Voice For Liberty

Tag: Subsidy

  • In Wichita, Epic Sports highlights need for reform

    Last week the Tax Foundation and KMPG issued a report that gives us some insight as to why this city council may feel it is necessary to award economic development incentives like the one being considered for Epic Sports today. According to the report, our tax costs on business are high — way too high.

    The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. The report also had some separate figures for Wichita, and the results were similar.

    While many of the problems with high tax costs on business are state issues, the city’s legislative agenda calls for continued authority to use existing economic development incentives. In particular, the city this year has testified for the continued use of historic preservation tax credits. Spending on these incentive programs reward the lucky few, but increases the cost of government, and therefore taxes, for everyone else.

    We need to realize that the city’s “active investor” method of targeted economic development isn’t working.

    As evidence, recently the Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. It claimed to have to have created 1,509 jobs in Sedgwick County during 2011. But that’s only 0.59 percent of the county’s labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts, which were at great cost.

    There is one incentive that can be offered to all firms: Reduce tax costs for all. The Tax Foundation report should be a shrill wake up call to the city and state that we must change our ways.

    But the action the council is considering today moves us in the opposite direction. These incentives have a cost. Other businesses have to pay. That motivates many to seek incentives from the city and state, which in turn raises the cost of government and taxes. It’s a spiral that leads to ever-increasing control of economic activity by city hall.

    We in Wichita need to build a dynamic economy in Wichita that is based on free enterprise and entrepreneurship rather than a government handout. This is the way we can have organic and sustainable economic development. We can start on this path today by saying no to this incentive package.

  • Mike Pompeo: We need capitalism, not cronyism

    In a guest column written for Americans for Prosperity, Kansas, U.S. Representative Mike Pompeo of Wichita explains why political cronyism, sometimes called crony capitalism, is wrong for our country. Pompeo coins a useful new term: “photo-op economics” to describe why some politicians support wasteful federal spending projects — as long as the spending is wasted in their districts. Then logrolling — the trading of legislative favors — applies, and those legislators who received votes from others to support wasteful spending must now reciprocate and support other wasteful spending.

    Pompeo touches on an important aspect of public policy that is not often mentioned: “Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.” This describes the problem of the seen and unseen, as explained by Frederic Bastiat and Henry Hazlitt in the famous parable of the broken window.

    We Need Capitalism, not Cronyism

    By U.S. Representative Mike Pompeo

    The word “conservative” brings to mind family values, lower taxes, fiscal responsibility — and limited government. Limited government means a government limited in size, in its claim on national wealth, and — importantly — limited in the ends to which government’s power is used. It also means federal elected officials must act in the nation’s best interest and not allow their own parochial concerns to dominate their decision making. A big obstacle on the path to restoring limited government in America is cronyism.

    We all know the story. A flawed system has created incentives that make it easier for some companies to succeed by hiring a lobbyist rather than improving productivity or satisfying customers. Lobbyists for these businesses and the politicians who support them want the federal government picking winners and losers across our economy — so long as they are selected as “winners.” In my first term in Congress, we have eliminated earmarks that rewarded politically connected, rent-seeking advocates for federal largesse by tucking provisions into bills without adequate vetting or thorough review. But ever clever politicians have another tool — the tax code — to accomplish much the same outcome. This form of cronyism must stop too.

    “Tax earmarks” — be they deductions or credits — provide certain industries and businesses a means to gain financial advantage. Tax earmarks distort our free choices, waste tax dollars, and raise prices to provide goods and services that free markets provide more abundantly and more cheaply. They also force federal tax rates up, penalizing those who don’t receive them, because higher rates are required to capture the same revenue given all of the special interest tax earmarks now in effect. And, unlike standard earmarks, tax earmarks tend to be renewed year after year after year.

    One current fight against the insidious political tool of tax earmarks involves the energy sector. I am leading the charge to eliminate over two dozen energy tax credits tucked into the Internal Revenue Code. My proposed legislation would get rid of every single tax credit related to energy — ending tax favoritism that today goes to wind and solar, algae and electric vehicles and tax credits that go to the oil and gas industry as well. Tax subsidies miscast the role of the federal government. Energy sources are either viable without subsidies or else they do not make economic sense for taxpayers.

    Subsidies and giveaways redistribute wealth from productive, self-sustaining enterprises to unproductive, less efficient, albeit politically connected, ones. Although subsidies may have positive local effects, they penalize successful businesses — leading to less innovation, decreased productivity, fewer jobs, and higher prices for consumers. Cronyism also mistreats unsubsidized competitors, who wind up subsidizing their own competition to the detriment of their employees, consumers, and free-market competition.

    Together with tried-and-true conservative leaders like House Budget Committee Chairman Paul Ryan (WI), and Tea Party leaders like Sen. Jim DeMint (SC), and Sen. Mike Lee (UT), I am fighting to end this form of cronyism. Conservative groups including Americans for Prosperity, Americans for Tax Reform, Club for Growth, Council for Citizens Against Government Waste, Freedom Action, Heritage Action, National Taxpayers Union, and Taxpayers for Common Sense have all rallied to the side of limited government on this issue. They understand that picking winners and losers in the energy marketplace does not create long-term economic growth, and it harms our economic and political systems.

    One example of a tax earmark that should be eliminated is the Production Tax Credit (PTC) that goes to the wind industry. Yet, some Republican and Democrat members of Congress, not surprisingly from “wind states,” are pushing for yet another multi-year extension of the PTC, a multi-billion dollar handout to Big Wind. The PTC manipulates the energy market, drives up electricity bills for consumers and businesses, and creates a dangerous economic bubble. The PTC is a huge subsidy. Applied to oil companies, it would be the equivalent of giving $30 for every barrel of oil produced, according to the Heritage Foundation. The PTC has existed for the past 20 years, but it has not succeeded yet in making unsubsidized wind competitive. Politicians who pretend that a few more years of the PTC will make wind competitive could be right, but that is not a responsible bet to make with taxpayer dollars.

    Supporters of Big Wind, like President Obama, defend these enormous, multi-decade subsidies by saying they are fighting for jobs, but the facts tell a different story. Can you say “stimulus”? The PTC’s logic is almost identical to the President’s failed stimulus spending of $750 billion — redistribute wealth from hard-working taxpayers to politically favored industries and then visit the site and tell the employees that “without me as your elected leader funneling taxpayer dollars to your company, you’d be out of work.” I call this “photo-op economics.” We know better. If the industry is viable, those jobs would likely be there even without the handout. Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.

    Here’s the data. The “green energy” 1603 grant program has given away $4.3 billion to 36 wind farms just since 2008. All together, these farms now employ 300 people. That’s $14 million per job. This is an unconscionable return on investment, especially for your tax dollars. Given that consumers also pay higher energy prices for electricity generated from wind, one has to wonder why some in Washington continue to push for Big Wind subsidies. Often the answer is that politicians care more about making good political investments than they do about making bad financial investments.

    In this respect, the PTC handout is virtually indistinguishable from the program that led to the Solyndra debacle. The Obama Administration gave 500 million taxpayer dollars to a private solar panel company to prop up a failed business model. As soon as government money ran out, the company folded. Solyndra could not attract sufficient private capital for financing because its solar panels could not compete in the consumer market. So it turned to its lobbyists in Washington and friends in the Obama Administration for its financing. The result was a skewed consumer marketplace and the waste of taxpayer dollars. Like the earmark for the Bridge to Nowhere, political allocation of your taxpayer dollars is failed policy.

    I get the game. Elected officials in Michigan want your money for electric cars. Those from California want your money for solar panels. And those from the Midwest want your money for wind turbines. In a country that has a $15 trillion national debt, annual deficits of over $1 trillion as far as the eye can see, and a $100 trillion unfunded liability in entitlement programs, this must stop.

    I believe that American ingenuity will eventually bring new energy sources to market successfully. It may be wind or algae, it may be biomass or solar. It may be the enormous natural gas and oil reservoirs that can now be reached affordably right here in North America. I also believe that American families making good choices for themselves will lead the way in deciding which new energy source or technology succeeds. Trying to pick that next great source from Washington, D.C. — and with your money — just leads to more cronyism, more debt, more bad decisions, more dependence on the Middle East and a much less limited federal government — outcomes that none of us can afford.

    Congressman Mike Pompeo represents Kansas’ 4th Congressional District.

  • Wichita, Kansas voters reject corporate welfare and cronyism

    From Americans for Prosperity, Kansas.

    Tuesday, Kansas voters made a bold statement, rejecting a plan favoring cronyism and big government, instead choosing to take a stand for fiscal responsibility.

    The Ambassador Hotel, which will receive $15 million in subsidies plus several hundred thousand annually, wanted to keep 75 percent of the guest tax they charged patrons, amounting to roughly $2.25 million in guest tax revenues over the next 15 years. The guest tax is a tax charged at Wichita hotels, otherwise used to promote convention and tourism.

    This proposed guest tax subsidy was put to a vote, a plan which voters rejected by a 61 to 39 margin.

    “The Ambassador Hotel guest tax subsidy was a prime example of political cronyism,” said Derrick Sontag, State Director of AFP-KS. “We were glad to see that voters made the right decision when presented with the facts about just how much public funding this development is receiving.”

    “The vote shows that taxpayers recognize the problems with corporate welfare and are willing to take a stand for fiscal responsibility,” Sontag said. “This victory is just one small step towards more responsible government.”

    Opponents of the tax subsidy recognize that government’s job is not to pick winners and losers, and AFP applauds those in Wichita who made their voices heard in support of limited government and the free market.

  • Wichita economic development isn’t working

    Recently the Greater Wichita Economic Development Coalition issued its annual report on its economic development activities for the year. That report, along with a Wichita Eagle article from January, tells us that the traditional methods of economic development used in the Wichita area isn’t working very well.

    In the Eagle article, (Why isn’t Wichita winning projects?, January 22, 2012 Wichita Eagle), after listing four items economic development professionals say Wichita needs but lacks, the reporter wrote “The missing pieces have been obvious for years, but haven’t materialized for one reason or another.”

    If these pieces are truly needed and have been obviously missing for years: Isn’t that a startling assessment of failure of Wichita’s economic development regime?

    While Wichita Mayor Carl Brewer was quoted in the article as saying “You hear a lot from the loud minority,” the fact is that the minority rarely wins. Six of seven members of the Wichita City Council will vote for almost any giveaway to any company, no matter how unnecessary or unwise the subsidy program is.

    With two of its five members having a realistic view of government’s power to influence economic development, it’s a little tougher to push programs through the Sedgwick County Commission. But most programs make it through or don’t need the county’s participation.

    The GWEDC report also shows us that power of government to influence economic development is weak. In its recent press release, the organization claimed to have created 1,509 jobs in Sedgwick County during 2011. According to the Bureau of Labor Statistics, the labor force in Sedgwick County in 2011 was 253,940 persons. So the jobs created by GWEDC’s actions amounted to 0.59 percent of the labor force. This is a very small fraction, and other economic events are likely to overwhelm these efforts.

    In his 2012 State of the City address, Brewer took credit for creating a similar percentage of jobs in Wichita.

    Not mentioned are the costs of creating these jobs. These costs have a negative economic impact on those who pay these costs. This means that economic activity and jobs are lost somewhere else in order to pay for the incentives.

    Also, at least some of these jobs would have been created without the efforts of GWEDC. All GWEDC should take credit for is the marginal activity that it purportedly created. Government usually claims credit for all that is good, however.

    GWEDC website stale and out-of-date

    If GWEDC is looking for ways to improve its efforts in marketing Wichita, it might start with its own website. While the site features a high level of design sophistication, examining its contents reveals a lack of attention being paid to the site.

    For example, on a GWEDC page titled Recent Relocations Highlights, the most recent item is from 2009.

    The “News” page holds as its most current story one encouraging attendance at a conference that took place in 2010. The second and final story on this page notifies us that someday in the future there will be an Intrust Bank Arena in downtown Wichita. That arena has now been open for two years.

    The site also promotes an RFP (request for proposal) with a deadline in 2009 — three years ago.

    Anyone who comes across the GWEDC site would conclude from this negligence that this is an organization — and by extension, a city — that simply doesn’t care about its online presence.

    Going forward

    The danger we in Kansas, and specifically the Wichita area, face is the overwhelming urge of politicians to be seen doing something. For example, in response to the departure of Boeing, Wichita Mayor Carl Brewer called for the community to “launch an aggressive campaign of job recruitment and retention.”

    It is likely that we will become susceptible to large-scale government interventions in an attempt to gain new jobs. Our best course would be to take steps to make Kansas and Wichita an inviting place for all firms to do business. The instinct of politicians such as Brewer, however, is to take action, usually in the form of targeted incentives as a way to spur economic development. GWEDC is the agency responsible for this.

    We’ve seen the disappointing results — not only with Boeing, but also in a report showing that Wichita has declined in economic performance compared to other areas.

    These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This, however, does not stop governments from creating policies for the awarding of incentives. It also doesn’t stop the awarding of incentives willy-nilly without a policy, as the Wichita City Council has done for a hotel.

    This “active investor” approach to economic development is what has led to Boeing and other companies escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form.

    Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and 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 expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

    In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers that Wichita is sure to undertake in response to the loss of Boeing: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

    In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

    There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates is an example of such a policy. Abating taxes for specific companies through programs like IRBs is an example of precisely the wrong policy.

    We need to move away from economic development based on this active investor approach. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

  • Ambassador Hotel discussed on This Week in Kansas

    On Sunday Bob Weeks, chair of Tax Fairness for All Wichitans, discussed the Wichita Ambassador Hotel election on the KAKE Television public affairs program This Week in Kansas.

  • Wichita Eagle fact checks Ambassador Hotel campaigns

    As campaign chair for Tax Fairness for All Wichitans, I’m very concerned that the campaign is accurate and truthful in everything it does. I insist on adhering to that standard, starting with myself.

    Now that the Wichita Eagle has published its fact checking article (Fact-checking claims on the Ambassador Hotel vote), I can say that this goal has been met. While the Eagle took issue with one of my claims, upon closer examination, there really is no issue at all.

    But the same can’t be said for the claims made by the “Vote Yes” side. That side of the issue is championed by a group named “Moving Wichita Forward,” managed by Sheila Tigert. While the Eagle article said there were “three instances where semantic liberties have been taken with the facts surrounding the development,” the article finds four problems.

    Specifically, the jobs claim made by Moving Wichita forward “is a stretch,” according to the director of the Wichita State University Center for Economic Development and Business Research. The number claimed is grossly exaggerated.

    Second, Moving Wichita Forward’s claim of “No new taxes” is refuted by the two cents per dollar Community Improvement District tax created for the hotel’s exclusive benefit.

    Third, Moving Wichita Forward ignores the economic impact of the $7.3 million in tax credits the hotel is receiving. Taxpayers across Kansas ($3.8 million) and the entire country ($3.5 million) have to make up the missing tax revenue that was diverted to the hotel developer.

    Fourth, Moving Wichita Forward “incorrectly frames the project’s return on investment for the city of Wichita.”

    The Eagle took issue with my claim that Wichita’s Tourism and Convention fund is losing $2 million this year, and therefore needs revenue from hotel guest taxes.

    The Eagle consulted Wichita assistant finance director Rob Raine, who disputed the claim of the loss. But to believe what Raine contends, you would have to suspend belief in the economic reality of events. You would also have to come to the realization that Wichita city budget documents can’t be taken at face value.

    Dave Trabert, who is president of Kansas Policy Institute and has experience with accounting, left a comment to the Eagle article that explains. He wrote:

    A little fact-checking of the city’s claims about its budget might be in order. Page 328 of Wichita’s 2012/2013 Annual Budget shows the following for the Tourism and Convention Fund:

    2012 Adopted:
Budgeted Revenues            $5,977,210
Budgeted Expenses            $7,983,130
Budgeted Loss               ($2,005,919)

2012 Beginning Fund Balance  $2,400,664
2012 Budgeted Loss          ($2,005,919)
2012 Ending Fund Balance       $394,745

    The City also budgeted for a $379,042 loss in 2013, which would bring the fund balance down to just $15,703.

    The Vote No group is not misreading the budget as claimed by the city. If anything, the city is attempting to misguide the Eagle reporter. If the city isn’t going to lose money this year and next as budgeted, they should openly explain what costs are being eliminated or revenues added to make up the difference. Until then, citizens must reasonably conclude that the budget is accurate.

    In a later comment Trabert added: “The city is also falsely claiming that reserves are ‘appropriated,’ implying that reserves are part of the $8 million in expenditures. Page 328 of the budget very clearly identifies the $8 million in budgeted expenditures and reserves are not part of that total. The budgeted $2 million net loss is deducted from beginning reserves as explained in my earlier post.”

    The tourism and convention budget may be viewed on page 328 of this document: Wichita Adopted Supplemental Budget 2012-2013. An excerpt from the budget of the relevant page may be viewed at Wichita Tourism and Convention Fund Budget 2012 – 2013.

    Wichita voters should not be mislead by Moving Wichita Forward, a campaign that is now shown to have little concern for being truthful.

    More information about the election and its issues are at Wichita Ambassador Hotel information sheet and Fact checking the Wichita Ambassador Hotel campaign.

  • Kansas Senator Jerry Moran wants to pick losers in the market: His choice is big wind

    In Kansas, we have a lot of wind — no doubt about that. But the economics of wind as a source of electricity generation is another matter. There’s a split in Kansas over this. On one side are Kansas Governor Sam Brownback, who has been vocal in his support of wind power, along with Wichita Mayor Carl Brewer, who has been busy promoting Wichita as a site for wind energy-related industry. Now we see Kansas’ newest U.S. Senator Jerry Moran jumping in to promote the wind power subsidy program. Contrast this with U.S. Representative Mike Pompeo of Wichita, who has introduced legislation to end all tax credits related to energy production. It’s important to remember that the government subsidy program for wind power is in the form of tax credits, which are equivalent to grants by the government. The term “tax expenditures” is starting to see widespread usage to accurately describe the economic effect of tax credits.

    Senator Jerry Moran wants to pick losers in the market: His choice is big wind

    By Daniel Horowitz

    If I were pressed to offer one anecdote exemplifying our failure to elect consistent conservatives to Congress last November, the story of Senator Jerry Moran and Big Wind would be at the top of the list.

    In 2010, then-Congressman Jerry Moran beat former Congressman Todd Tiahrt for the Republican nomination for Senate in Kansas running as a red meat conservative. He easily won the seat in this solid Republican state and summarily joined the ‘Tea Party Caucus’ in the Senate. Nothing emblematizes the convictions of the Tea Party more than its fervent opposition to special interest handouts and government interventions in the private sector as a way of picking winners and losers. Yet, Senator Moran let the cat out of the bag last week that he has absolutely no compunction about picking winners and losers, or in the case of Big Wind, big losers.

    Last week, Senator Moran announced that he is submitting an amendment to the terrible Senate highway bill (S.1813) that would extend the 2.2 cent/ per kilowatt-hour Production Tax Credit (PTC) for another 4 years. This special interest handout to Solar and Wind is slated to expire at the end of the year. What happened to Moran’s Tea Party views? Well, he unabashedly threw them under the solar-powered bus:

    Asked about opposition to extending the credit expressed by Rep. Mike Pompeo of Wichita, Moran said: “There are members of Congress who feel we ought not to pick winners and losers, to let the markets decided. I believe it’s better to get this industry up and running, then let the country decide … rather than pull the rug out overnight.”

    Wow! At least he’s honest. I wish we had known that before the election.

    The PTC is the corporate version of the Earned Income Credit for green energy. It is among 51 ‘tax extenders’ that have either expired last December or are slated to expire this December. The PTC offers a 2.2 cent/per kilowatt-hour refundable credit for wind, solar, or geothermal. According to the Heritage Foundation, if the oil industry received a commensurate subsidy, they would get a $30 check for every barrel produced.

    Headed into the November elections, one of our most potent and popular arguments we have is to paint the Democrats with the Solyndra economy — an economy where the government intervenes to pick winners and losers, at the detriment of consumers and taxpayers. How can we effectively articulate an alternative free-market vision when we have a member of “the Tea Party Caucus” supporting Obama’s policy of picking losers in the energy sector? Talk about pale pastels!

    Folks, this is not how we win elections. Moreover, this type of special interest peddling — from energy subsidies to farm welfare — creates dependency in some of the reddest states. This is not a winning message for the future of conservatism, especially when it emanates from such a Republican state.

    There is a better way. Congressman Mike Pompeo (R-KS) introduced legislation (HR 3308) to sunset all targeted energy tax credits and grants, including those for fossil fuels and nuclear power. The bill would use the savings from the repeal of these credits (roughly $90 billion over ten years) to lower the corporate tax rate on everyone. Senator DeMint has introduced a companion bill in the Senate (S.2064).

    Every member of Congress who seeks a clean break from a centrally-planned Solyndra economy must cosponsor this bill. Additionally, as we look for more congressional candidates to endorse, it is these issues — energy and farm subsidies — that will separate the men from the boys. We must fight this election by offering voters a choice, not an echo.

    Cross-posted from The Madison Project

  • Wichita Ambassador Hotel radio ads

    There are two radio advertisements regarding the special election regarding the Wichita Ambassador Hotel.

    Wichita Ambassador Hotel 60 second spot

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    [powerpress url=”http://dtwichita.com/wp-content/uploads/2012/02/Wichita-Ambassador-Hotel-60-second-spot.mp3″]

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    What’s the real cost of the Ambassador Hotel? The out-of state developer building this project received over $3.3 million in tax increment financing, diverting money from Wichita police and fire departments. They received more than $4.2 million from the city to fund parking. The State of Kansas gave them $3.8 million in tax credits. And they got another $3.5 million in tax credits from the federal government. Now they want to keep 75% percent of the guest tax that promotes tourism in Wichita, including improvements to Century II. Why should an out-of-state developer receive sweetheart tax treatment when local taxpayers and businesses have to make up the difference? Maybe a better question is … When will it end? Vote no on February 28th to promote fairness. Vote no to protect Century II. Vote no to protect local businesses from unfair competition. If you’re tired of back-room political deals, vote no on February 28th. Get the facts at dtwichita.com. That’s dtwichita.com. Paid for by Tax Fairness for All Wichitans.

    Wichita Ambassador Hotel 30 second spot

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    [powerpress url=”http://dtwichita.com/wp-content/uploads/2012/02/Wichita-Ambassador-Hotel-30-second-spot.mp3″]

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    What’s the real cost of the Ambassador Hotel? The out-of state developer building this project has received over 15 million dollars in tax credits and incentives. Now they want to keep 75% percent of the guest tax that promotes tourism and improvements to Century II. When will the sweetheart deals end? Vote no on February 28th to protect Century II. Vote no on February 28th to protect local businesses. Get the facts at dtwichita.com. Paid for by Tax Fairness for All Wichitans.

  • Why vote no in the Wichita Ambassador Hotel election

    By Susan Estes, Americans for Prosperity. A version of this appeared in the Wichita Eagle.

    As the February 28th special election in Wichita nears, members of Tax Fairness for All Wichitans would like citizens to have the full range of facts available as they decide how to cast their ballots.

    Most importantly, Wichitans should know that the Ambassador Hotel developer has said that renovation work will proceed and the hotel will open regardless of the outcome of the election. So whatever the impact of the hotel on jobs and downtown — all this will happen even if citizens vote no.

    That the hotel will open even if the guest tax rebate fails to pass is recognition of the large taxpayer subsidy that the hotel is receiving. The Ambassador Hotel will benefit from at least eight government programs, all of which cost the taxpayer. Voting No on February 28th simply prevents a ninth layer of taxpayer subsidy from taking effect. The other eight layers of generous taxpayer subsidies are not affected by the election.

    Regarding specifically the guest tax rebate that is the subject of the election: Supporters claim that this tax is paid by visitors to Wichita, and therefore is not a new tax that costs Wichitans.

    On the surface, this seems logical. But according to the Wichita State University study that hotel developers use, 50 percent of the Ambassador Hotel’s business is diverted away from existing hotels. These hotels — with two exceptions — pay their full share of guest tax to Wichita’s Tourism and Convention Fund. As business shifts from these hotels to the Ambassador Hotel, we can expect revenue to that fund to decline.

    The Tourism and Convention Fund is used to fund the city’s tourism promotion, but also for debt service, maintenance, and updates to Century II. The fund is running a loss of $2 million this year, and next year its balance will be near zero. As there are plans for increased spending at Century II, taxpayers across Wichita will likely have to make up for the Ambassador Hotel’s missing tax revenue.

    By the way, there are no restrictions on what the hotel owners may do with the diverted guest tax revenue. It is likely to be a source of profit for them at the expense of Wichita taxpayers.

    There are also problems with the use of the WSU study regarding the hotel, explained in more detail at dtwichita.com. As an example, supporters cite only the positive impact to one city fund while ignoring the larger negative impact the study found for the entire city. The study also fails to include the cost to taxpayers of all the eight government subsidy programs the hotel is receiving.

    Hotel boosters also say it’s important not to oppose the city council’s economic development efforts and send a negative message to future investors. This argument ignores the eight generous subsidy programs the hotel is receiving, at a cost of over $15 million. Remember, the election concerns only a ninth program.

    Finally, Voting No helps protect the principle that taxation should be for public purposes, not for private gain.

    More information may be found at dtwichita.com.