Voice For Liberty

Tag: Sedgwick county government

  • In Sedgwick County, expectation of government entitlements

    In Sedgwick County, expectation of government entitlements

    In Sedgwick County, we see that once companies are accustomed to government entitlements, any reduction is met with resistance.

    When an executive of Spirit Aerosystems accused the Sedgwick County Commission of “working against us,” the company may have forgotten the assistance and special treatment the company has received from local governments and taxpayers. This assistance has amounted to hundreds of millions of dollars over several decades, when we consider both Spirit and its predecessor, Boeing.

    Now, Spirit objects to a proposed reduction in funding to Wichita Area Technical College, and also cuts to local attractions such as the zoo. The proposed cut to WATC is less than the cut made the year before, although part of that cut was rescinded, making the proposed cut equal to last year’s cut. These cuts follow a trajectory recommended by the former county manager, who was widely praised as understanding and accommodating the needs of area business firms.

    So when Spirit accuses county taxpayers as working against the company, it’s a little hard to stomach. Residents of Sedgwick County pay higher taxes so that Spirit can pay less.

    Especially glaring is when companies ask for forgiveness of paying sales tax, as Spirit routinely does. In Kansas, low-income families must pay sales tax on their groceries, and at a rate that is among the highest in the country. Even more difficult to fathom are the companies that campaigned for a higher sales tax in Wichita, but engage in financial maneuvers designed to avoid paying any sales tax. Sometimes companies campaign for higher property taxes, especially school bonds, but then ask for exemption from paying those taxes. 1 2 3

    Following, a discussion of a Spirit Aerosystems tax abatement request from 2014.

    This week the Wichita City Council will hold a public hearing concerning the issuance of Industrial Revenue Bonds to Spirit AeroSystems, Inc. The purpose of the bonds is to allow Spirit to avoid paying property taxes on taxable property purchased with bond proceeds for a period of five years. The abatement may then be extended for another five years. Additionally, Spirit will not pay sales taxes on the purchased property.

    City documents state that the property tax abatement will be shared among the taxing jurisdictions in these estimated amounts:

    City: $81,272
    State: $3,750
    County: $73,442
    USD 259: $143,038

    No value is supplied for the amount of sales tax that may be avoided. The listing of USD 259, the Wichita public school district, is likely an oversight by the city, as the Spirit properties lie in the Derby school district. This is evident when the benefit-cost ratios are listed:

    City of Wichita: 1.98 to one
    General Fund: 1.78 to one
    Debt Service: 2.34 to one
    Sedgwick County: 1.54 to one
    U.S.D. 260: 1.00 to one (Derby school district)
    State of Kansas: 28.23 to one

    The City of Wichita has a policy where economic development incentives should have a benefit cost ratio of 1.3 to one or greater for the city to participate, although there are many loopholes the city regularly uses to approve projects with smaller ratios. Note that the ratio for the Derby school district is 1.00 to one, far below what the city requires for projects it considers for participation. That is, unless it uses one of the many available loopholes.

    We have to wonder why the City of Wichita imposes upon the Derby school district an economic development incentive that costs the Derby schools $143,038 per year, with no payoff? Generally the cost of economic development incentives are shouldered because there is the lure of a return, be it real or imaginary. But this is not the case for the Derby school district. This is especially relevant because the school district bears, by far, the largest share of the cost of the tax abatement.

    Of note, the Derby school district extends into Wichita, including parts of city council districts 2 and 3. These districts are represented by Pete Meitzner and James Clendenin, respectively.

    The city’s past experience

    Wichita Mayor Carl Brewer Facebook 2012-01-04Spirit Aerosystems is a spin-off from Boeing and has benefited from many tax abatements over the years. In a written statement in January 2012 at the time of Boeing’s announcement that it was leaving Wichita, Mayor Carl Brewer wrote “Our disappointment in Boeing’s decision to abandon its 80-year relationship with Wichita and the State of Kansas will not diminish any time soon. The City of Wichita, Sedgwick County and the State of Kansas have invested far too many taxpayer dollars in the past development of the Boeing Company to take this announcement lightly.”

    Along with the mayor’s statement the city released a compilation of the industrial revenue bonds authorized for Boeing starting in 1979. The purpose of the IRBs is to allow Boeing to escape paying property taxes, and in many cases, sales taxes. According to the city’s compilation, Boeing was granted property tax relief totaling $657,992,250 from 1980 to 2017. No estimate for the amount of sales tax exemption is available. I’ve prepared a chart showing the value of property tax abatements in favor of Boeing each year, based on city documents. There were several years where the value of forgiven tax was over $40 million.

    Boeing Wichita tax abatements, annual value, from City of Wichita.
    Boeing Wichita tax abatements, annual value, from City of Wichita.
    Kansas Representative Jim Ward, who at the time was Chair of the South Central Kansas Legislative Delegation, issued this statement regarding Boeing and incentives:

    Boeing is the poster child for corporate tax incentives. This company has benefited from property tax incentives, sales tax exemptions, infrastructure investments and other tax breaks at every level of government. These incentives were provided in an effort to retain and create thousands of Kansas jobs. We will be less trusting in the future of corporate promises.

    Not all the Boeing incentives started with Wichita city government action. But the biggest benefit to Boeing, which is the property tax abatements through industrial revenue bonds, starts with Wichita city council action. By authorizing IRBs, the city council cancels property taxes not only for the city, but also for the county, state, and school district.

  • Sedgwick County WATC funding trajectory following manager’s recommendations

    Sedgwick County WATC funding trajectory following manager’s recommendations

    Sedgwick County taxpayers have been generous with funding for Wichita Area Technical College, and the former county manager has recommended reducing its funding.

    During the July 16, 2014 meeting of the Sedgwick County Commission, county manager Bill Buchanan presented the recommended budget for 2015. It included a cut in funding for Wichita Area Technical College in the amount of $150,000. In response to a question, Buchanan told the commissioners:

    “The new president has been assertive and aggressive in trying to deal with their financial issues. They have, he has turned that financial, that institution around financially. They are in pretty healthy shape. They have a fund balance that’s relatively strong, and it’s in my opinion that our subsidy, although it was critical in the beginning, is less critical in their operations now, and perhaps it would be time for us, when we face our own fiscal issues, to reduce their funding so we can address some of ours.”

    Under the leadership of Chair Dave Unruh, this reduction in funding was approved.

    At the January 7, 2015 meeting of the commission, again under the leadership of Unruh, the commission heard an off-agenda item to restore $50,000 of the funding for 2015, making the cut $100,000. That item passed. Being an off-agenda item, there is little or no public notice. Commissioner Karl Peterjohn noted this in his remarks: “I frankly would feel much more comfortable if we postponed this issue until we could get it published in the paper and have at least whatever public attention that that would generate provided, as opposed to taking another Off Agenda item that’s going to increase county spending.”

    In support of Peterjohn’s motion to delay the decision for a week, Commissioner Richard Ranzau expressed concern over the lack of financial information made available to commissioners. He also repeated the manager’s recommendation that WATC needs less county funding: “Well, I’d like to have more financial information. It’s my understanding that since the state has increased funding for Vocational Ed, they’re doing very well, their reserves increased significantly, and that’s why, I mean, I was told the reason we could reduce it $150,000 was because they were doing so well. I support what they’re doing out there, but if they’ve had an influx of money from the state, a result of Vocational Ed legislation then I think it’s appropriate to adjust our spending, and I’m not prepared to increase it by $50,000 without more financial information, and that’s why I support Commissioner Peterjohn’s motion to postpone this a week so we can get more information and make a more educated decision on this. There is really no reason for hurry through this in my estimation.”

    In summary, the Sedgwick County manager recommended that commissioners reduce funding to WATC, as its need for county funding has declined. Under commission chair Unruh, the commission did so, in the net amount of $100,000. The same amount is proposed for cuts this year. In light of this, the criticism of WATC beneficiaries like Spirit Aerosystems is unfounded.

    By the way, the commission has been criticized for considering off-agenda items since Ranzau became chair in January, with the Wichita Eagle editorial board describing one off-agenda vote as “abrupt.” In another op-ed, Rhonda Holman complained that “The move came in an off-agenda item, with little opportunity for GWEDC and the business community to argue against it.”

    Whether off-agenda items are good or bad public policy seems to depend on the whim of the Eagle editorial board.

  • Sedgwick County spending beneficiaries overwhelm others

    Sedgwick County spending beneficiaries overwhelm others

    That so many speakers at a public hearing were in favor of government spending is not surprising.

    In a letter to the editor of the Wichita Eagle the writer stated “But apparently few of them felt strongly enough to come to the commission hearing and express their support of budget cuts.” He was referring to the public hearing on Wednesday July 29, when some 50 people spoke, and just three supported cuts.

    This lopsided ratio is not surprising. It’s an example of the well-known phenomenon of concentrated benefits and dispersed (or diffuse) costs. Explained in this video, it observes that for most government spending programs, the benefits are showered on a few very visible recipients who benefit greatly. There were 47 of these speaking at last week’s public hearing.

    But the costs of these spending programs are spread across everyone, or at least a large group. For them, the cost is small. In fact, politicians use this argument in favor of their spending programs. Dave Unruh observed that the proposed county property tax cuts amount to savings of $1.37 per year for a $100,000 house. His arithmetic is correct, and so is his understanding of human nature. Most people look at the small cost of any single government spending program and realize it’s not worth much personal effort to save $1.37 (or whatever) per year.

    Since the costs of each spending program is small for any single person, not many get worked up and take action. That’s why only three of 50 speakers opposed the spending programs. Politicians and beneficiaries of spending programs rely on this imbalance of motives.

    Not often mentioned is that most of the organizations seeking county funding are charities. Anyone may make contributions directly to them. Some people have testified that they don’t need a cut in taxes, or that they would be willing to be taxed more so that these organizations could have more funding. Perhaps these people don’t realize that it is within their power to make contributions to these charities at any time.

    It seems we have forgotten that charity is a voluntary act, and that government taxation and spending is not charitable. This is evidence of further drift from a civil society where things like zoos and medical care for the poor are handled on a voluntary and cooperative basis. Instead, we fight.

  • Sedgwick County Zoo funding

    Sedgwick County Zoo funding

    The Sedgwick County Commission has been generous with zoo funding, spending far more than agreed upon and granting a moratorium on loan payments and interest.

    Funding agreement from 2013.
    Funding agreement from 2013.
    In September 2013 the Sedgwick County Commission agreed on a new funding plan with the Sedgwick County Zoo for years 2014 through 2018. For 2016 the recommended budget calls for keeping funding the same as the 2015 level instead of a 6.9 percent increase as indicated by the 2013 plan.

    That’s the plan. What actually happened is quite different.

    In September 2014 the commission voted to give the zoo $5.3 million to help pay for a new elephant exhibit. This contribution was not in any funding agreement, and the money was paid in January 2015. This extra funding is almost as large as the planned funding for 2015, which was about $5.6 million.

    Sedgwick County Zoo funding, planned and actual.
    Sedgwick County Zoo funding, planned and actual.
    For next year the commission proposes drawing back just a little, proposing that 2016 funding be the same as 2015 planned and actual funding.

    But instead of being grateful for the contribution of $5.3 million for the elephant exhibit, zoo boosters are bitter because the commission is proposing to keep zoo funding level from 2015 to 2016. Level, that is, if one ignores an extra $5.3 million from the county in 2015.

    When considering zoo funding we also need to factor in the zoo’s failure to keep its commitment to the county. The zoo has borrowed money from the county so it could build a restaurant. Now the zoo is enjoying a deferral of loan payments and a break from accumulating interest charges. See For Sedgwick County Zoo, a moratorium on its commitment.

    By the way, the 2013 funding plan holds that “either party may terminate this agreement by giving written notice.” The parties contemplated that one may not be able or willing to meet the plan.

  • For Sedgwick County Zoo, a moratorium on its commitment

    For Sedgwick County Zoo, a moratorium on its commitment

    As the Sedgwick County Zoo and its supporters criticize commissioners for failing to honor commitments, the Zoo is enjoying a deferral of loan payments and a break from accumulating interest charges.

    In 2007 the Sedgwick County commission authorized a loan of up to $2.4 million to the zoo to build a restaurant. The idea for this is credited to just-retired County Manager Bill Buchanan. According to meeting minutes from February 21, 2007, the Manager told the commissioners “A new restaurant in the zoo will make some money for the zoo, it is a feature that zoos around the country use as a way to attract people and as an additional revenue source.” As for the county’s role in the venture, the manager said “I’ve viewed this as a way to invest our money, rather than with a Treasury note[,] with a partner.”

    Buchanan pitched the loan as a way for the county to earn a little bit more interest than a Treasury note, and as a way for the Zoo to save over $100,000 in interest. If the Zoo was not able to repay the loan, the manager said the county’s annual contribution to the Zoo could be a repayment source. “No one is anticipating that,” said Buchanan.

    Immediately after the manager spoke Chris Chronis, the county’s Chief Financial Officer, told the commissioners that “despite what you may have concluded from what the Manager just said, we do not consider this an investment. In fact, it would not be a permitted investment under State law.” Instead, he told the commissioners it should be considered “a loan for economic development purposes.”

    Mark Reed, the Zoo Director, told the commissioners “it is my desire and hope to have this paid off in five to seven years.”

    What has been the result of this loan?

    The zoo borrowed a total of $2,251,100 in two draws in 2007 and 2008. Payments were made through 2013. As of the end of 2014 the zoo owed $936,044 on this loan, according to the county’s annual financial report and other documents.

    In 2013 the commission authorized a five-year moratorium on loan payments, to start in 2014. Besides deferring loan payments, the commission decided that interest will not accrue during the moratorium. The deferred payments are in the amount of $234,011.11 for each year.

  • Sedgwick County budget outlook

    Sedgwick County budget outlook

    The Sedgwick County recommended budget for 2016 reduces projected deficits.

    Sedgwick County budget outlook as presented to commissioners in February.
    Sedgwick County budget outlook as presented to commissioners in February.
    In February Sedgwick County Commissioners were presented with a forecast of budget deficits through 2020, as can be seen in the nearby illustration provided by the county. (Click charts for larger versions.)

    Sedgwick County budget outlook as contemplated by recommended budget in July.
    Sedgwick County budget outlook as contemplated by recommended budget in July.
    The recommended budget reduces the deficits in each year, as can be seen in the second chart provided by the county. The bar chart provides a different view of the same figures.

    During a meeting with commissioners, the county’s financial officer said “In each year this budget provides for a reduction in the anticipated deficit.” He also added that it improves the county’s financial picture.

    The recommended budget cuts spending in some areas. An alternative that could be proposed by commissioners is to raise taxes, either property or sales.

    An alternate presentation of the projected deficits based on the recommended budget.
    An alternate presentation of the projected deficits based on the recommended budget.

  • Sedgwick County commissioners oppose Westar rate increase

    The following resolution was voted on during the July 22, 2015 meeting. All five Sedgwick County commissioners voted in favor. More about the proposed rate increase may be found from Westar, from the Citizens’ Utility Ratepayer Board, and also the Kansas Corporation Commission.

    A RESOLUTION OPPOSING $152 MILLION ELECTRIC RATE HIKE

    WHEREAS, electricity is a key utility needed for life and a strong, functioning economy in the 21st century; and

    WHEREAS, the Consumer Price Index (CPI) as measured by the federal government’s measurement is well under two percent a year; and

    WHEREAS, the $152 million dollar rate hike proposed by Westar would average an increase of almost 8 percent for rate payers; and

    WHEREAS, between 2009 and 2014 Westar has received 22 electric rate hikes that have totaled $536.9 million (this is the net that also includes two rate reductions that totaled $6 million during that same period of time) at a time when the Sedgwick County economy was struggling and with almost no growth in the assessed value of the taxable property base; and

    WHEREAS, residential rates would see another dramatic increase of 12.1 percent if this request is approved as requested according to the Citizens Utility Rate Board (CURB); and

    WHEREAS, further electric rate hikes of $24 million are either pending or projected within the next year according to CURB; and

    WHEREAS, the competitiveness of this region is dependent upon having competitive rates for basic utility functions, with electricity production a vital key; and

    WHEREAS, we are aware that the federal government is opposing carbon based energy production and intent on raising costs, while limiting low cost energy production.

    NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF SEDGWICK COUNTY, KANSAS, that:

    1. Sedgwick County opposes this proposed $152 million rate hike by Westar. This opposition also extends to any other rate hikes sought by Westar this year.

    2. Sedgwick County opposes unfunded federal mandates onto energy production that would raise costs, inhibit production, and make Kansas and the rest of the U.S. less energy competitive with foreign competition and does so without significant environmental benefits.

  • Wichita Eagle editorial board on county budget

    Wichita Eagle editorial board on county budget

    When someone invokes “ideology” in their criticism of you, you know that they’ve either run short of actual arguments based on fact, or they don’t know what ideological means.

    In its op-ed this Sunday, the Wichita Eagle editorial board blasts the Sedgwick County Commission for cuts to various programs, mentioning “Sedgwick County Zoo, Exploration Place, the Arts Council and Greater Wichita Economic Development Coalition” specifically.

    I might invite the Eagle editorialists to revisit the county’s recommended budget for 2013, prepared under the leadership of then-chairman Tim Norton, the body’s sole Democrat, both then and now. According to county documents, Norton’s recommended budget made these cuts:

    Zoo: $255,889
    Exploration Place: $112,405
    Arts Council: $0
    GWEDC: $0

    So this is not the first time the zoo and Exploration Place have been cut.

    Additionally, Norton’s recommended budget cut 113.80 employees from the county payroll. Of these, 60.75 were from the closure of the Judge Riddel Boys Ranch Juvenile Detention Program, leaving 53.05 in cuts from other county programs. The 2016 recommended budget calls for cuts of 10.00 employees.

    I wonder: Did the Eagle editorial writers rail against commissioners Norton, Unruh, and Skelton for the cuts in the 2013 recommended budget? Yes, there was criticism of budget cuts then, but no ideological bashing.

    This year the Eagle editorial board also criticizes the commission majority for its plan to eliminate routing borrowing for county roads and bridges. Last year the Eagle recommended Wichitans vote in favor of a sales tax. One of its components, viewed favorably by the city and the Eagle, was the avoidance of borrowing for a large public works project.

    But now that conservatives on the county commission propose avoiding debt — some debt, not all debt — the Eagle is opposed.

    The shifting sands underlying the Eagle editorial board’s criticism is evidence of an ideology, and a rather shallow one. Cuts made by conservatives? Bad. There will be damage, says the headline.

    Much larger cuts made by progressives? The editorial board acknowledges “the county needs to tighten its belt and prioritize its services.”

    That’s quite a contrast.

    Here are excerpts from the 2013 and 2016 Sedgwick County recommended budgets showing recommended cuts.

  • WichitaLiberty.TV: Sedgwick County Commissioners Karl Peterjohn and Richard Ranzau

    WichitaLiberty.TV: Sedgwick County Commissioners Karl Peterjohn and Richard Ranzau

    In this episode of WichitaLiberty.TV: It’s budget season for local governments. Sedgwick County Commissioners Karl Peterjohn and Richard Ranzau visit the WichitaLiberty.TV studios to explain the county budget for 2016. View below, or click here to view at YouTube. Episode 89, broadcast July 26, 2015.

    Sedgwick County’s page for the 2016 budget is here.