Voice For Liberty

Tag: Intrust Bank arena

  • Assessment of Wichita’s Intrust Bank Arena’s success premature

    Any rational assessment of the success of the Intrust Bank Arena in downtown Wichita must realize that the arena is in its honeymoon period. Will the parade of big-name stars playing to a packed arena continue for long? Will the Wichita Eagle and local television stations continue to breathlessly announce every upcoming event?

    Until initial enthusiasm dies down and the arena has a track record of a year or more, we simply have no idea what the financial performance of the arena will be. That’s what’s important.

    This premature glowing assessment of the arena’s success is dangerous in that it leads us to believe that there is a positive role for large government projects in Wichita. Worse, people are lead to think that taxation is a good way to pay for such things. As an example, the one cent sales tax used to pay for the arena is presently touted as a model for funding other government spending, ranging from Governor Parkinson’s proposal for a sales tax to fund state government to what surely will be a proposal for a sales tax to fund the revitalization of downtown Wichita.

    Proponents say that the sales tax was painless, so why not do it again? Some were sorry to see it expire. As the sales tax that funded the arena was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)

    But the tax was not painless. Undoubtedly, the employment landscape was shifted in Sedgwick County because of the tax, and that caused some people to be unemployed. My post Prepare for sales tax-induced job effects now reports on what happened in Little Rock when that city’s arena was built. It would be reasonable to think that similar effects happened here.

    Last year in Portland, a proposal to build a new minor league baseball stadium was found to produce a net job loss. An economics consulting firm reported: “Thus, the Lent’s project would have a net impact of a 182 job-year loss on the City’s economy (a gain of 175 from the construction less a loss of 357 due to reduced spending by households and businesses because of higher taxes).”

    It also concluded that “If those individuals who put their money into baseball via taxes are allowed to put that money into the private market, that same amount of money would actually yield more jobs.” Reportedly, Portland’s mayor “appears to have sat on” the study and was not eager to release it.

    This effect — a shiny, highly touted public works project being much more visible than private dispersed economic activity — was known long ago and explained by Henry Hazlitt in his classic work Economics in One Lesson:

    Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

    We were also told that the arena would be a driver of downtown development. But in its first test, the Wichita City Council evidently didn’t believe what arena boosters told them, as it voted to grant several million dollars in subsidy to the developer of a hotel just a few blocks from the arena. Will all future development around the arena — if it happens — require similar subsidy?

  • Intrust Bank Arena’s missing name

    A note to readers: I served as co-manager of Peterjohn’s campaign in 2008.

    The commemorative plaque on the Intrust Bank Arena in downtown Wichita, Kansas.The commemorative plaque on the Intrust Bank Arena in downtown Wichita, Kansas.

    On the commemorative plaque outside the Intrust Bank Arena in downtown Wichita, there’s a missing name.

    The names of eight Sedgwick County commissioners appear, including all who were members of the Commission when the arena sales tax passed in November 2004, all who have served since then, and all present commissioners.

    Except for one: current third district commissioner Karl Peterjohn.

    In 2004 Peterjohn led opposition to the sales tax ballot measure that funded the arena. When he decided early in 2008 that he would run for the commission against long-time Republican incumbent Tom Winters, Peterjohn told Winters that the next commissioner would have their name on a plaque on the arena. On primary election night, when Peterjohn defeated Winters, Peterjohn told me “I told him [Winters] he could have that spot, and I’m keeping my word.”

    It was a gracious gesture.

    There’s been a small controversy surrounding Peterjohn in his new role as arena supporter. He participated in the arena’s recent ribbon-cutting ceremony. More importantly, he voted last February for a $1.7 million seating upgrade. That upgrade would reduce the cost of transition between events, and also improve seating and viewing.

    That vote, along with participation in the ribbon-cutting, is central to Peterjohn’s goal of seeing that the arena is a success and doesn’t become a fiscal burden on taxpayers. Although the contract with SMG, the arena’s management firm, shields Sedgwick County from losses, that contract comes to an end someday. It’s also full of loopholes that, in my opinion, would allow SMG to make an early exit if arena finances are not favorable.

    Working for the success of the arena, therefore, is a logical continuation of Peterjohn’s concern for the taxpayer, the same concern as when he opposed the arena in 2004, he said.

    There’s also been grumbling that county commissioners and bureaucrats will receive perks such as tickets and premium parking passes to arena events. Peterjohn said he’s received no tickets or parking perks.

    A Wichita Eagle blog post by Deb Gruver on this topic is Karl Peterjohn’s name not on Intrust Bank Arena sign.

  • Ticket scalping is a market function, not a criminal activity

    At the Intrust Bank Arena in downtown Wichita, some concerts are very popular, which leads to people frustrated at two things: the inability to buy tickets when they go on sale, and then the high prices that ticket scalpers ask for tickets on the aftermarket.

    I understand the frustration of the stymied ticket buyers. Who wants to pay $300 for a ticket that was sold by the arena’s box office for $50? It would be great if everyone who wanted to attend could do so for $50 — or for $5, for that matter. And that gets to the heart of the problem and why it isn’t likely to be solved: human behavior and economics.

    Walter Block has a chapter in his book Defending the Undefendable that defends the ticket scalper. (The book in pdf form is here.)

    As it turns out, scalping is a beneficial economic activity. But even if you don’t believe this, scalping could be avoided if venues like the arena would sell tickets in a different manner.

    According to Block, scalping requires “a fixed, invariable supply of tickets.” After all , if the supply of tickets was unlimited, everyone could buy all they wanted at list price (the price printed on the ticket, and what the venue sells them for).

    Also, scalping requires “the ticket price chosen by management be lower than the ‘market clearing price.’” Markets clear when people want to buy the same number of tickets that are for sale. This balance is achieved by allowing the price of the tickets to freely adjust. When the list price of the ticket is less than what some people are willing to pay, that’s when scalpers have an opportunity to earn profits.

    This points to one way that scalping could be eliminated, if concert promoters wanted to: They could sell tickets like shares of stock or bushels of wheat are sold. These items don’t have a list price. Instead, their price is whatever people are willing to pay.

    Why would concert promoters price tickets at less than some people are willing to pay? If a scalper can get say, $300 for a ticket that the box office sells for $50, why doesn’t the box office price the ticket at $300? Or maybe $200? Here’s what Block writes:

    For one thing, lower prices invite a large audience. Long lines of people waiting to enter a theater or ballpark constitutes free publicity. In other words, management forgoes higher prices in order to save money it might have had to spend on advertising. In addition, managers are loath to raise ticket prices — even though they would have little difficulty selling them for a big event or special movie — for fear of a backlash. Many people feel that there is a “fair” price for a movie ticket, and managers are responsive to this feeling.

    There are several other motivations, less compelling, for keeping prices fixed at below equilibrium levels. Taken together they ensure that this pricing policy — the third condition necessary for scalping — will continue.

    In other words, better for scalpers to bear the brunt of public ire for setting market-clearing prices. Can you imagine the public backlash at the Intrust Bank Arena and Sedgwick County if ticket prices for very popular concerts were set at market-clearing prices?

    The chapter goes on to explain the two ways that scarce goods — concert tickets in this care — are rationed: price rationing, and non-price rationing. Price rationing, as you might imagine, relies on the price mechanism to determine a market-clearing price so that supply equals demand.

    Non-price rationing, on the other hand, relies on something else. Block mentions “first-come, first served” (camping out the night before at the box office window) and favoritism (those connected to or favored in some way by arena management get special privileges) as two methods of non-price rationing. The Intrust Bank Arena has used another method — a lottery — for some concerts.

    So which is “fair?” Does price rationing favor those with the ability to pay high prices? Certainly scalping makes it easier for rich people to obtain scarce tickets. But Block says that scalping provides entrepreneurial opportunities. Someone with a small amount of capital (just enough to buy one or more tickets) but a lot of spare time (someone without a job) can camp out in line and earn profits by selling the tickets. Or, they could simply wait in line and be paid a wage.

    By the way, scalpers are not guaranteed profits. If there is not much demand for tickets for an event, scalpers will have to sell the tickets at a loss — or they may not be able to sell them at any price.

    Back to Wichita: According to a Wichita Eagle article, a group named Taxpayers for Tickets has been formed to take action against scalping. Reading the website, it seems that the group’s focus is on more laws and enforcement of them to effect the goal of getting tickets in the hands of the taxpayers who paid for the construction of the Intrust Bank Arena.

    I don’t favor this approach. First, as we’ve seen, scalping is a socially beneficial activity that provides market-clearing prices for tickets.

    Second, there is plenty of actual crime in our community that causes death, injury, and loss of property. We don’t need to squander law enforcement resources on victimless crimes like people willingly and voluntarily engaging in market transactions.

    In a letter published in the Wichita Eagle, Todd Allen, head of Taxpayers for Tickets, wrote “I figured that since the taxpayers paid for the arena, that makes us the owners.” I hate to disappoint Mr. Allen, but that’s far from the case. Try requesting a contract, as in Sedgwick County keeps lease agreement secret. Not even Sedgwick County Commissioners are able to see the lease of the arena’s flagship tenant.

    Another article on ticket scalping is Ticket Scalpers Are Hidden Heroes.

  • Wichita arena lands a whopper

    The Intrust Bank Arena in downtown Wichita has landed NCAA women’s basketball first- and second-round tournament games in 2011.

    Recently, the NCAA bypassed the Wichita arena when selecting sites for men’s NCAA games. On KAKE TV, arena manager Chris Presson said women’s games are a testing ground for something “perceived to be bigger. … Certainly the women’s to us is as big as the men’s and is as big a deal to us as the men’s would be. We’re more than content, more than happy with what we’ve got.”

    According to Associated Press reporting from earlier this year, “The first two rounds drew an average of 4,100 people.” The Wichita Eagle reports 4,915 averages attendance for all tournament games.

    Is Presson being reasonable: women’s games, at 4,100 per game, are equivalent to men’s games, which are likely to sell out the arena? It’s his job to promote the arena, but statements like this are not reasonable.

    The publicly-supported arena in downtown Wichita remains a contentious issue. Comments left to a recent post of mine about the arena provide some insight into the thinking of arena tax supporters.

    One comment writer said that instead of complaining, I should be supporting the arena. He may have forgotten the extra sales tax that I contributed to pay for the arena. Doesn’t that count?

    Another wrote: “My question to you is since the arena has been built, do you want it to succeed or fail?” I guess this writer didn’t read the final sentence of the post, which is: “Ultimately, it is the Sedgwick County taxpayer who is financially responsible for the arena, and it is they who must hope for success.”

    So yes, I do hope that the arena is a success. As someone who is opposed to taxation — that’s why I opposed the arena sales tax ballot measure — I sincerely hope that tax revenues are not required to support the arena. Arena tax supporters have already shown that they’re willing to tax one person to build a playhouse for themselves, so I don’t suspect they’ll be opposed to future tax support of the arena, should it become necessary.

  • Low NBA attendance in Wichita danger sign for Intrust Bank Arena

    The Intrust Bank Arena management firm SMG must be wondering what it bit off in Wichita. Last night NBA professional basketball players put sneaker to floor in Wichita for the first time in 14 years, and only an estimated 8,000 fans showed up. (Estimate is by the Wichita Eagle.)

    The game was held at the Charles Koch arena on the campus of Wichita State University. That arena has a capacity, according to the goshockers website, of 10,400.

    Wichita downtown arena boosters told voters that if we passed the tax, we’d have lots of events like this, and lots of fans would attend. But in this trial run of big-time professional sports in Wichita, the fans that did attend would fill barely more than half of the new downtown Wichita arena.

    Arena apologists are likely to come up with a variety of excuses for this embarrassingly poor turnout: It was only an exhibition game. It wasn’t at the downtown arena. It wasn’t the right teams. It was drizzling rain. There will always be excuses.

    The citizens of Sedgwick County are going to have to hope that the Intrust Bank Arena can do a better job drawing fans. Even though the SMG contract puts that firm on the hook for losses, that contract has a lot of ways for SMG to wiggle out, even before its five year management term expires. Ultimately, it is the Sedgwick County taxpayer who is financially responsible for the arena, and it is they who must hope for success.

  • Downtown Wichita parking plan at odds with revitalization goals

    Currently, Wichita is struggling to find enough parking spots downtown to meet the demand expected to be created by the new Intrust Bank Arena. It’s been a contentious issue, with many Wichitans skeptical of the city’s ability to supply enough parking at prices that people are willing to pay for.

    But did you know that there is likely to be fewer parking spots in downtown Wichita if the firm likely to lead downtown revitalization planning has its way?

    Here are a few excerpts from the proposal submitted by Goody Clancy, the firm the city is likely to choose to lead the planning process:

    Because transit, walking and biking will be viable options, less parking will be needed. … Parking policy will also unlock opportunity to redevelop parking lots … The effects of visionary choices such as increasing downtown residential development, expanding transit service, and constraining parking supplies will be investigated. … A sound and coordinated approach, encompassing economics, engineering and urban design, is needed to free up existing parking lots for redevelopment. (emphasis added)

    I wonder: do city leaders know that their herculean effort to develop more parking downtown is an obstacle to downtown Wichita revitalization?

  • Welshimer files for re-election to Sedgwick County Commission

    Gwen Welshimer campaign announcement 2009-10-09Sedgwick county commissioner Gwen Welshimer files for re-election.

    Today, Sedgwick County Commissioner Gwen Welshimer filed for re-election to her position as a member of the commission. Her statement is below.

    Welshimer, a Democrat, is so far the only candidate in that party. There are three Republicans who have either filed or are considering filing.

    Welshimer campaigned and has voted as a fiscal conservative. I asked her given your fiscal conservatism, how will these Republicans differentiate themselves from you? Welshimer said that she’s not heard their campaign platforms. They are all city people, she said, likely to support funding of downtown Wichita.

    Responding to my question about the downtown Wichita revitalization planning and the likelihood of a tax to fund it, she said that we’ve given the city a $210 million economic development tool called the downtown Wichita arena. The county has also given many years of property tax incentives, both in the past and in the future. The other 19 cities in the county have not enjoyed this treatment, she said.

    In 2006, Welshimer signed a pledge to not raise taxes if elected, and she has fulfilled that pledge so far. Her opponent in that election, incumbent Ben Sciortino, received the endorsement of the Wichita Eagle. Welshimer narrowly won that election, 10,081 votes to 9,941.

    Analysis

    Given Welshimer’s fiscal conservatism, Republican candidates will find it difficult to run to her right. Her stand against tax increment financing (TIF) districts and subsidies to downtown developers means she’s not likely to get the support of those downtown developers who thrive on taxpayer subsidy. Those people contribute heavily to political campaigns. Additionally, her support for the dismissal of Sedgwick County Manager Bill Buchanan — a position I support — puts her at odds with the Chamber of Commerce crowd. They make political contributions, too.

    In this district (district 5), my analysis of a recent voter file shows voter registration runs 29% Democratic, 40% Republican, and 31% unaffiliated. (The remainder are Libertarian and Reform party registrants.)

    Considering recent voters (those who voted in an election in 2008), the numbers change a bit. In this case, 30% are Democratic, 44% Republican, and 26% unaffiliated.

    Welshimer’s statement

    I have filed as a candidate for re-election to the 5th District Seat on the Sedgwick County Commission. I want to continue holding the line for Sedgwick County taxpayers.

    At this time, center Downtown redevelopment is the number one issue for this race. I want the tax dollars paid by Southeast Wichita, Derby, and Mulvane to be used for paving roads, drainage, infrastructure, traffic controls, township assistance, and business district enhancements in District #5. The $210 million sales tax arena and decades of property tax incentives for center Downtown have been a weight around the neck of my district. I will support redevelopment of Downtown through private investment only in the future.

    I want more property tax reduction. I want to pay for it with new revenues and more efficient policies.

    If re-elected, I will continue to work for safe, sensible, and reasonable alternatives to a costly new jail.

    The Coliseum site has the potential for 1,000 new jobs and $10 million in new revenue over the next five years. I want to work to make this happen.

    I want to continue to work for the success of the National Center for Aviation Training at Jabara Airport. This is evolving into a job training destination center for employers around the world and it offers an incredible new future for Sedgwick County.

    I believe in the power of progressive new ideas. I have not been a commissioner who gives in to the out-of-touch “good old boy” network.

    I am ready for a rigorous campaign.

  • Wichita sales tax likely to be proposed

    Two recent events have led me to suspect that as part of the plan for the revitalization of downtown Wichita, we’re going to see a sales tax proposed.

    The first is Phillip Brownlee’s editorial in last Friday’s Wichita Eagle, which carried the title Taxes are lower than many think. While this editorial focused on property taxes, it’s easy to see this as an argument that Wichitans can bear the burden of more taxation. Softening up the electorate, so to speak.

    Then, there’s this email sent to the Wichita city council and Sedgwick county commission members:

    I recently received the attached information on Oklahoma City’s next plan for their downtown area. This is their MAPS program that spurred their downtown developed. I thought you might find this of interest.

    http://www.okc.gov/maps3/

    Sincerely,

    John Rolfe
    President and CEO
    Go Wichita Convention & Visitors Bureau

    MAPS — that’s the program that funded Oklahoma City’s downtown improvements through a sales tax, with a second version funding school projects — will be voted on in December. If approved, a 1% sales tax will raise funds for more downtown projects. This email, without saying so directly, endorses the idea of a sales tax for downtown development.

    What’s the sales tax in Oklahoma City, you may be wondering? It’s 8.375%. It won’t change if the new MAPS plan is approved by the voters, as a current 1% tax will expire.

    That sales tax was billed as “temporary,” and it does appear that it will expire as planned. But, city leaders are recommending approval of the new sales tax. This is similar to the sales tax for the downtown Wichita arena, when as that tax was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)

    The sales tax for Wichita is 6.3%.

    City leaders are likely to use the the Intrust Bank Arena in downtown Wichita as an example of a successful project funded through a sales tax. But any assessment of the success of this project is about two years away. The fact that the arena exists is evidence of a minimum level of competence. It will be some time before we know whether the arena can support itself without being a drain on taxpayers, despite the provisions of the SMG management contract.

    In Wichita, we’re going to have to be watchful. The drumbeats of new taxation have started.

  • Wichita downtown arena parking promises not fulfilled

    In 2004, as residents of Sedgwick County were considering whether to vote for a sales tax to fund the downtown Wichita arena (now known as the Intrust Bank Arena and nearly ready to open), people wondered about parking.

    So on a campaign literature piece, the arena supporters made this claim: “With the proposed garage structures, more than 10,000 parking spaces will be available within a three-block radius of the Arena (compared with the Coliseum’s 4,500 spaces.)”

    Today, on the eve of the arena’s opening, these parking garages don’t exist.

    What about surface parking spaces? According to the draft version of the parking plan submitted to the city council last week, there is “available weekday parking supply at peak of approximately 3,040 spaces within the Arena District.” That district is, approximately, a three-block radius around the arena.

    The parking structures promised by arena boosters might be built. The city has approved a TIF district that surrounds the arena, and there is the potential, by my reckoning, to spend around $9 million on parking structures. But at a cost of $20,000 to $25,000 per space, this money buys 450 parking spots at most.

    By the way, I learned that the number of parking spaces around the arena is likely to decrease. At least that’s the goal of one of the firms who pitched their planning services to Wichita last week. That’s because if there is development of the area immediately surrounding the arena, there won’t be room for so much parking. Travel by automobile is something to be reduced, according to most of the planners, and we should rely on transit and bicycles instead.

    I realize that the arena boosters who put out this information weren’t government officials (although some may have been involved). They put out a few other whoppers, too. It’s too bad that so many citizens believed them.