Voice For Liberty

Tag: Paul Gray

  • 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.

  • 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)

  • Kansas and Wichita quick takes: Monday December 6, 2010

    Cato scholar to speak on economic freedom. Friday’s meeting (December 10) of the Wichita Pachyderm Club features noted Cato Institute scholar, Principal Attorney at the Pacific Legal Foundation, and author Timothy Sandefur. He will discuss his recent book The Right to Earn a Living: Economic Freedom and the Law. A description of the book at Amazon.com reads: “America’s founders thought the right to earn a living was so basic and obvious that it didn’t need to be mentioned in the Bill of Rights. Yet today that right is burdened by a wide array of government rules and regulations that play favorites, rewrite contracts, encourage frivolous lawsuits, seize private property, and manipulate economic choices to achieve outcomes that bureaucrats favor. The Right to Earn a Living charts the history of this fundamental human right, from the constitutional system that was designed to protect it by limiting government’s powers, to the Civil War Amendments that expanded protection to all Americans, regardless of race. It then focuses on the Progressive-era judges who began to erode those protections, and concludes with today’s controversies over abusive occupational licensing laws, freedom of speech in advertising, regulatory takings, and much more.” … Of the book, Dick Armey said: “Government today puts so many burdens and restrictions on entrepreneurs and business owners that we’re squandering our most precious resource: the entrepreneurial spirit and drive of our people. Sandefur’s book explains how this problem began, and what steps we can take to ensure that we all enjoy the freedom to pursue the American Dream.” … The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

    Success factor for liberals identified. On last night’s installment of The Right, All Along: The Rise, Fall & Future of Conservatism, economist Arthur Laffer issued this assessment of the presidency of Bill Clinton: “Two groups I love are principled conservatives and unprincipled liberals. And Bill Clinton I viewed as an unprincipled liberal. And he did one of the best jobs — one of the best presidents we’ve ever had.” It’s an interesting observation by Laffer that for liberals to have success, they must be unprincipled.

    Joshua Blick for Wichita City Council. A website for a candidate for Wichita City Council district 4 is up and running. Joshua Blick’s site says: “Joshua Blick is an active leader in District 4; he is the President of his neighborhood association and a local business owner. Joshua also passionately supports the growth and sustainability of new jobs for Wichita, and improving the quality of living for every resident in this great city.” District 4 covers the southwest side of Wichita. The incumbent council member, Paul Gray, may not run again because of term limits.

    Washington is why the economy is not growing. Mark Tapscott of the Washington Examiner runs through the reasons why the economy is not growing: “On every front, the federal government is creating more investment-killing tax uncertainty, issuing endless pages of new bureaucratic regulations on the economy, and preventing firms from taking actions that could create hundreds of thousands of new positions and kick-start a muscular recovery with real legs. … Obama is also tightening the federal bureaucracy’s regulatory straightjacket on economic growth. As the Heritage Foundation reported a week before the election, the hidden tax of regulation costs at least $1.75 trillion annually. … Then there is the Obama Permitorium on energy exploration and production here in the United States, which threatens even greater long-term damage to the economy’s ability to generate new jobs and growth. … Instead, Obama is spending billions of tax dollars to subsidize alternative energy programs that cannot possibly replace the energy produced by oil, coal or natural gas until 2030 at the earliest.” The full article is Mark Tapscott: Washington is why the economy is not growing.

    Rasmussen polls from last week. Current Congress not appreciated: “Most voters continue to give this Congress poor marks in its closing days, and they still don’t believe the national legislature has passed anything to significantly improve life in America.” Full story here. Ability of Congress to substantially cut spending is doubted, especially by Republicans. See Most Voters Don’t Expect Big Spending Cuts From New Congress. About half of Americans believe that lenghty unemployment benefits increase the number of unemployed people. See Americans Question Whether Extended Unemployment Benefits Do More Harm Than Good. Almost half say repeal of Obamacare would be good for the economy. See Health Care Law.

    Kansas Democrats not quite dead. Tim Carpenter of the Topeka Capital-Journal looks at the results of the November election in Kansas and the future for Kansas Democrats. An important process to watch is reapportionment, when new legislative districts will be drawn: “The reapportionment debate is likely to have an urban vs. rural character as districts are reconfigured to correspond with population growth in urban counties, especially Johnson County, and erosion of residents in rural areas of the state. The math isn’t clear yet, but results of the 2010 Census could trigger loss of two rural Senate districts and six rural House districts.” As for the future of Democrats, two observers say “They are back in the Stone Ages” and “We’re seeing a definite balance-of-power shift.” One observer warns that breakdown of the “union of Republican social and economic conservatives” could be an opening for Democrats and moderate Republicans. See KS Dems: Weaker, but not dead.

    Young Republicans group started. Lynda Tyler of Kansans for Liberty is shepherding a new group of young Republicans. Writes Lynda: “Do you know a high school student, child, grandchild in the teen years who is interested in learning more about politics and getting involved? Perhaps you would like to get them involved. Chase Blasi has started the Sedgwick Teen Age Republicans group known as STARS. We are sponsoring them and would like to help the group grow so see below for details on their next meeting.” Lynda is hosting a Christmas Party for this group. Write to her at lyndaty@swbell.net for more information.

  • Wichita trash cooperative: gateway to mandatory recycling?

    Opposition to a proposed trash pickup cooperative in Wichita focuses mostly on two issues: the free market, and specific problems with the program.

    Conservative city council members — Paul Gray and Sue Schlapp in this case — advocate for a free market in trash collection. I appreciate that. But it is confusing to hear them advocate for a free market in trash collection when at the same time they vote for big-spending economic development programs that don’t work.

    Brent Wistrom’s Wichita Eagle article Questions pile up as Wichita eyes trash plan does a fine job of laying out the unanswered questions and issues left to be resolved — if they can be solved.

    These issues are important. But here’s the biggest reason to oppose this plan: it’s a gateway to mandatory recycling in Wichita.

    Recycling, while held up by its supporters as a moral imperative if we care anything about the planet, is a gigantic waste of resources. There are only a few settings in which recycling makes any sense at all. Automobiles and commercial cardboard are two such situations.

    In almost any other area, recycling uses more resources than it saves, despite the claims of its proponents.

    We need to look no farther than economics to learn the true value of an activity or a resource. In the case of recycling — except for the narrow examples mentioned above — most people have to pay to have their recycled goods hauled away. Or, they must incur costs themselves in hauling them somewhere that will accept them.

    Yes, Waste Connections in Wichita has a recycling program that pays people to recycle. Or does it? The program works this way: First, people pay $3.75 per month for recycling bins and their pickup twice monthly. By filling the recycling bin people can earn points which they may redeem for rewards.

    The roundabout approach to paying people to recycle only highlights the unfavorable economics of recycling. Why doesn’t Waste Management simply pay people for their recycled goods? Or why don’t they pick them up for free?

    The fact that Waste Management won’t engage in a straightforward transaction with its recycling customers allows the company to appear to be politically correct towards recycling, while at the same time escaping the fact that household recycling simply does not pay. Here’s Daniel K. Benjamin explaining the economics of curbside recycling in Eight Great Myths of Recycling:

    The numbers I have presented here avoid these problems and make clear that, far from saving resources, curbside recycling typically wastes resources — resources that could be used productively elsewhere in society.

    Indeed, a moment’s reflection will suggest why this finding must be true. In the ordinary course of everyday living, we reuse (and sometimes recycle) almost everything that plays a role in our daily consumption activities. The only things that intentionally end up in municipal solid waste — the trash — are both low in value and costly to reuse or recycle. Yet these are the items that municipal recycling programs are targeting, the very things that people have already decided are too worthless or too costly to deal with further. This simple fact that means that the vast bulk of all curbside recycling programs must waste resources: All of the profitable, socially productive, wealth-enhancing opportunities for recycling were long ago co-opted by the private sector.

    Commercial and industrial recycling is a vibrant, profitable market that turns discards and scraps into marketable products. But collecting from consumers is far more costly, and it results in the collection of items that are far less valuable. Only disguised subsidies and accounting tricks can prevent the municipal systems from looking as bad as they are.

    That’s right: The sober assessment of the price system is that in the context of households, recycling is a waste of resources. Although if people want to pursue it as a pastime or hobby, I have no objection.

    Nonetheless, supporters of recycling such as Wichita City Council member Janet Miller still believe in the false moral imperative of recycling. At last week’s workshop on Wichita trash, she said “There is only a finite amount of space on earth to bury stuff. At some point there’s not going to be any more room to bury stuff.”

    The fact is that landfills occupy a minuscule fraction of available space. We have plenty of space for trash.

    But the misinformed or uninformed attitude of Miller and a few others on the council — and maybe some bureaucrats too — is that recycling activity by Wichitans must increase, no matter how much of a waste of time it is.

    Answer this question: once Wichita has a mandatory, city-controlled and city-regulated trash pickup process in place, what’s to stop city hall from mandating that we recycle?

    Nothing, as far as I can tell.

    That’s the best reason for opposing takeover of our trash system by the city.

  • Kansas and Wichita quick takes: Friday November 12, 2010

    Dilts drops campaign for city council. Jason Dilts has announced that he is ending his campaign for a position on the Wichita City Council. He had been running for the district 4 position currently held by Paul Gray, who is precluded from running again by the city’s term limit law. While Dilts’ politics are liberal and might have been expected to depart from those of the incumbent, Gray voted for nearly every spending measure that came before the council. … Dilts’ departure leaves this district without any publicly declared candidates. The filing deadline for city and school board elections is January 24, 2011. The primary election is March 1, and the general election is on April 5. These elections are non-partisan, meaning that candidates run without party identification, although everyone who cares knows who belongs to which party. In the primary, the top two vote-getters advance to the general election.

    OTB: One-term Barack. Larry Sabato of the University of Virginia Center for Politics predicts a dim future for President Barack Obama and his chances for reelection. Sabato’s most recent “Crystal Ball” column starts off with “The wreckage of the Democratic Party is strewn just about everywhere. President Obama’s carefully constructed 2008 Electoral College breakthrough is now just broken, a long-ago memory of what might have been a lasting shift in partisan alignment.” After presenting the evidence, Sabato concludes: “There’s only one logical conclusion to be drawn: President Barack Obama is down for the count, will have an early lame duck presidency, and will be out of the White House in two years.”

    Project Downtown: The Master Plan for Wichita. The “final draft” version of the plan for the revitalization of downtown Wichita is now available. Click on Project Downtown: The Master Plan for Wichita. Perhaps after the “final draft” comes the “first permanent version?” Next week the Metropolitan Area Planning Commission will hold a public hearing to consider adoption of the plan. The meeting is at 1:30 pm Thursday Nov. 18, in the tenth floor conference room at Wichita City Hall, 455 N. Main. This is an opportunity for the public to comment on this project. I’m thinking I’ll be there.

    Wichita city hall garage closing. Letter to Wichita Eagle, in part: “The bureaucrats reserve for themselves convenient services, while those they are supposed to serve do without and are exposed to parking-meter violations and parking fines. Wichita government has a history of poor service to its citizens. Recent examples include the mismanagement of the Wichita water utility and resulting increases in our water bills, and the increased fees assessed to homeowners for home protection alarms. Yet we see good-old-boy deals on below-market rate loans and tax incentives to every project that comes before city officials, worthy or not.”

    Some Kansas counties voted against judges. Last week’s elections in Kansas offered voters the opportunity to vote whether several Kansas Supreme Court and Kansas Court of Appeals justices should be retained in office. Voters decided to retain all by roughly a two-to-one margin. But some Kansas counties voted against retaining the judges. In particular, some western Kansas counties, Cherokee county in extreme southeastern Kansas, and Coffey county in east-central Kansas voted against the judges. A Kansas Watchdog story asked Fort Hays State University political science professor Chapman Rackaway for his analysis. He said “I think you’re seeing more an expression of a philosophy than a particular agenda against these particular justices.” He noted “A more libertarian streak runs strong in western Kansas, and along with that comes a philosophy of ‘throw the bums out.’” He also says that “I think if you ran a correlation of votes you’d find that the strongest Libertarian and Republican results would come from some of the counties you’ve pointed out. In the end, then, this is more about general change than it is a specific policy or judge.”

    Health insurance profits. Watching liberal media so you don’t have to: Cenk Uygur, who appears on the liberal television network MSNBC, reported on the profits of health insurance companies. He said that health insurance companies earned $9.3 billion in profits for the first three months of the year, up 41 percent in the last year, adding “Do we really want to leave decisions about our health and our lives to a corporation whose sole purpose is to make money off of us? They get billions in profits by taking in more money from us than they pay out for our care. I’m not sure that makes a lot of sense.” First: citing a number like these profit figures without providing context means very little. Health insurance company profits — in terms of the industry’s size — have been low in recent years. Second: Have the insurance companies figured out how to the “game” the Obamacare plan? It wouldn’t be the first time large companies have co-opted government regulation for their own profit. Third: Do you — as does Uygur — trust the government to make decisions regarding your health care? The idea of a benevolent government paternally caring for our best interests is dangerous. Profit is a more reliable motive. The problem is that health insurance companies compete in a highly regulated market, where the profit motive is not fully able to express itself. Contrast the market for automobile insurance, where companies compete vigorously for business. In that industry, complaints of companies refusing to pay legitimate claims are rare. That’s because with auto insurance, consumers have a wide variety of companies to select from. That’s not the case with health insurance, where the choice for many people is made by their employer. Dissatisfied consumers have little ability to switch to another company.

    KansasOpenGov.org revamped. The Kansas Policy Institute announces a major revision of its government transparency website KansasOpenGov.org. I’ll have a longer article about this website next week.

  • Kansas and Wichita quick takes: Wednesday November 3, 2010

    Republican Party on probation. Noted conservative figure Richard A. Viguerie of ConservativeHQ.com expressed a common idea: “Voters have given Republicans one more chance to get it right. They are on probation, and if they mess up again, they won’t get another chance. The last time the Republicans were in charge, they became the party of big spending, Big Government, and Big Business. They abandoned the philosophy of Ronald Reagan and cozied up to lobbyists and special interests. And they paid a price at the polls.”

    Limited government and economic freedom not desired. In today’s Wichita Eagle editorial assessing the election results, Rhonda Holman just can’t grasp the importance of limited government and economic freedom to prosperity. Instead, she prefers what some call “nuanced” politicians, who can be pressured by newspapers to vote for big-government boondoggles: “Incumbent Commissioner Dave Unruh and Wichita City Council member Jim Skelton already have proved to be thoughtful leaders; the same cannot be said of Richard Ranzau, whose tea party tendencies could put important county priorities at risk.” The victories of Ranzau — there were two, one in the primary over an Establishment Republican and again in the general election over a Democrat in a Democratic district — were gained the old-fashioned way: by meeting voters and letting them know what he stands for. And he was not bashful in his message of limited government. Both times, voters responded. The Wichita Eagle ought to take notice.

    Future of Sedgwick County Commission. Yesterday’s defeat of incumbent Gwen Welshimer by Jim Skelton replaces a commissioner committed to low taxes and spending with someone with a less convincing record. While Skelton has sometimes voted against TIF districts — he and Paul Gray voted against the $10.3 million Exchange Place TIF district, although they were okay with it at $9.3 million — he firmly believes it is his duty — as city council member and as future county commissioner — to direct the economic development of the region.

    Future of Wichita City Council. Skelton’s move to the county commission means there will be another new face on the council be fore long. Already the spring elections will bring two new faces, as members Sue Schlapp and Paul Gray will be leaving the council due to term limits. Now Skelton will be replaced, either by city council appointment or election next spring, depending on the timing of Skelton’s resignation. That’s a total of three new members. Mayor Carl Brewer and Vice Mayor Jeff Longwell must run for relection in the spring if they want to stay on the council. Brewer has already announced his intent to run.

    Commission criticized as “gutless.” Because Wichita real estate developer Rob Snyder wasn’t granted some $400,000 in taxpayer subsidy because of the action of the Sedgwick County Commission, he criticized the commission as “gutless,” according to Wichita Eagle reporting. When testifying before the Wichita City Council as to the need for his developer welfare, Snyder whined about how that earmarks are now unpopular with the American public and not available to finance his proposed Save-A-Lot grocery store. An earmark — that is to say, a grant of money paid for by U.S. taxpayers — was used as a large part of the financing for the other Save-A-Lot in Wichita at 13th and Grove.

    Kahn to substitute at Pachyderm. A scheduling change means Wichita State University political science professor Mel Kahn will be the presenter at this Friday’s (November 4) meeting of the Wichita Pachyderm Club. The always-interesting and entertaining Kahn will speak on the topic “Do Political Attacks Help or Harm our Republic?” This seems like a timely topic given the recent general and primary elections. The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

  • Community Improvement Districts discussed in Wichita

    At yesterday’s meeting of the Wichita City Council, council members approved the start of the process to create two Community Improvement Districts in Wichita. Yesterday’s action sets August 10 as the date for a public hearing.

    CIDs are a creation of the Kansas Legislature from last year. They allow merchants in a geographic 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. More background may be read in the article Wichita community improvement districts should have warning signs.

    In my remarks to the council, I asked the city to consider consumer protection and education regarding CIDs. I noted that just by crossing a street and shopping within the boundaries of a CID, consumers will have to pay higher sales tax. How would consumers know this in advance?

    Council member Paul Gray noted that by crossing a street, consumers might enter a different municipality and have to pay more sales tax. While this is true — the neighboring city of Andover is considering a one-cent city sales tax — the Wichita city council can’t control what its neighbors do. But it can control what happens within the boundaries of Wichita.

    Gray said that he didn’t want to create community improvement districts and then handicap them with further government regulation. I agree. But the proper way to avoid this extra regulation is to avoid government intervention in the first place by forging the creation of community improvement districts.

    But perhaps the most important 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?

    City council members and city staff did not provide an answer to this question.

    Gray did not vote on this measure as a family member is employed by the business seeking this CID. Council member Lavonta Williams was absent. All other council members voted to approve the petition and set a public hearing on August 10.

    Wichita Eagle reporting on this issue is at Public hearings set on sales tax districts at WaterWalk and Central and Oliver. Wichita Business Journal reporting is at City Council moves forward on two CIDs.

  • Wichita Bowllagio hearing produces only delay

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Analysis

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Wichita city council signals possible change in economic development incentive policy

    At today’s meeting of the Wichita City Council, discussion by council members and their vote may signal a change in the city’s stance toward economic development incentives.

    At issue was a request for extension of economic development incentives for a Wichita company. Five years ago the city council approved an economic development package for the company that included a tax abatement. As is the city’s policy, the council revisits the issue in five years to see if the company has meet its goal commitments. In the case of this company, one commitment — the building of a new facility — was met. The other commitment — creation of a certain number of jobs — was met early on during the period of the tax abatement, but employment has been declining in recent years, and employment is currently 100 jobs below the goal.

    Recently the city council adopted new guidelines for companies that are not meeting their goals at the time of review. These guidelines make it easier for companies to qualify for the extension of the abatement. If the WSU Current Conditions Index has declined since the awarding of the incentives, the company will qualify for an extension if a majority of the goals are met. A company will also qualify for extension if their peak job creation numbers exceeded the goal, even if the number has fallen, as is the case with the company under consideration today.

    Based on the new guidelines, city staff recommended to approve the extension of the incentives.

    Council member Lavonta Williams asked if it was possible if, as an company receiving an incentive, could “I hire five people today and fire them by Friday and then meet my criteria?” The answer by city economic development director Allen Bell is that the policy contains no such guideline as to minimum period of employment.

    Wichita city manager Bob Layton interjected that staff’s recommendation to approve the extension is a difficult one to make, as this company is in a declining pattern of employment. Additionally, the newly calculated benefit-to-cost ratios are low, and he said he is uncomfortable with that: “We’re actually subsidizing this business, so to speak, or others are subsidizing or bearing their load for debt service.”

    Council member Sue Schlapp asked a question not covered by policy: if we deny the extension today, and next year the company improves its situation, could they come back and ask for the extension of the tax abatement then? There is no definitive answer to this question at this time, according to Bell and Layton.

    Schlapp added that it seems like we’re “lowering the bar all the time” as to the granting of incentives.

    Council member Paul Gray remarked that the council makes itself look bad in these situations, as it always grants extensions even though the city has created policies that should hold companies accountable to their committed goals. The reason for awarding the incentives, he said, was for the increase in employment, and that employment level has not been kept. “We need to start taking a harder stand on this, as we’re going to run out of money if we keep giving it all away.” Vice mayor Jim Skelton agreed.

    No one from the public was there to speak on this matter.

    Wichita mayor Carl BrewerWichita Mayor Carl Brewer was on the losing end of a 6 to 1 vote.

    Gray made a motion to deny the staff recommendation of approval of the extension. Mayor Carl Brewer said that this vote, if it proceeds in the direction it appears to be going, will change the direction of many things that affect businesses in Wichita. He said that the intent of the council is to start holding individuals accountable, and there’s not been a track record of that. It’s been worse since the economy entered the recession, he said. He urged council members to make sure they know which way they’re going with this action. “This will be the direction that we’ll be going as we start working on policy, and it will be effective for everyone, whether it be large or whether it be small. … Just making sure that when we press that button and we head down this path, that we know what we’re doing.”

    The vote was 6 to 1 in favor of Gray’s motion, with the mayor being the lone “No” vote.

    Analysis

    This action by the Wichita city council, being nearly unanimous, is very much different from its action just one week ago, when it employed one new method plus several existing methods to heap millions in subsidy on a downtown hotel developer.

    Today’s discussion is another illustration of just how difficult it is to pick winners and losers, and how difficult it is to choose which companies the city should invest in. This is why I have recommended that Wichita grant tax abatements on all new capital investment.

    Today’s action is especially cruel to the subject company. In the past, city staff has argued that withdrawing tax abatements when a company is struggling is harmful. In December 2008, economic development director Bell said this regarding a company that had not met its performance commitments: “I don’t think it would be productive at this time to further penalize them — as the market has already penalized them — by putting them back on the tax roles at this time.” This is further evidence that taxes are harmful to business and economic growth.

    Council member Williams’ question about hiring and then quickly firing employees indicates that she must not be familiar with the costs of hiring and firing. Furthermore, a company’s unemployment insurance premiums are based on its history, and actions like this would certainly raise premiums by a large amount.

    Extension of EDX Tax Exemption (Sharpline Converting, Inc.)