Voice For Liberty

Tag: Sedgwick county government

  • For McGinn, a liberal voting record is a tradition

    Based on votes made in the Kansas Senate, the advertising claims of Sedgwick County Commission candidate Carolyn McGinn don’t match her record.

    Kansas CapitolIn a radio advertisement, Carolyn McGinn says she is conservative. In a mailer, she touts her “fiscal conservative leadership” in the Kansas Senate.

    But voting records don’t match these claims.

    Several voting scorecards in recent years show Senator McGinn ranking low in terms of voting for economic freedom issues. These issues generally concern taxation, wasteful spending, and unnecessary regulation. In recent years, a freedom index has been produced by Kansas Policy Institute. In 2012 the Kansas Economic Freedom Index was a joint product of Americans for Prosperity-Kansas, Kansas Policy Institute, and myself. In 2010 I produced an index by myself. All tabulations show McGinn rarely voting in favor of economic freedom.

    In the 2014 formulation, McGinn scored 25.8 percent. Four senators (Kansas has 40 senators) had lower scores. Some Wichita-area legislators that had higher scores than McGinn include Senator Oletha Faust-Goudeau and Representatives Ponka-We Victors, Gail Finney, Jim Ward, Tom Sawyer, and Brandon Whipple. All these are Democrats, by the way, and they voted more in favor of economic freedom than did Carolyn McGinn.

    In 2013, McGinn scored 40 percent. Eight senators had lower scores.

    In 2012 the scores were calculated in a different manner. McGinn scored -6, with 16 senators scoring lower.

    There was no index for 2011.

    In 2010, on an index that I produced, McGinn scored seven percent. Three other senators had the same score, and one had a lower score.

    At a recent forum, McGinn criticized the concept of a vote index, telling the audience: “The economic freedom index, I just find that interesting. Because it’s based on amendments after we’re out of session, so you can pick and choose what you want for who.”

    She’s right, in a way. I don’t know what she meant by “amendments,” but the organizations that construct voting scorecards choose votes that they believe distinguish candidates along some axis. Usually the votes are chosen after they’re made, although sometimes organizations “key vote” an issue. That means they alert legislators in advance of a vote that the vote will be included on their scorecard.

    There are organizations that are in favor of more spending, less accountability, and fewer choices for Kansas parents and schoolchildren. They produce scorecards, too. In particular, Kansas Association of School Boards found that McGinn never voted against their position from 2009 to 2012. Kansas National Education Association, while not making a scorecard public, recommended that its members vote for McGinn.

  • Sedgwick County economic development incentives 2013 status report

    Sedgwick County economic development incentives 2013 status report. View below, or click here to open in new window.

  • Sedgwick County economic development incentives: 2005-2011

    Results of all Sedgwick County forgivable loans and economic development exemptions (EDX) approved between 2005 and 2011. Compiled by county staff in October 2011. View below or click here.

  • Voice for Liberty Radio: Sedgwick County Commission Candidates

    Voice for Liberty Radio: Sedgwick County Commission Candidates

    In this episode of Voice for Liberty Radio: Candidates for Republican party nominations in two districts for Sedgwick County Commission spoke at the Wichita Pachyderm Club on June 20, 2014.

    In district 4, which is parts of northeast, north and northwest Wichita and the towns of Park City, Valley Center, and Maize, Kansas Senator Carolyn McGinn is challenging the incumbent Richard Ranzau. In district 5, which is parts of south and southeast Wichita and the town of Derby and surrounding area, Derby Mayor Dion Avello is facing Kansas Representative Jim Howell. The format of the meeting was an opening statement by each candidate followed by questions from the audience and a brief closing statement.

    Here are candidates for Republican party nominations for Sedgwick County Commission at the Wichita Pachyderm Club on June 20, 2014.

    Shownotes

    Candidates in district 4:
    Carolyn McGinn | Working For Kansas
    Vote Richard Ranzau for County Commission

    Candidates in district 5:
    Dion Avello
    State Representative Jim Howell for Sedgwick County Commissioner

  • With new tax exemptions, what is the message Wichita sends to existing landlords?

    With new tax exemptions, what is the message Wichita sends to existing landlords?

    As the City of Wichita prepares to grant special tax status to another new industrial building, existing landlords must be wondering why they struggle to stay in business when city hall sets up subsidized competitors with new buildings and a large cost advantage.

    Tomorrow the Wichita City Council considers whether to grant property and sales tax exemptions to a proposed speculative industrial building in north central Wichita. If approved, this will be the second project undertaken under new economic development policies that allow for this type of tax exemption.

    Those with tax abatementsCity documents estimate that the property tax savings for the first year will be $312,055. This exemption will be granted for five years, with a second five year period possible if performance goals are met.

    The city documents also state that the project will also apply for a sales tax exemption, but no estimate of these tax savings are given. It’s common for a project of this type to have about half its cost in purchases subject to sales tax. With “site work and building” at $10,350,000, sales tax in Wichita on half that amount is $370,012. Undoubtedly a rough estimate, it nonetheless gives an idea of how much sales tax the developers will avoid paying.

    (If city hall has its way, the sales tax in Wichita will soon increase by one cent per dollar, meaning the developers of this project would save $421,762 in sales tax. While others will hurry to make purchases before the higher sales tax rate takes effect — if it does — these developers will be in no hurry. Their sales tax is locked in at zero percent. In fact, once having a sales tax or property tax exemption, these developers are now in a position to root for higher sales and property tax rates, as that increases costs for their competitors, thereby giving these tax-exempt developers a competitive advantage.)

    City documents give the benefit-cost ratios for the city and overlapping jurisdictions:

    City of Wichita General Fund 1.30 to one
    Sedgwick County 1.18 to one
    USD 259 1.00 to one
    State of Kansas 12.11 to one

    It’s not known whether these ratios include the sales tax forgiveness.

    Wichita City Budget Cover, 1992While the City of Wichita insists that projects show a benefit-cost ratio of 1.3 to one or better (although there are many exceptions), it doesn’t apply that standard for overlapping jurisdictions. Here, Sedgwick County experiences a benefit-cost ratio of 1.18 to one, and the Wichita school district (USD 259) 1.00 to one. These two governmental bodies have no input on the decision the city is making on their behalf. The school district’s share of the forgiven taxes is 47.4 percent.

    When the city granted a similar tax exemption to a speculative warehouse in southwest Wichita, my estimates were that its landlord has a cost advantage of about 20 percent over other property owners. Existing industrial landlords in Wichita — especially those with available space to rent and those who may lose tenants to this new building — must be wondering why they struggle to stay in business when city hall sets up subsidized competitors with new buildings and a large cost advantage.

    Wichita property taxes

    Property taxes in Wichita are high for industrial buildings, and even higher for commercial buildings. See Wichita property taxes compared. So it’s difficult to blame developers for seeking relief. But instead of offering tax relief to those who ask and to those city hall approves of, it would be better to have lower taxes for everyone.

    Targeted economic development incentives

    The targeted economic development efforts of governments like Wichita fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. In the case of the Wichita, do we really know which industries should be targeted? Is 1.3 to one really the benchmark we should seek, or would we be better off by insisting on 1.4 to one? Or should we relax the requirement to 1.2 to one so that more projects might qualify?

    This assumes that these benefit-costs ratios have validity. This is far from certain, as follows:

    1. The benefits that government claims are not really benefits. Instead, they’re in the form of higher tax revenue. This is very different from the profits companies earn in voluntary market transactions.

    2. Government claims that in order to get these “benefits,” the incentives must be paid. But often the new economic activity (expansion, etc.) would have happened anyway without the incentives.

    3. Why is it that most companies are able to grow without incentives, but only a few companies require incentives? What is special about these companies?

    4. If the relatively small investment the city makes in incentives is solely responsible for such wonderful outcomes in terms of jobs, why doesn’t the city do this more often? If the city has such power to create economic growth, why is anyone unemployed?

    Do incentives work?

    The uncontroverted peer-reviewed research tells us that targeted economic development incentives don’t work, if we consider the entire economy. See: Research on economic development incentives. Some of the conclusions of the studies listed there include:

    “No evidence of incentive impact on manufacturing value-added or unemployment”

    “Small reduction in employment by businesses which received Ohio’s tax incentives”

    “No evidence of large firm impacts on local economy”

    “No permanent employment increase across a quasi-experimental panel of all Cabela’s stores”

    “Employment impact of large firms is less than gross job creation (by about 70%)”

    These research programs illustrate the fallacy of the seen and the unseen. It is easy to see the jobs being created by economic development incentives. It’s undeniable that jobs are created at firms that receive incentives, at least most of the time. But these jobs are easy to see. It’s easy for news reporters to find the newly-hired and grateful workers, or to show video footage of a new manufacturing plant.

    But it’s very difficult to find specific instances of the harm that government intervention produces. It is, generally, dispersed. People who lose their jobs usually don’t know the root cause of why they are now unemployed. Businesses whose sales decline often can’t figure out why.

    But evidence tells us this is true: These incentives, along with other forms of government interventionism, do more harm than good.

  • Let’s create something special and unique

    Following, Sedgwick County Commissioner Karl Peterjohn explains something that the county could do to boost economic growth that doesn’t require government intervention, doesn’t need fleets of bureaucrats, reduces cronyism and corruption, increases economic freedom, respects property rights, reduces the power of government to control its subjects, and doesn’t give politicians opportunities to inflate their egos and boost their electoral prospects by being photographed at ground-breaking and ribbon-cutting ceremonies taking credit for spending your money on something you don’t want and which does not work to create jobs and prosperity. For these reasons — especially the latter — this won’t be popular with the political class.

    I’ve gathered data from the property tax study that Peterjohn mentions and presented data specific to Wichita at Wichita property taxes compared. A version of this commentary appeared in the Wichtia Eagle.

    Let’s create something special and unique

    By Karl Peterjohn

    This community as well as our country is still in an economic crisis. Our community needs a boost, or a comparative growth advantage. Creating a one (1) cent city sales tax in Wichita won’t create economic growth.

    In fact, raising taxes would put our community on the same path trail blazed by many other communities across our country. That is the path to fiscal perdition: Detroit.

    Sedgwick County Courthouse 2014-03-23This community can create a special and unique comparative advantage by eliminating one of the major disadvantages that this state in general, and Wichita and Sedgwick County face: high property taxes. The high property tax problem for Wichita was once again identified in a national study by the Lincoln Institute on Land Policy and the Minnesota Center for Fiscal Excellence’s, “50 State Property Tax Comparison Study,” issued in March. In this study it identified the fact that Wichita’s property tax on commercial property was 38% above the national average.

    High taxes mean less economic growth. This is particularly true for property taxes.

    The unique and special approach this community needs is instead of raising the sales tax to expand city spending, the focus should be on eliminating the county’s property tax. Currently the county imposes a 29.3 mill property tax county wide. This mill levy could be eliminated with about a 1.5 cent increase in the sales tax on a revenue neutral basis.

    This type of property tax competitiveness would be beneficial on several levels. First, it would provide a unique selling proposition to help attract business to this county and Wichita.

    Eliminating the county property tax would provide benefits to all property taxpayers and not just a select few getting special subsidies contained within the city’s sales tax hike plan. Eliminating the county’s property taxes would reduce most county taxpayers’ property tax bills by roughly 25 percent.

    Let’s move away from the subsidy model whose odious examples include the failed Solyndra national subsidy boondoggle.

    Instead of dangling subsides, which everyone else in the eco-devo game is doing, let’s try a unique incentive: Sedgwick County just eliminated its property tax! We should try this because it can work.

    In 1995 Kansas eliminated its state unemployment tax because the fund had developed a large cash balance. This five year tax moratorium created a unique economic advantage for Kansas business. Within a couple of years, the Kansas economy enjoyed a substantial surge in economic growth. Kansas became a leader enjoying some of the fastest economic growth between 1997 to 1999. Eventually, the unemployment fund’s cash balance shrank. By 1999 the unemployment tax was restored. This unique tax advantage was eliminated.

    As a county commissioner I am focused on creating a special advantage for everyone in Sedgwick County. Eliminating the county’s property tax is an idea whose time has come.

  • WichitaLiberty.TV: Government accounting, Government ownership of infrastructure, and Wichita commercial property taxes

    WichitaLiberty.TV: Government accounting, Government ownership of infrastructure, and Wichita commercial property taxes

    In this episode of WichitaLiberty.TV: Government leaders tell us they want to run government like a business. But does government actually do this, even when accounting for its money? Then, is it best for government to own all the infrastructure? Finally, taxes on Wichita commercial property are high, compared to the rest of the nation. Episode 46, broadcast June 8, 2014. View below, or click here to view at YouTube.

  • What is the record of economic development incentives?

    What is the record of economic development incentives?

    On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well.

    Money GrabberJudging the effectiveness of economic development incentives requires looking for the unseen effects as well as what is easily seen. It’s easy to see the groundbreaking and ribbon cutting ceremonies that commemorate government intervention — politicians and bureaucrats are drawn to them, and will spend taxpayer funds to make sure you’re aware. It’s more difficult to see that the harm that government intervention causes.

    That’s assuming that the incentives even work as advertised in the first place. Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. A few quotes from the study, with emphasis added:

    Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

    On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

    The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

    Following is the full paper, or click here.

  • Intrust Bank Arena: Not accounted for like a business

    Intrust Bank Arena: Not accounted for like a business

    Proper attention given to the depreciation expense of Intrust Bank Arena in downtown Wichita recognizes and accounts for the sacrifices of the people of Sedgwick County and its visitors to pay for the arena. It’s a business-like way of accounting, but a well-hidden secret.

    Sedgwick County Working for YouThe true state of the finances of the Intrust Bank Arena in downtown Wichita are not often a subject of public discussion. Arena boosters promote a revenue-sharing arrangement between the county and the arena operator, referring to this as profit or loss. But this arrangement is not an accurate and complete accounting, and hides the true economics of the arena. What’s missing is depreciation expense.

    An example of the incomplete editorializing comes from Rhonda Holman of the Wichita Eagle, who opined “Though great news for taxpayers, that oversize check for $255,678 presented to Sedgwick County last week reflected Intrust Bank Arena’s past, specifically the county’s share of 2013 profits.”

    Earlier reporting on this topic in the Eagle did not mention depreciation expense, either.

    There are at least two ways of looking at the finance of the arena. Most attention is given to the “profit” (or loss) earned by the arena for the county according to an operating and management agreement between the county and SMG, a company that operates the arena.

    This agreement specifies a revenue sharing mechanism between the county and SMG. For 2103, the accounting method used in this agreement produced a profit of $705,678, to be split (not equally) between SMG and the county. The county’s share, as Holman touted, was $255,678. Presumably that’s after deducting the cost of producing an oversize check for the television cameras.

    The Operations of Intrust Bank ArenaWhile described as “profit” by many, this payment does not represent any sort of “profit” or “earnings” in the usual sense. In fact, the introductory letter that accompanies these calculations warns readers that these are “not intended to be a complete presentation of INTRUST Bank Arena’s financial position and results of operations and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America.”

    That bears repeating: This is not a reckoning of profit and loss in any recognized sense. It is simply an agreement between Sedgwick County and SMG as to how SMG is to be paid, and how the county participates.

    A much better reckoning of the economics of the Intrust Bank Arena can be found in the 2013 Comprehensive Annual Financial Report for Sedgwick County. This document holds additional information about the finances of the Intrust Bank Arena. The CAFR, as described by the county, “… is a review of what occurred financially at Sedgwick County in 2013. In that respect, it is a report card of our ability to manage our financial resources.”

    Regarding the arena, the CAFR states:

    The Arena Fund represents the activity of the INTRUST Bank Arena that opened on January 9, 2010. The facility is operated by a private company; the county incurs expenses only for certain capital improvements or major repairs and depreciation, and receives as revenue only a share of profits earned by the operator, if any. The Arena had an operating loss of $4.7 million. The loss can be attributed to $5.3 million in depreciation expense.

    Financial statements in the same document show that $5,295,414 was charged for depreciation in 2013, bringing accumulated depreciation to a total of $21,190,280.

    Depreciation expense is not something that is paid out in cash. Sedgwick County didn’t write a check for $5,295,414 in depreciation expense. Instead, depreciation accounting provides a way to recognize and account for the cost of long-lived assets over their lifespan. It provides a way to recognize opportunity costs, that is, what could be done with our resources if not spent on the arena.

    But some don’t recognize this. In years past, Commissioner Dave Unruh made remarks that show the severe misunderstanding that he and almost everyone labor under regarding the nature of the spending on the arena: “I want to underscore the fact that the citizens of Sedgwick County voted to pay for this facility in advance. And so not having debt service on it is just a huge benefit to our government and to the citizens, so we can go forward without having to having to worry about making those payments and still show positive cash flow. So it’s still a great benefit to our community and I’m still pleased with this report.”

    Intrust Bank Arena commemorative monument
    Intrust Bank Arena commemorative monument
    The contention of Unruh and other arena boosters such as the Wichita Eagle editorial board is that the capital investment of $183,625,241 (not including an operating and maintenance reserve) on the arena is merely a historical artifact, something that happened in the past, something that has no bearing today. There is no opportunity cost, according to his view. This attitude, however, disrespects the sacrifices of the people of Sedgwick County and its visitors to raise those funds.

    Any honest accounting or reckoning of the performance of Intrust Bank Arena must take depreciation into account. While Unruh is correct in that depreciation expense is not a cash expense that affects cash flow, it is an economic fact that can’t be ignored — except by politicians, apparently.

    We see our governmental and civic leaders telling us that we must “run government like a business.” Without frank and realistic discussion of numbers like these and the economic facts they represent, we make decisions based on incomplete and false information.