’t have to look very hard to find waste like this, and we know that small examples of waste are multiplied many times. So when city leaders tell us that there is nowhere left to cut in the budget, that everything that can be done to trim the fat has already been done, and that the only thing we can do is raise taxes — well, think of this photograph and others illustrated in Wichita advances in the field of cost savings, Another Friday lunch, and even more lights are on, To compensate, Wichita switched on the street lights, In Wichita, the streetside seating is illuminated very well, In Wichita, the rooftops are well-lit and On a sunny day in downtown Wichita you can see the street lights.

    City of Wichita official Facebook page.
    City of Wichita official Facebook page.
    This is not to say that waste like this does not occur in the private sector. Of course it does. But businesses and individuals have a powerful incentive to avoid waste that isn’t present in government: Businesses and people are spending their own money. And even if they waste money, it’s their money, not ours.