Voice For Liberty

Tag: Jeff Longwell

Wichita City Council Member Jeff Longwell

  • Kansas and Wichita quick takes: Tuesday January 18, 2011

    Education reformer to speak in Kansas. Next week the Kansas Policy Institute hosts education reform expert Dr. Matthew Ladner at several events in Kansas. In Wichita, he will speak at a free breakfast event on Tuesday January 25th. Information on that event and those in Topeka and Overland Park can be found at Kansas Policy Institute Upcoming Events. Ladner, of the Goldwater Institute, will speak on the topic “Good to Great — Lessons for Kansas from Florida’s education revolution.” Florida has been at the forefront of education reform in recent years, according to a study by EducationNext. Kansas, on the other hand, ranks very low in studies that look at education reform among the states. An invitation to the Wichita event is here. RSVPs are requested by January 20th.

    Wichita council candidate websites spotted. This is not a comprehensive list of candidates. Instead, these are city council candidates’ websites that have been noticed. District 2, currently held by Sue Schlapp, who may not run due to term limits: Steve Harris, Paul Savage, Charlie Stevens. … District 3, currently held by Roger Smith on an interim basis: Clinton Coen, James Clendenin…. District 4, currently held by Paul Gray, who may not run due to term limits: Joshua Blick, Michael O’Donnell. … District 5, currently held by Jeff Longwell: Jeff Longwell, Lynda Tyler.

    Schools’ funding claims questioned. “Much of the increase in state spending for schools since 2005 has accumulated in cash reserve funds rather than being spent in classrooms, according to an analysis of unencumbered cash reserves held by districts.” The Kansas Watchdog story by Paul Soutar continues: “Carryover cash in accessible district funds has increased by $306 million since 2005, the year the Kansas Supreme Court’s Montoy decision went into effect. Cash in these funds grew to about $743 in 2010, up $187 million since 2008. The carryover, or unencumbered cash, is money appropriated in previous years but not spent and with no claims against it for unpaid bills or other obligations. The cash accumulates in more than 30 distinct funds.” … The balances in these funds rise when money is not spent as fast as it is put in. School districts argue that they need some fund balances — and they do — but the growing balances, year after year for most districts, undermines the claims of school spending advocates.

    Kansas schools rated. “Kansas elementary and secondary schools rose one spot in a new national performance ranking, but are still below the U.S. average and many other states, the publishers of Education Week reported this week. The publication’s 15th annual ‘Quality Counts’ survey of how precollegiate schools are faring across the nation, ranks Kansas’ performance 37th in the nation, up one place from last year’s assessment, but still lower than the national average.” The Kansas reporter story mentions state school board member Walt Chappell and his concern that Kansas’ state-controlled student achievement scores — which show rapidly rising performance — may not be valid or reliable: “Even so, the Education Week rankings and others like them are important, said Walt Chappell, a state board of education member who in the past has expressed skepticism about claims of educational excellence that he believes don’t square with students’ college entrance exams or the state’s double digit high school dropout rates. At the very least, ‘here is another outside observer taking another look at our schools and telling us there is room for improvement,’ Chappell said.”

    Insurance costs on the rise in Kansas. From Kansas Reporter: “Health insurance premiums have gone up 5 to 7 percent in Kansas because of the federal Patient Affordable Care Act, an underwriters’ group official told lawmakers Thursday.” Mandates for increased coverage are seen as a cause.

  • Kansas and Wichita quick takes: Tuesday January 11, 2011

    Legislature website still down. Last week visitors to the Kansas Legislature website were greeted with a message indicating that an upgrade would be forthcoming. As of this moment, that message is replace with a generic error message and the site is not working. In a phone call yesterday, a clerk said the site would — hopefully — be available yesterday afternoon. The legislature’s site needed an update, as parts of it were frustrating to work with. But with it not working at all, Kansans are missing out on vital information. For example, it is not possible to remotely retrieve the Legislature’s calendars and journals.

    Treasurer to ask for more information. In an effort to return more unclaimed property, new Kansas state treasurer Ron Estes will ask the legislature to allow him to obtain contact information from other state agencies. See Treasurer wants more data so office can return property.

    Wichita CID proposals delayed. Proposals for two Community Improvement Districts in Wichita have been delayed from consideration at today’s Wichita City Council meeting. More information about these two proposals is at In Wichita, two large community improvement districts proposed. Today’s action would have simply accepted the petitions, setting a public hearing and approval — or not — for a future date. … In editorializing against these CIDs, the Wichita Eagle’s Rhonda Holman wrote: “As it was, insufficient time had been allowed for staff vetting of the proposals and thorough consideration by the council and public.” Time and time again, city staff assures the public that they have thoroughly vetted developers and projects, but here is another example of why citizens need to be wary of city hall bureaucrats. … In summary, Holman writes: “The council needs to treat the CID designations as the hidden tax hikes that they are — and use them only where and when they are mission critical, such as to implementing the Goody Clancy downtown master plan.. … By that standard, these two proposals don’t even come close.”

    Longwell on citizen knowledge. My reporting on Wichita City Council member Jeff Longwell and his attitude towards citizen knowledge reminded me of a similar incident from the past. Recently, Longwell spoke in favor of signs telling shoppers that they’re about to enter a store that relies on Community Improvement District financing. But the signs would not tell shoppers how much extra tax they would be paying. Longwell said “So having something on the front door that says we are financing this with a CID tax, where they’re made well aware that it’s collected there, I think to try and include a percentage might even add some confusion as we collect different CID taxes around the city.” In other words, giving citizens too much information will confuse them. … In 2008, when a matter was rushed through the council with little time to study the issue, Longwell was quoted in The Wichita Eagle as saying: “It’s unlikely many residents would read the full contract even if it had been made public earlier.” … It doesn’t take many residents to read it. Just a few will usually be enough. … Not surprisingly, the matter Longwell wanted to rush through concerned taxpayer-funded welfare for Wichita theater owner Bill Warren. This is another example of how Longwell has been captured by special interests.

    State of the State tomorrow. On Wednesday, Kansas Governor Sam Brownback will deliver the State of the State Address. It will be carried in Wichita on KPTS channel 8 at 6:30 pm.

    This week at Sedgwick County Commission. Tomorrow’s meeting of the Sedgwick County Commission has a light agenda. It will be the first meeting for commissioners Richard Ranzau and Jim Skelton. At the end of the meeting, commissioners will elect a new chairman and chairman pro tem. Karl Peterjohn has been the chair for the last year. The chairman conducts the meetings and signs official documents. Speculation is that Dave Unruh, who is just starting his third term, has the inside track for election.

    Changes to Kansas campaign law recommended. Washburn University’s Bob Beatty writes about two “common sense bills” bills that the Kansas Legislature will consider this year, and which he recommends be passed “in order to help clarify for voters what they’re seeing when the political ad season begins anew.’ … The first measure would ban state officeholders from appearing in public service advertisements for a 60-day period before elections. The second would require candidates to state their approval of an advertisement. More at Fine-tuning political ads.

  • In Wichita, two large community improvement districts proposed

    On Tuesday (January 11) the Wichita City Council will decide whether to accept petitions calling for the formation of two Community Improvement Districts (CIDs) in Wichita. In both cases, city staff recommends that the council accept the petitions and set February first as the date for the public hearing. It is on that date that the council will accept public input and vote whether to form each of the CIDs.

    CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    The districts proposed are two well-established Wichita shopping centers. Westway Shopping Center is at the southwest corner of West Pawnee Avenue and South Seneca Street. Eastgate Center is at the southeast corner of Kellogg and Rock Road.

    In the case of Westway, city documents indicate that the funds from the CID proceeds are to be used for “public and private improvements and the payment of certain ongoing operating costs.” At Eastgate, funds will be used for “renovation and modernization.”

    Both projects ask for one cent per dollar to be added to shoppers’ sales tax. Both ask to be implemented using the “pay-as-you-go” method, meaning that the city will not issue bonds. Instead, the city will send to the applicants the proceeds from the extra sales tax as it is collected.

    Both applicants are represented by Polsinelli Shughart, an Overland Park law firm that has represented other clients that have received approval for community improvement districts from the Wichita City Council.

    Signage discussion at city council

    At the December 7, 2010 meeting of the Wichita City Council, the council considered whether stores in CIDs should be required to post signs warning shoppers of the amount of extra tax being charged. Some, including myself, feel that shoppers should have this information before deciding to shop in such a store.

    At the meeting Korb Maxwell, a representative of Polsinelli Shughart, spoke to the city council in support of the CID legislation. While Maxwell spoke as though he was advocating for the public interest, he in fact works for a law firm that is representing the narrow interests of its clients.

    Speaking to the council, Maxwell denied that developers “have any interest in hiding something from the public, or keeping citizens from having full knowledge about these community improvement districts.”

    But he said — rather obliquely — that the retailers they are trying to bring to Wichita would be discouraged by full disclosure of the extra sales tax that citizens would pay in their stores. “We want to make sure that anything that we do, or anything that we implement within a policy is appropriate and will not counteract the very tool we’re creating here.”

    He provided a suggested sign design that states that community improvement district financing was used, but not that customers will pay a higher sales tax in CID stores. Retailers would accept this, he said.

    In discussion from the bench, Vice Mayor Jeff Longwell said it is important that we disclose these “types of collections” as they are taxing the public. But in a convoluted stretch of reasoning, he made a case that posting a sign with a specific sales tax would be confusing to citizens:

    “I was leaning to putting a percentage on there, but again if we have a website that spells out the percentage, I think that’s important. And number two, I guess I would be a little bit concerned how we would work through it — if you put a percentage on a development over here in downtown that’s only collecting one percent and someone walks in and sees a CID tax collected of one percent and just assumes every CID tax is one percent it would be confusing when they go to the next one, and it may scare them off if they see one that’s two percent, they’ll never go to one that’s maybe only one percent. So I think that proves an additional concern for some confusion. So having something on the front door that says we are financing this with a CID tax, where they’re made well aware that it’s collected there, I think to try and include a percentage might even add some confusion as we collect different CID taxes around the city.”

    I think this means that Longwell’s okay with telling people as they enter a store that they’re being taxed, but not how much tax they’re being asked to pay. We can summarize his attitude as this: Giving citizens too much information will confuse them.

    Council Member Sue Schlapp said she supported transparency in government:

    “Every tool we can have is necessary … This is very simple: If you vote to have the tool, and then you vote to put something in it that makes the tool useless, it’s not even any point in having the vote, in my opinion. Either we do it, and we do it in a way that it’s going to be useful and accomplish its purpose. … I understand totally the discussion of letting the public know. I think transparency is absolutely vital to everything we do in government. So I think we’re doing that very thing.”

    Schlapp understands and said what everyone knows: that if you arm citizens with knowledge of high taxes, they’re likely to go somewhere else.

    Mayor Brewer said he agreed with Schlapp and the other council members.

    In the end, the council unanimously voted for requiring signage that reads, according to minutes from the meeting: “This project made possible by Community Improvement District Financing and includes the website.”

    This sign doesn’t mention anything about extra sales tax that customers of CID merchants will pay. Contrary to Schlapp’s assertions, this is not anything like government transparency.

    This episode is a startling example of the council and staff being totally captured by special interests.

    Sales tax increase spreading across Wichita

    These two CIDs break new ground in that these shopping centers are not tourist destinations or trendy shops. Some council members like Longwell have justified past CIDs on the basis that since they are tourist destinations, much of the tax will be paid by visitors to Wichita. This is not a wise policy, but even it it was, it does not apply to these two shopping centers.

    Instead, these two applications are more indications that soon Wichita — its major retail centers and destinations, at least — is likely to be blanketed with community improvement districts charging up to an extra two cents per dollar sales tax. Currently, merchants in a CID are running the very real risk that once their customers become aware of the extra sales tax, they will shop somewhere else. But as CIDs become more prevalent in Wichita, this competitive disadvantage will disappear.

    Step by step, a sales tax increase is engulfing Wichita, and our city council and mayor are fine with that happening. This is on top of the statewide sales tax increase from last year, which, despite claims of its supporters and opposition by conservatives, is likely a permanent fixture.

  • Kansas and Wichita quick takes: Thursday December 30, 2010

    Kansas Meadowlark blog recast. Earl Glynn of Overland Park has reformed his Kansas Meadowlark site from a blog to a news site along the lines of the Drudge Report. Glynn’s full-time job is working for Kansas Watchdog.

    Longwell site noted. A website supporting the candidacy of Wichita Vice Mayor Jeff Longwell for re-election to his current position has been spotted. Title: Vote for Jeff Longwell.

    Kansas legislative issues to watch. Fort Hays State University political science professor Chapman Rackaway lists the things to watch for in the upcoming session of the Kansas Legislature, which opens on January 10. Here’s his list: The budget, K-12 education funding, economic growth, higher education, entitlements, a balancing act between the “interests of the center-right and polar-alliance wings of the party,” and redistricting. The full article is in the Wichita Eagle at Seven legislative issues to watch in 2011.

    Local governments are a model. H. Edward Flentje, public affairs professor at Wichita State University, explains the difference between the finances of local governments — cities and counties — as compared to states and the federal government: “So, why aren’t our cities and counties wallowing in red ink? For the most part, they do the basics right. They keep revenues and spending in balance. When times are tough, they tighten the belt. In good times, they pay off debt or pay for projects that might otherwise require debt. They maintain reasonable fund balances that buffer economic downturns and avoid unnecessary tax increases or draconian cuts in services. They use debt sparingly but never for ongoing obligations.” He also mentions the role of professional managers in local government, something that Kansas has a long tradition of using. Flentje plays a role in educating and training these managers, and served a stint as interim city manager for Wichita a few years ago. The full article is at State of the State KS at Insight Kansas Editorial: Local Clues for Stemming the Flow of Red Ink.

    Truce in culture wars? Michael Barone in the Washington Examiner: “The fact is that there is an ongoing truce on the social issues, because for most Americans they have been overshadowed by concerns raised by the weak economy and the Obama Democrats’ vast increase in the size and scope of government.” Somehow I don’t think this message has made it to Kansas. As reported by Fred Mann in today’s Wichita Eagle: “Before Kansas lawmakers consider such a bill, Kinzer said, they will take up a host of previous abortion measures that were vetoed by former Govs. Kathleen Sebelius and Mark Parkinson, and that are more likely to be approved by incoming Gov. Sam Brownback.” Lance Kinzer is a member of the Kansas House of Representatives from Olathe and a member of Governor-Elect Sam Brownback’s transition team. Barone, in the article mentioned above, writes “Abortion remains controversial. But we are not going to see abortion criminalized, not in a country where the Supreme Court has been ruling for 37 years that it’s a right. At the same time, we are seeing abortion disfavored and restricted by state laws that are widely popular and have at least in some cases been upheld by the courts.” In Kansas, though, anti-abortion forces are preparing a number of laws that concern, according to Mann, “tightened reporting requirements for late-term abortions, remedies against doctors who violate the laws, and provisions allowing a woman, her husband or parents to sue a doctor if they thought a late-term abortion was performed illegally.” The biggest danger is the culture war in Kansas will take our focus off the state’s economy and the need to get it on track. Chapman Rackaway, in his piece mentioned above, wrote: “If Brownback can successfully balance pragmatism and the interests of the center-right and polar-alliance wings of the party, he can be a rousing success as governor. If open warfare breaks out between wings of the party, all could be lost.”

    Wind power: the transmission subsidy. From The Wall Street Journal column The Midwest Wind Surtax: The latest scheme to socialize the costs of renewable energy: “You’d think poor Michigan has enough economic troubles without the Federal Energy Regulatory Commission placing a $300 million to $500 million annual surtax on the state’s electric utility bills. But on December 16 FERC Chairman Jon Wellinghoff announced new rules that would essentially socialize the cost of transmission lines across 13 states in the Midwest. … This is another discriminatory subsidy for wind energy that will raise electricity prices on everyone, notably on those who don’t rely on wind for electric power. … Let’s be very clear on what’s happening here: Mr. Wellinghoff and FERC are trying to establish by regulatory fiat a national energy policy that Congress has refused to endorse. Last summer Congress rejected the Obama Administration’s renewable energy standard law because it would have inflated power costs.” In Kansas, outgoing Governor Mark Parkinson is proud of his accomplishments in forcing more wind power mandates on Kansans.

  • North Dakota TIF video reminiscent of Wichita

    The North Dakota Policy Council has a video on YouTube that explains the mechanics of tax increment financing (TIF) districts and the public policy problems associated with TIF.

    The video is presented in three sections. The material in the first section is different from the way TIF districts work in Kansas, but the other two sections are very similar to the way the law works in Kansas.

    At the start of part 3 (“Problems with TIFs”) the narrator states the problem succinctly: “Tax increment financing negatively affects everybody’s property tax bill by taking the tax revenue from increased taxable valuations on the properties in the TIF areas and putting that into TIF accounts.”

    She then presents an illustration showing how the property taxes for non-TIF properties have to rise to make up for the fact that taxes from TIF properties do not go towards paying for city, county, or school district services. While Wichita doesn’t use the term “TIF accounts” as used in this video, the economic effect is the same.

    The video also mentions politically-favored developers being the beneficiaries of TIF districts, specifically mentioning “a friend of the city who might own property that is struggling.” I wonder: is the North Dakota Policy Council aware of the situation in Wichita, where many feel that the city has bailed out Real Development (also known as the “Minnesota Guys”) by not only granting TIF financing to them, but increasing the amount of TIF financing against the recommendation of its independent consultant?

    Compounding the problem is the obvious lack of understanding of the economic effects of TIF districts by members of the Wichita City Council, and possibly by city hall bureaucrats, too. Wichita vice mayor Jeff Longwell has complained to the Wichita Eagle that the public doesn’t understand tax increment financing. We should be questioning Longwell’s own understanding, and that of council member Janet Miller, too.

    Longwell and Miller — the rest of the council too, for that matter — are aided by newspaper reporters like the Wichita Eagle’s Bill Wilson, who is dismissive and hostile towards free markets and those who advocate for them, calling reliance on markets “intellectually shallow” and a “thin ideological argument.”

  • Wichita Old Town TIF district illustrates cost and harm of subsidy

    At this week’s meeting of the Wichita City Council there was an item of good news: the closing of the Old Town tax increment financing, or TIF, district. But the expressed attitude of city council members towards TIF districts indicates that citizens must be concerned that the council will attempt to use this harmful form of developer and corporate welfare in the future.

    Citizens need to be made aware of the uninformed and misinformed views of council members, particularly Janet Miller, who was the primary speaker on this item Tuesday. Most of the other city council members, however, also share these views, even those who consider themselves conservative and opposed to intervention in the economy.

    While Miller expressed a correct view of the mechanics of TIF districts, she — and the other council members too — always miss the economic meaning of these districts.

    In her remarks, Miller disagreed with a citizen who said that the TIF district “helped out” the property owners in the district. Miller said: “In tax increment financing districts, it is the property owners’ taxes that they pay, that pay the cost of the public improvements in that area. … The taxes that they paid in on their increased valuations in property have paid for the improvements.”

    She also said that with careful planning the community benefits from TIF districts, and that we should look forward to “future great things that are going to come from this kind of initiative and creativity.”

    It’s quite easy to see the mistakes and fallacies in Miller’s remarks. Do TIF districts help out the favored developers? Of course they do. Why else would the city create them?

    A typical scenario is that a developer has an idea to build something, but claims a “gap” between the financial resources at their disposal and what the project costs. City staff checks the developer’s arithmetic and agrees. So the city creates a TIF district, and the project is able to proceed.

    So the TIF financing filled the gap. How can this be interpreted as doing anything but helping the developer?

    The city and council members like Jeff Longwell regularly claim that TIF districts don’t cost the city anything. We can easily see the errors in this thinking. Over the past 17 years, did Old Town require any attention from the police department? Of course it did. Old Town consumes vast police resources. In 2008 Wichita Police Chief Norman Williams was quoted in the pages of the Wichita Eagle: “Williams said that as Old Town changed from a warehouse district to an entertainment district, it has presented a ‘tremendous challenge’ to public safety.”

    As was brought forth in Tuesday’s city council meeting, Old Town does pay some property taxes that go into the city’s general fund and can be used to pay for the police protection that Old Town requires. The valuation before the TIF district was formed was said to be $1 million dollars. Now it’s $9 million. So the city’s general fund has received taxes on $1 million in property valuation to pay for all the services Old Town requires. The property taxes paid on the other $8 million in valuation are directed back to the district for the benefit of the property owners.

    So yes, TIF districts like Old Town do cost the city. Someone has to pay for the cost of police protection and other government services in Old Town. Its property taxes don’t even come close.

    That’s what the city council doesn’t understand (or maybe it does, see below): The entire purpose of TIF districts is to benefit the property in the district.

    How TIF districts benefit recipients

    Here’s how it works. When using tax increment financing, a geographic district is formed. The property taxes being paid by a property in the district at the time of formation is noted and called the base. Usually this property is not very valuable, so this base is a low value. In the case of Old Town, it was $1 million.

    Then a development plan is created. Based on that plan and the property taxes that the completed project will likely pay, the city will borrow money and give it to the developers. While cities like to say that TIF funds can be used only for things with a public purpose like infrastructure, this doesn’t make any difference. (If the expenditures had a truly public purpose, why wouldn’t the city pay for them without a TIF district?)

    After the project is completed, the tax appraiser notices that there’s something new and valuable where there wasn’t before, and he levies a higher tax bill on the property. The difference between the original taxes — the base — and the new taxes is called the increment.

    Under normal conditions when new property comes on the tax rolls, the tax revenue is used to provide public services such as police and fire protection. The school district is usually a recipient of a large portion of the new tax revenue, which might be used to pay for the schooling of residents of the new housing in the district, for example.

    But in a TIF district, what happens to this new tax revenue — the increment?

    Recall that the city borrowed money and gave it to the developers. The new property taxes — the increment — is used to pay off these bonds.

    So council member Miller is correct, in a way. Old Town property owners paid increased property taxes.

    But when these increased taxes are used to pay off bonds that exclusively benefit Old Town, how is this any different from not paying?

    Consider development not in a TIF district. Developers may borrow money to build something. Then they have to make loan payments and higher tax payments.

    But TIF developers pay only higher taxes. There are no loan payments, as their increased property tax payments are used to pay off the loan.

    Public choice in action

    I wrote earlier that the city council doesn’t understand this. It may be possible that council member Miller, the mayor, and others do understand this, but they decide to go ahead and create TIF districts and other forms of developer subsidy and welfare nonetheless.

    That’s entirely possible, as TIF districts and other corporate welfare illustrate the worst aspects of public choice theory in action. In this case, we have a situation where a small group of people — the subsidized developers — have a huge and powerful motive to obtain TIF financing and other forms of subsidy. Politicians and bureaucrats want to see these things happen too, as they feel a need to justify themselves and increase their spheres of influence and power.

    Average citizens may realize that these things cost them, but it’s a relatively small amount of money — certainly in contrast to the millions that subsidized developers received — so their motive to oppose them is small. This is a reason why many people don’t bother to vote.

    Don’t forget that politicians want to receive campaign contributions, too. Developers who seek subsidy from city hall generally contribute to all city council members. It’s difficult to see how someone who has a political ideology — say fiscal conservatism — could contribute to all city council members. But they do.

    Miller has received large amounts of campaign contributions from those who have benefited from TIF financing and other corporate welfare in the past, and who plan to benefit again in the future. She’s not alone in this regard.

  • Economic freedom at decline, across the U.S. and in Wichita

    Earlier this year Robert Lawson appeared in Wichita to speak about economic freedom throughout the world. While the United States presently ranks well, that is changing. Writing this month in The Freeman, Lawson and his colleagues warn of dangerous trends — particularly the Obama Administration’s response to the recession — that pose a threat to the economic freedom that powers growth and prosperity.

    While the article is focused primarily at the national economy, there are lessons to be learned locally, too. In particular, increasing intervention into the state and local economy leads to compounding the loss of economic freedom.

    As an example, the Wichita City Council has just approved a plan for the revitalization of downtown Wichita that calls for public investment to be made downtown. While the plan is promoted as a market-based plan, it is, instead, a government plan to redirect investment from where people have decided it should be to where politicians, bureaucrats, and their patrons think it should be. These patrons are sometimes called “crony capitalists,” as explained in this passage from the article (James D. Gwartney, Joshua C. Hall and Robert A. Lawson:
    The Decline in Economic Freedom    ):

    It is important to distinguish between market entrepreneurs and crony capitalists. Market entrepreneurs succeed by providing customers with better products, more reliable service, and lower prices than are available elsewhere. They succeed by creating wealth — by producing goods and services that are worth more than the value of the resources required for their production. Crony capitalists are different: They get ahead through subsidies, special tax breaks, regulatory favors, and other forms of political favoritism. Rather than providing consumers with better products at attractive prices, crony capitalists form an alliance with politicians. The crony capitalists provide the politicians with contributions, other political resources, and, in some cases, bribes in exchange for subsidies and regulations that give them an advantage relative to other firms. Rather than create wealth, crony capitalists form a coalition with political officials to plunder wealth from taxpayers and other citizens.

    We are now in the midst of a great debate between the proponents of limited government and open markets on the one hand and those favoring more collectivism and political direction of the economy on the other. The outcome of this debate will determine the future of both economic freedom and the prosperity of Americans and others throughout the world.

    In Wichita, “those favoring more collectivism and political direction of the economy” are winning. Not only are they winning the actual political votes, they are also winning the battles within their own minds. Astonishingly, many of the crony capitalists in Wichita have deluded themselves into believing that they are supporters of free markets and capitalism. But taxpayer-supported institutions like Wichita Downtown Development Corporation and Visioneering Wichita exist for the very purpose of directing taxpayer funds toward the crony capitalists. Even the Wichita Metro Chamber of Commerce plays a role in the plunder of the taxpayer, with its president nodding in approval as nominally conservative members of the Wichita City Council expressed their support for the collectivist, anti-market vision for downtown Wichita.

    The heads of each of these organizations, along with city council members Sue Schlapp, Paul Gray, Jim Skelton, and Vice Mayor Jeff Longwell consider themselves to be conservatives. Many of these have personally assured me they are in favor of free markets.

    The actions of the council members, not only their enthusiastic embrace of the downtown plan, but their interventions — at nearly every meeting, week after week — that interfere with the market economy and destroy economic freedom, show that none have even a basic understanding of the difference between the economic means and the political means. Writing in his recent book The Science of Success, Koch Industries Chairman and CEO Charles Koch explains the difference:

    The economic means of profiting involves voluntarily exchanging your goods or services for the goods or services of others. Parties will not voluntarily enter into an exchange unless they both believe they will be better off. Therefore, you can only profit over time in a system of voluntary exchange (a market) by making others better off.

    The political means of profiting transfers goods or services from one party to another by force or fraud. A coerced or fraudulent exchange leaves at least one of the parties worse off. Examples are stealing, committing fraud, polluting, using unsafe practices, filing baseless lawsuits, lobbying government to hamper competitors or obtain subsidies and promoting self-serving redistribution programs.

    The economic means creates wealth by making each participant, and, therefore, society as a whole, better off. The political means, at best, merely distributes wealth. As a general system, it causes the overcoming majority of people to be worse off. (emphasis added)

  • Wichita Community Improvement District policy to be decided

    Tomorrow the Wichita City Council is scheduled to decided the city’s policy on Community Improvement Districts (CID).

    CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    One of the main issues to be decided is the issue of warning signage. Some have recommended that consumers be protected from unknowingly shopping in stores, restaurants, and hotels that will be adding extra sales tax to purchases. Developers who want to benefit from CID money say that merchants object to signage, fearing it will drive away customers. Imagine that: people don’t want to pay any more tax than necessary!

    City staff has recommended that a website be used to notify customers of CIDs. This form of notification is so weak as to be meaningless.

    One of the follies in Wichita government economic development policy is the categorization of costs into eligible and non-eligible costs. The proceeds from programs like CIDs and tax increment financing may be used only for costs in the “eligible” category. I suggest that we stop arbitrarily distinguishing between “eligible costs” and other costs. When city bureaucrats and politicians use a term like “eligible costs” it makes this process seem benign. It makes it seem as though we’re not really supplying corporate welfare and subsidy.

    As long as the developer has to spend money on what we call “eligible costs,” the fact that the city subsidy is restricted to these costs has no economic meaning. Suppose I gave you $10 with the stipulation that you could spend it only on next Monday. Would you deny that I had enriched you by $10? Of course not. As long as you were planning to spend $10 next Monday, or could shift your spending from some other day to Monday, this restriction has no economic meaning.

    The rise of CIDs is an example of the city working at cross-purposes with itself, as many of the CIDs are for the benefit of hotels and other tourist attractions. Now we have the situation where we spend millions every year subsidizing airlines so that airfares to Wichita are low. Then we turn around and add extra tax to visitors’ hotel bills and perhaps the shops and restaurants they visit. Vice Mayor Jeff Longwell approves this as a wise strategy.

    Developers say that Wichita will lose deals if businesses don’t have the ability to charge extra sales tax without the prior knowledge of customers. I would suggest we lose deals because of another reason: our high business property taxes. According to the Minnesota Taxpayers Association, commercial property in Wichita is taxed an an effective rate of 2.801 percent per year. The national average is about 1.9 percent, meaning the rate in Wichita is 47 percent greater.

    These high commercial property taxes have driven developers such as Colby Sandlian and others out of Wichita. They continue to develop properties outside of Wichita and Kansas — in Sandlian’s case, over $100 million in commercial development outside of Kansas since 1989.

    These high business taxes mean that the state and cities must concoct schemes like CIDs and other economic development giveaways in order to attract business to Wichita. This places governmental bodies like the Wichita City Council in the position of selecting which business firms it will invest in, when there’s no way the Council has the knowledge and incentive structure needed to make these decisions.

    If we will lose deals because a special class of merchants can’t charge extra sales tax, then we have a big problem.

    If we will lose deals because we’re afraid to notify consumers — in advance — of the taxes they will pay, we have a big problem.

    Finally perhaps the simplest public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

  • Kansas and Wichita quick takes: Monday November 22, 2010

    Wichita city council this week. This week is workshop only, meaning that legislative action is limited to consent items. These items are voted on in bulk, unless a council member wants to “pull” an item for separate discussion and voting. Generally consent items are thought to be non-controversial, at least by the person who creates the agenda. This week one consent item may cause a bar to lose its license, as Hurst Laviana reports in the Wichita Eagle. Start time is 9:30 am instead of the usual 9:00 am.

    Workshop to discuss Wichita trash. Tuesday’s Wichita city council meeting will have a workshop discussing a plan for a Wichita trash haulers’ cooperative and for a recycling plan. Brent Wistrom and Deb Gruver report in the Wichita Eagle. Conservatives on the council who favor big government — Jeff Longwell, Jim Skelton, and Sue Schlapp — seem to favor the proposal. I guess it is inevitable. But I worry that if we start relying on government to manage a simple thing like trash for us, the danger is that government will want to expand its realm of responsibility to providing things like water, jobs and economic development, employee training for business, housing for low-income people, golf courses, art museums and culture, transit, ice skating rinks, airports, dances for seniors, planning services, education, retirement plans, and health care.

    Candidate for Wichita mayor noticed. Bob Nelson describes himself this way: “I am a 36 year old lawyer, technical consultant, and aviation industry professional. I am a long time Republican and conservative.” His website –maybe still in developmental state, but nonetheless visible to the world — is Bob Nelson for Mayor.

    Former Wichita school chief in news. Former USD 259, the Wichita public school district superintendent Winston Brooks, now head of Albuquerque public schools, is in the news. An administrator alleges a hostile work environment and has been placed on leave with pay. It’s not the first time highly-paid administrators have been placed on paid leave for long periods since Brooks took over. The meaning of this to Wichita? Many of the current members of the Wichita school board loved Brooks and were sorry to see him leave Wichita.

    Charter school studies examined. Carl Bialik, in a “The Numbers Guy” article in the Wall Street Journal, writes about the “confusing report cards” that charter schools have received in various studies. Some studies report glowing results for charters, and other report poor results as compared to regular public schools. Bailik does report one finding: “There is some consensus among these studies. Researchers generally have found that charter schools in low-income, urban areas boost test scores, while suburban charter schools in wealthier areas don’t.” Mentioned by one source quoted in the article is one of the best attributes of charter schools: they can’t force students to attend, so poor ones close down, unlike poor public schools.

    Rasmussen polls from last week. “Talk about low expectations” was the start of the email message from Rasmussen Reports. Examples: “Just 26% of voters now think the country is heading in the right direction. This finding continues to fall since Election Day and is the lowest reading since mid-March, largely because Democrats are down but sentiments among Republicans and unaffiliated voters haven’t moved.” (Right Direction or Wrong Track) … “A plurality (47%) of voters believes America’s best days have come and gone, a number that has remained fairly constant since the beginning of the year.” … “Thirty percent (30%) of homeowners say the value of their home is less than what they still own on their mortgage.” … “Belief that a home is a good buy for a family remains at an 18-month low.” It’s all at What They Told Us: Reviewing Last Week’s Key Polls .