A report on the economic impact of the first ten years of operation of the Intrust Bank Arena in downtown Wichita incorrectly reported tax revenue.
Recently Intrust Bank Arena in downtown Wichita promoted the results of an analysis of the economic impact of the arena through its first ten years of operation. 1 The arena partnered with the Center for Economic Development and Business Research at Wichita State University to conduct the study. 2
In all, the report claims $2.7 million over ten years in Sedgwick County guest tax revenue paid by out-of-town arena visitors who stayed in local hotels. But while the county has a guest tax, it does not raise nearly the dollars shown in the report.
The transient guest tax, sometimes called a guest tax or bed tax, is a tax on a hotel bill. It is collected in addition to retail sales tax. In the City of Wichita, hotel guests pay 7.5 percent retail sales tax, an additional six percent guest tax, and an additional 2.75 percent city tourism fee. If the hotel is located within a Community Improvement District, an additional tax of up to two percent is collected.
The guest tax for Sedgwick County was last revised in 2006. 3 The rate is five percent. The ordinance says that the tax “… shall be levied in the unincorporated area of Sedgwick County, Kansas …”
The term unincorporated area is key, meaning the portions of the county that are not within an incorporated town or city. Reports from the Kansas Department of Revenue show there is just one establishment in Sedgwick County that files a guest tax report. 4 For comparison, 108 establishments in the City of Wichita file guest tax reports. These are located in the city limits and are not in the unincorporated area of the county, and therefore not subject to the county guest tax.
How much does Sedgwick County collect in guest tax? The reports from the Kansas Department of Revenue don’t say. The value is suppressed to protect confidentiality, given that there is just one filing establishment in the unincorporated area of the county.
We do know, according to the economic impact report, that the one hotel in unincorporated Sedgwick County collects $351,656 per year in guest tax (annualized over the period 2015 to 2019.) Since the guest tax rate is five percent, that implies $7 million in annual sales, which would be collected by a hotel selling 191 rooms per day at a rate of $100 per day, 365 days per year.
Is there such a hotel in unincorporated Sedgwick County? It’s unlikely. Consider this one hotel with $351,656 in guest tax collections by arena visitors compared to the $421,987 reported for all hotels in the City of Wichita, again for arena visitors. (The Wichita guest tax rate is slightly higher at six percent, so the comparison is not strictly equal.)
Remember: According to the analysis, this level of activity is generated just by visitors attending events at Intrust Bank Arena.
I think it’s safe to say there is a mistake. Correspondence with CEDBR, the organization that prepared the analysis, confirms that county guest tax was incorrectly estimated, and a new version reports $0 in county guest tax. 5 CEDBR says no numbers were changed other than the county guest tax and totals that included it.
While it is unfortunate that CEDBR made this mistake, the use of the analysis by downstream consumers teaches us something about economic development, the data supporting it, and its practitioners.
As an example, the management of Intrust Bank Arena issued a press release touting the analysis and its findings. Regarding tax collections, the announcement reports, “The fiscal impact of visitors to the area for INTRUST Bank Arena events that occurred in 2010-2019 was approximately $12 million in tax revenue generated.”
What’s interesting is that the release cites only the retail sales tax revenue. It omits the guest tax revenue, which is — according to the analysis that was available at the time of the press release — about $6 million. That’s half as much as the retail sales tax, but it was not included in a press release touting economic impact.
An excerpt from the first page of the CEDBR analysis. Click for larger.
Why didn’t the arena use the guest tax collections, thereby reporting $18 million in tax revenue collected from visitors rather than $12 million? It wasn’t due to concern over the accuracy of the guest tax collections, as arena management told me they were not aware of CEDBR’s error. But because the press release did not mention the erroneous guest tax, arena management says there is no need to correct the press release. This is correct, and it reveals the mistake in not including guest tax revenue.
Adding to our learning about the use of data in economic development is this: Of the sales tax collected by hotels in Wichita, about 87 percent belongs to the State of Kansas, with the remainder shared by Wichita and Sedgwick County. For guest tax, however, all is returned to the city, except for a small administrative fee of two percent. So of the $12 million in retail sales tax revenue promoted by arena management, about $1.5 million was shared by the city and county. 6 For the purported $6 million in guest tax revenue, all went to the city and county, except for the administrative fee.
We also learn about the diligence of Sedgwick County Commissioner Pete Meitzner (district 1) in examining this data. He is quoted in the arena’s press release. But it’s quite easy to see that the analysis erroneously reports county guest tax revenue.
Besides this mistake, there are other areas of concern regarding this analysis of the economic impact of the arena. One is that this report mentions revenue but not costs. 7
The second is that before Intrust Bank Arena opened in downtown, the county owned another arena. That former arena generated economic activity and economic impact, too, including NCAA men’s basketball tournament games. A thorough analysis should look at the marginal activity created by the new arena.
Sedgwick County. A charter resolution exempting Sedgwick County, Kansas, from the provisions of k.S.A. 12-1692, 12-1693, 12-1694, 12-1694a, 12-1695, and providing substitute and additional provisions on the same subject relating to the levy of a transient guest tax in the unincorporated area of Sedgwick County and providing for purposes of expenditure of such funds; and repealing charter resolution #32. Available at https://library.municode.com/ks/sedgwick_county/codes/code_of_ordinances?nodeId=SECOKACO_APXACHRE_NO._59. ↩
Specifically, the analysis reports $983,449 in sales tax to the city and $703,714 to the county, for a total of $1,687,163. ↩
It’s common for officials to talk as though there is no cost or expense in owning the arena, because a sales tax was used to pre-fund the arena. After the funds were in place, the arena was built. But, see Weeks, Bob. The finances of Intrust Bank Arena in Wichita. Available at https://wichitaliberty.org/sedgwick-county-government/the-finances-of-intrust-bank-arena-in-wichita/. For annual expenses, in a presentation to Sedgwick County Commissioners in February, county staff reported $1,991,471.99 in expenses charged to the arena’s reserve fund. This was offset by $722,933.65 in revenue, mostly from a revenue-sharing agreement with the arena’s operator and from the sale of naming rights. The declining balance in the arena’s reserve fund led Commissioner David Dennis to wonder if a special tax district could be established to provide more revenue to cover these expenses. See https://drive.google.com/file/d/1UbAfjQaIWQOzrYzIWqKdBIbrqFMDlfX-/view↩
From the Wichita Pachyderm Club: Sedgwick County Commissioner Pete Meitzner. He is the chair of the commission this year. This audio presentation or podcast was recorded on February 14, 2020.
The City of Wichita says it values open and transparent government. But the city’s record in providing information and records to citizens is poor, and there hasn’t been much improvement.
The City of Wichita is proud to be an open and transparent governmental agency, its officials say. Former Mayor Carl Brewer often spoke in favor of government transparency. 1
Mayor Jeff Longwell penned a column in which he said, “First off, we want City Hall to be open and transparent to everyone in the community.” And the mayor’s biography on the city’s website says, “Mayor Longwell has championed many issues related to improving the community including government accountability, accessibility and transparency …”
But the reality is different. It shouldn’t be. Nearly four years ago the city expanded its staff by hiring a Strategic Communications Director. When the city announced the new position, it said: “The Strategic Communications Director is the City’s top communications position, charged with developing, managing, and evaluating innovative, strategic and proactive public communications plans that support the City’s mission, vision and goals.”
But there has been little, perhaps no, improvement in the data and information made available to citizens. The Wichita Eagle has editorialized on the lack of sharing regarding the details surrounding the new baseball team. 3
While this is important and a blatant example, there are many things the city could do to improve transparency. Some are very simple.
For example, it is very common for governmental agencies post their checkbooks on their websites. Sedgwick County does, as does the Wichita school district. But not the City of Wichita.
Until a few years ago, Wichita could supply data of only limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult and beyond the capability of most citizens to translate the data to a useful format. Even if someone translated the reports to computer-readable format, I don’t think it would be very useful. This was a serious defect in the city’s transparency efforts.
Now, if you ask the city for this data, you’ll receive data in an Excel spreadsheet. This is an improvement. But: You may be asked to pay for this data. The city says that someday it will make check register data available, but it has been promising that for many years. See Wichita check register for the data and details on the request.
Another example: For several years, the Kansas city of Lawrence has published an economic development report letting citizens know about the activities of the city in this area. The most recent edition may be viewed here.
The Lawrence report contains enough detail and length that an executive summary is provided. This report is the type of information that cities should be providing, but the City of Wichita does not do this.
Example from the Lawrence report. Click for larger.It’s not like the City of Wichita does not realize the desirability of providing citizens with information. In fact, Wichitans have been teased with the promise of more information in order to induce them to vote for higher taxes. During the campaign for the one cent per dollar Wichita city sales tax in 2014, a city document promised this information regarding economic development spending if the tax passed: “The process will be transparent, with reports posted online outlining expenditures and expected outcomes.” (This is what Lawrence has been doing for several years.)
The city should implement this reporting even though the sales tax did not pass. If it’s good for citizens to have this type of information if the sales tax had passed, it’s good for them to know in any circumstance, because the city (and other overlapping governmental jurisdictions) still spends a lot on economic development.
Why is this information not available? Is the communications staff overwhelmed, with no time to provide this type of information?
During the sales tax campaign Wichita city staff had time to prepare news releases with titles like “City to Compete in Chili Cook-off” and “Jerry Seinfeld Returns to Century II.” Now the city produces headlines like “Wichita Transit to Receive Good Apple Award.”
But if you want to know how the city spends economic development dollars, you won’t find that.
Most of all, the city simply needs to change its attitude. Here’s an example.
Citizen watchdogs need access to records and data. The City of Wichita, however, has created several not-for-profit organizations that are controlled by the city and largely funded by tax money. The three I am concerned with are the Wichita Downtown Development Corporation, Visit Wichita (the former Go Wichita Convention and Visitors Bureau), and Greater Wichita Economic Development Coalition, now the Greater Wichita Partnership. Each of these agencies refuses to comply with the Kansas Open Records Act, using the reasoning that they are not “public agencies” as defined in the Kansas law that’s designed to provide citizen access to records.
The city backs this interpretation. When legislation was introduced to bring these agencies under the umbrella of the Kansas Open Records Act, cities — including Wichita — protested vigorously, and the legislation went nowhere.
Recently the City of Wichita added a new tax to hotel bills that may generate $3 million per year for the convention and visitors bureau to spend. Unless the city changes its attitude towards citizens’ right to know, this money will be spent in secret.
This attitude has been the policy of the city for a long time. In 2008, Randy Brown, at one time the editorial page editor at the Wichita Eagle wrote this:
I’m fairly well acquainted with Bob Weeks, our extraconservative government watchdog. It’s fair to say that I agree with Weeks no more than one time in every 20 issues. But that one time is crucial to our democracy.
Weeks is dead-on target when he says that conducting the public’s business in secret causes citizens to lose respect for government officials and corrupts the process of democracy (“TIF public hearing was bait and switch,” Dec. 5 Opinion). And that’s what happened when significant 11th-hour changes to the already controversial and questionable tax-increment financing plan for the downtown arena neighborhood were sneaked onto the Wichita City Council’s Tuesday agenda, essentially under cover of Monday evening’s darkness.
This may not have been a technical violation of the Kansas Open Meetings Act, but it was an aggravated assault on its spirit. Among other transgressions, we had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue.
The Wichita officials involved should publicly apologize, and the issue should be reopened. And this time, the public should be properly notified.
Randy Brown
Executive director
Kansas Sunshine Coalition for Open Government
A few years later, Brown noticed the attitude had not improved. Although he did not mention him by name, Brown addressed a concern expressed by Wichita City Council Member Pete Meitzner (district 2, east Wichita). He accurately summarized Meitzner’s revealed attitude towards government transparency and open records as “democracy is just too much trouble to deal with.”
“The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.” Wichita City New Release. Available at https://www.wichita.gov/News/Pages/2013-03-18b.aspx. ↩
The Wichita economy saw jobs lost in 2017, but improved last year. Job growth is expected to trend slightly higher in 2019, buoyed by manufacturing and professional services. We anticipate the Wichita economy to expand this year, but grow at slower rate than the U.S. and the majority of metro areas. Business/consumer optimism and aerospace demand should help power the local economy; however, trade issues, commodity prices, lack of skilled labor, and slow population growth will likely limit growth in southeast Kansas.
There’s not much good news in this forecast, except that job growth is expected to grow rather than decline as it did two years ago. So we have to wonder why the mayor retweeted — presumably approvingly — this grim forecast.
Responding to a different forecast of job growth in Wichita for 2019, Scot Rigby, who is Assistant City Manager, Director of Development Services for the City of Wichita, tweeted “great news.” But that forecast is as gloomy as the Intrust forecast, with job growth expected to be about half the national rate. See Job growth in Wichita: Great news?
Generally, Wichita officials are pleased with the local economy (Former Wichita City Council Member Pete Meitzner: “We have enjoyed great progress and growth during my two terms as a City Council member and I plan to do my part to assure Sedgwick County is part of this continued success.”) But the available statistics are grim and are improving only slowly. See Growing the Wichita economy.
If Wichitans don’t read beyond the rosy headlines and tweets from the mayor and city officials, they will be uninformed, and unfortunately, misinformed by people we should be able to trust.
He’s running on his record of economic development. His website says: “Pete’s seven years on the City Council has proven to be a large part of the positive momentum we have recently experienced.”
Let’s take a look at the record. Click here to view a presentation of the numbers.
Example from the presentation. Click the chart to view the presentation.
In normal times, Republicans may be reluctant to vote for a Democrat for the Sedgwick County Commission. But these are not normal times, and a vote for Pete Meitzner sends a message that we just don’t care about our economy.
If you’ve been following analyst James Chung — and it seems like everyone has — he’s delivered a sobering message: The Wichita economy has not been growing. “[Wichita has been] stuck in neutral for about three decades, with basically no growth, amidst the landscape of a growing U.S. economy,” he said. (In 2017 the Wichita economy shrank from the previous year.)
Chung says we need to change our ways. In his June visit he said, and the Chung Report wrote, “Every market signal points to the same conclusion: The manner in which Wichita is operating during this critical point in our history is just not working.”
So what needs to change? Chung doesn’t say, but here are two things:
First, there are some elected officials and bureaucrats who have presided over the stagnation of the Wichita-area economy. These people need to go.
That sounds good, but under the hood it’s the same leadership and the same methods, although with a few new hired hands.
So when James Chung (and others) says our manner of operation is not working, it’s the Wichita Chamber of Commerce and its ecosystem that must assume a large portion of blame.
That Chamber ecosystem is pumped up and funded by the City of Wichita and Sedgwick County. Bureaucrats and elected officials on those bodies who have supported these economic development efforts must be dismissed.
At the top of this list is Wichita City Council Member Pete Meitzner (district 2, east Wichita). He’s running as a Republican for an open position on the Sedgwick County Commission in east Wichita.
Why should voters reject Pete Meitzner? That’s a good question, because on his campaign web page he promotes his experience: “Pete’s seven years on the City Council has proven to be a large part of the positive momentum we have recently experienced.”
He’s endorsed by the retiring county commissioner he seeks to replace. Again, from his campaign page, there’s this from Sedgwick County Commissioner Dave Unruh: “Pete displays leadership that produces results. We need to only look to the City of Wichita’s recent successes to see the type of leadership Meitzner is capable of. His enthusiasm and business-minded approach to challenges has greatly helped create the positive momentum that Wichita experiences today. Sedgwick County needs Meitzner’s leadership.”
Click for larger.
Let’s compare these claims to the record. Nearby is a chart of nonfarm jobs in the Wichita metropolitan area. I’ve identified when Unruh and Meitzner took office. As you can see, when Unruh took office there had been a downturn. But the Wichita economy improved, although slower than the national economy.
When Meitzner took his position on the city council, there had also been a downtown. The national economy recovered. But the Wichita-area economy has not recovered. As time passes, the gap between the Wichita and national economy grows.
Wichita and national GDP. Click for larger.
There are other indicators besides jobs that illustrate the performance of the Wichita-area economy. Gross Domestic Product, the total value of everything produced, has fallen.
Click for larger.
Real personal income fell in 2016, the last year for which there is data. Over the years, its growth in Wichita has been slower than most other areas.
Is the record of Dave Unruh relevant when considering whether to vote for Pete Meitzner? Yes. Meitzner praises Unruh’s record: “His (Unruh’s) legacy of 16 years of professionalism … has been many successes and often the calm in the storm that’s been of recent,” Meitzner said. “There’s a strong feeling in the community that what we’re doing in the city and in the region is really moving in the right direction. I can help the county have our oars in the water going the same way as the whole region.” (“Wichita City Council member hopes to become calming force on County Commission” Wichita Eagle, February 13, 2018.)
Except: the legacy of Unruh in economic development is stagnation and falling behind, as is Meitzner’s record on the city council. As for “professionalism” and “calm in the storm,” we must take notice that the FBI is investigating Unruh for “potential obstruction of justice based on possible whistleblower retaliation.” (“FBI investigating possible obstruction of justice in Sedgwick County Commission” Wichita Eagle, October 23, 2018.)
Despite all the evidence, Meitzner is running on his record. His campaign literature says he is committed to “Maintaining his track record of successful ECONOMIC DEVELOPMENT.” He praises the Wichita city manager, the city bureaucracy, and our economic development machinery for doing a good job. He believes these are doing the right thing.
This demonstrates another problem. Besides presiding over our region’s poor economic performance, Meitzner (and Unruh) do not acknowledge the problem. To them, there is “momentum.” We’re “really moving in the right direction,” Meitzner says.
For someone to say these things, they must be either blissfully ignorant, a blatant liar, or someone who wants to be in office so badly that they’ll say anything to be elected.
Republicans may be reluctant to vote for a Democrat for the Sedgwick County Commission. In normal times, I am too. But these are not normal times, and a vote for Pete Meitzner sends a message that we just don’t care about our economy.
In this episode of WichitaLiberty.TV: Sedgwick County Commissioner Richard Ranzau explains the current problems with corruption in the county. Then, Renee Duxler tells us why she’s running for Sedgwick County Commission. View below, or click here to view at YouTube. Episode 215, broadcast October 28, 2018.
An excerpt from the first page of the CEDBR analysis. Click for larger.
