Voice For Liberty

Tag: Wichita city government

  • More intervention for Wichita proposed

    Tomorrow the Wichita City Council will consider accepting petitions for the formation of another Community Improvement District. In this case the applicant is the Broadview Hotel in downtown Wichita.

    This hotel is already the recipient of potentially $4.75 million in Kansas historic preservation tax credits. Despite the name of the program, the tax credits are in effect a grant of money to the developers.

    Now the hotel seeks permission to charge extra sales tax for its own benefit.

    The action the council may take tomorrow is on the consent agenda, as noticed by the Wichita Eagle’s Brent Wistrom. The consent agenda is usually reserved for non-controversial items. It’s likely that many more CIDs will be proposed, so many that accepting petitions requesting their formation is now considered a routine item of business.

    Each CID, however, must have a public hearing. But already council members have indicated they are ready to approve all CIDs, and council members are not receptive to opposition, if a televised overheard whispered remark by one council member is any indication.

    Separately a proposed downtown Wichita grocery store gets government assistance. Announced by the Kansas Department of Commerce, the Exchange Market & Deli in downtown Wichita can receive $2.5 million in government stimulus financing. The bonds are exempt from federal income taxes, and the federal government pays 45 percent of the interest. It’s part of President Obama’s stimulus program.

    The project this grocery store is attached to — Exchange Place — is the beneficiary of over $10 million in Wichita tax increment financing. That is, if the developers, Real Development, can close on their financing of a nearby project. That financing has been delayed several times.

    Each of these projects is another example of increasing government intervention in the future of downtown Wichita. Each represents a loss of economic freedom to Wichitans, as the city council uses taxes to override the decisions that thousands of Wichitans have made as to where to live and locate their business. Some of the city council members that consistently vote for these interventions describe themselves as conservative.

  • Wichita Community Improvement District approvals signal increased interventionism

    Yesterday’s action by the Wichita City Council in approving two Community Improvement Districts signals a new era in increased intervention in free markets by Wichita politicians and bureaucrats.

    CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    Although at past city council meetings some members seemed as though they might view the districts with skepticism, there was little meaningful discussion, and no council members voted against the formation of the districts.

    The mayor and city council members are unable — or unwilling — to consider the harmful effects of their interventions in creating special tax districts.

    Or, it might be that some strategic campaign contributions helped city council members make up their minds. While I believe that Council Member Lavonta Williams is an honest and honorable council member, we have to be concerned when campaign contributions are made by people who know they will be asking the council for special treatment and favor, as Christian Ablah did yesterday.

    He got what he wanted from the council. Wichita taxpayers lost.

    The city looks silly when it jumps through hoops to conform to laws that shape the way it conducts economic development. As I urged the council:

    Let’s stop distinguishing between “eligible costs” and other costs. When we use a term like “eligible costs” it makes this process seem benign. It makes it seem as though we’re not really supplying corporate welfare and subsidy to the developers.

    As long as the developer has to spend money on what we call “eligible costs,” the fact that the city subsidy is restricted to these costs has no economic meaning.

    Suppose I gave you $10 with the stipulation that you could spend it only on next Monday. Would you deny that I had enriched you by $10? As long as you were planning to spend $10 next Monday, or could shift your spending, this restriction has no economic meaning.

    The issue of high-tax districts being a consumer protection issue didn’t resonate with the council, either. There are several council members who normally would be in favor of exposing greedy merchants who overcharge people, but not in this case. Maybe it’s the campaign contributions again.

    Even pointing out how the city works at cross-purposes with itself doesn’t work. We spend millions every year subsidizing airlines so that airfares to Wichita are low. Then we turn around and add extra tax to visitors’ hotel bills, with Vice Mayor Jeff Longwell and the Wichita Eagle editorial board approving this as a wise strategy.

    People remember high taxes. I don’t think it’s a good strategy to establish high-tax districts designed to capture extra tax revenue from visitors to our city.

    But perhaps the simplest public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

    No one at Wichita city hall wants to talk about this, at least in public.

    Next month the city will hold public hearings for three proposed CIDs in addition to the two approved yesterday. I suspect that the next year will see many more proposed.

    With each intervention like this — not to mention each TIF district, STAR bond, industrial revenue bond with accompanying tax abatement, forgivable loan, EDX property tax exemption, historic preservation income tax credit, and other programs — Wichita and Kansas move farther away from the principles of economic freedom that have created prosperity, and move closer to a centrally planned economy. Those have not worked out well.

  • More Wichita Community Improvement Districts proposed

    Tomorrow’s meeting of the Wichita City Council will consider starting the process for the approval of three Community Improvement Districts in Wichita.

    CIDs are a creation of the Kansas Legislature from the 2009 session. They allow merchants in a district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    CIDs may work in one of two ways: First, the city might sell special obligation bonds, give the money to the applicant, and pay off the bonds with the extra sales tax that is collected.

    The other way is “pay-as-you-go,” in which the extra sales tax is sent to the applicant as it is collected.

    Tomorrow’s city council meeting will accept petitions by property owners in the proposed CIDs and set dates for public hearings, usually around 30 days in the future.

    The first of the proposed CIDs is the Bowllagio project at Kellogg and Maize Road. This is proposed to be a pay-as-you-go CID, meaning that the city will not issue bonds. The applicant proposes to collect the full two cents per dollar extra tax for up to 22 years.

    The second is a development in the 2600 block of north Maize Road titled Central Park Place Development. The applicant proposes collecting an additional one cent per dollar for up to 22 years on a pay-as-you-go basis.

    The third project is Planeview Grocery Store Project at George Washington Blvd. and Pawnee in southeast Wichita. This applicant proposed to collect two cents per dollar extra sales tax on a pay-as-you-go basis. This applicant also proposes creating a tax increment financing (TIF) district.

    According to city documents, a goal of this project is to provide “affordable access to grocery shopping to the underserved Planeview area.” But if affordability is a goal of this project, we have to question the wisdom of adding two cents per dollar spent to the grocery bills of low income people.

    Community Improvement Districts and public policy

    There are several public policy issues surrounding Community Improvement Districts that deserve consideration.

    First, the extra sales tax collected in these districts needs to be considered from a consumer protection perspective. How will shoppers in these districts learn that they are going to be paying extra sales tax? While some shoppers may not care, certainly low-income shoppers need to stretch their grocery dollars. Asking them to spend two cents extra per dollar doesn’t seem like the city is watching out for the best interests of its citizens.

    Then there’s the “tax our visitors” strategy of council member and Vice Mayor Jeff Longwell and some other council members. Since the extra sales taxes in some CIDs like a hotel will largely be paid by visitors, it’s a wise economic development strategy, they say.

    We need to consider, however, the effect of these high sales tax districts on visitors to Wichita. Will they be happy with their decision to visit Wichita once they learn of the high taxes on their hotel or restaurant bill? Will they mistakenly assume that these high taxes apply to the entire city? When corporate expense accounting sees the high taxes charged in Wichita, will they want to send business here again?

    But perhaps the simplest public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

    No one at Wichita city hall has an answer for this question.

  • The ‘tax expenditure’ solution for our national debt

    While most critics of government spending focus on entitlements, regular appropriations, and earmarks, there is a category of spending that not many pay much attention to. The spending is called “tax expenditures.”

    It’s a big issue. As economist Martin Feldstein writes in the Wall Street Journal, tax expenditures will increase the federal budget deficit by $1 trillion this year.

    Tax expenditures are implemented through the tax system. It’s usually the income tax system, especially at the federal level. Taxpayers may receive tax credits, which reduce the tax that must be paid dollar for dollar. Many credits are refundable, meaning that if the taxpayer has no tax liability, the government will send the recipient a check. Examples cited by Feldstein include “$500 million annual subsidy for the rehabilitation of historic structures and a $4 billion annual subsidy of employer-paid transportation benefits.”

    While supporters of many of these programs portray them as not costing the government anything, Feldstein writes that they do: “These tax rules — because they result in the loss of revenue that would otherwise be collected by the government — are equivalent to direct government expenditures.”

    I argued this in testimony I presented to a committee in the Kansas Legislature this year, when it was considering restoring and expanding the Kansas historic preservation tax credit program. I told committee members: “We must recognize that a tax credit is an appropriation of Kansans’ money made through the tax system. If the legislature is not comfortable with writing a developer a check for over $1,000,000 — as in the case with one Wichita developer — it should not make a roundabout contribution through the tax system that has the same economic impact on the state’s finances.”

    In that committee, not one member voted against this program, even though the committee has some members who consider themselves very fiscally conservative and hawks on spending.

    Here in Wichita, the city council regularly steers spending to certain companies through the tax system by granting property tax exemptions and tax increment financing.

    Feldstein describes problems with spending implemented through the tax system:

    • Politicians use tax expenditures to grow the welfare state. While proposing a freeze on discretionary spending, President Obama at the same time proposed an expansion of a tax credit program for child or elderly care.
    • Once enshrined in the tax law, these appropriations don’t have to be reauthorized each year. They’re on auto-pilot, so to speak.
    • Eliminating tax expenditures is looked on by Republicans as a tax increase, so they are reluctant to support their elimination. Felstein counters: “But eliminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking.”
    • Tax expenditures distort the economy in harmful ways: “[Eliminating tax expenditures] would also increase overall economic efficiency by removing incentives that distort private spending decisions.”

    Feldstein concludes: “Cutting tax expenditures is really the best way to reduce government spending. And to be politically acceptable, the cuts in tax expenditures must be widespread, requiring most taxpayers to give up something so that the fiscal deficits can decline.”

    The ‘Tax Expenditure’ Solution for Our National Debt

    The credits and subsidies that make the tax code so complicated cost big bucks. Reduce them by third and the debt will be 72% of GDP in 2020 instead of 90%.

    By Martin Feldstein

    When it comes to spending cuts, Congress is looking in the wrong place. Most federal nondefense spending, other than Social Security and Medicare, is now done through special tax rules rather than by direct cash outlays. The rules are used to subsidize a wide range of spending including education, child care, health insurance, and a myriad of other congressional favorites.

    These tax rules — because they result in the loss of revenue that would otherwise be collected by the government — are equivalent to direct government expenditures. That’s why tax and budget experts refer to them as “tax expenditures.” This year tax expenditures will raise the federal deficit by about $1 trillion, according to estimates by the congressional Joint Committee on Taxation. If Congress is serious about cutting government spending, it has to go after many of them.

    Continue reading at the Wall Street Journal (subscription required)

  • Community Improvement Districts discussed in Wichita

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

    CIDs are a creation of the Kansas Legislature from last year. They allow merchants in a geographic district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID. More background may be read in the article Wichita community improvement districts should have warning signs.

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

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

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

    But perhaps the most important public policy issue is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? Why the roundabout process of the state collecting extra sales tax, only to ship it back to the merchants in the CID?

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

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

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

  • Wichita community improvement districts should have warning signs

    At today’s meeting of the Wichita City Council, council members may approve the start of the process to create two Community Improvement Districts in Wichita.

    CIDs are a creation of the Kansas Legislature from last year. They allow merchants in a geographic district to collect additional sales tax of up to two cents per dollar. The extra sales tax is used for the exclusive benefit of the CID.

    In Wichita, one CID is limited to a Fairfield Inn hotel being built downtown. That CID proposes to collect an additional two cents per dollar sales tax. The second is a retail and office development of about two blocks at Central and Oliver that asks to collect an additional one cent per dollar.

    There are a few problems associated these CIDs. One is this: How will potential tenants of a CID know that they will have to charge their customers higher sales tax? I asked this question earlier this year at a council meeting, and no answer was given.

    But more importantly, how will consumers considering purchases from a merchant located in a CID know that they’ll have to pay higher sales tax?

    The City of Lawrence is considering how to deal with this problem. Normally I’m cautious of adopting ideas coming out of Lawrence, although that is where I received my university education.

    In Lawrence the mayor and some city council members are concerned for the welfare of consumers, according to reporting in the Lawrence Journal-World. According to the article: “Commissioners said they have heard multiple concerns from residents who fear they may buy products at locations without knowing they are paying the extra tax.”

    That’s a problem. Most people are generally aware of their state’s sales tax rate, and of that in the city where they live. But shoppers are just starting to realize that different stores in a city may charge different sales tax rates. And it’s not in the interest of merchants located in CIDs to publicize that their customers will spend more by shopping in a CID.

    So mandated warning signs might be the answer to this issue of consumer protection and education.

    Some might say this isn’t much of a problem, as the extra sales tax is just one or two cents. But it’s more than that. It’s an additional one or two cents per dollar spent. Since the sales tax in Wichita is now 7.3 cents per dollar, an increase of one cent per dollar is 13.7 percent more paid in sales tax.

    Or, in the case of the Wichita hotel CID, it’s two cents per dollar, or 27.4 percent more sales tax.

    Proponents of economic development tools like CIDs often attempt to justify their use by arguing that the proceeds can be used only for certain eligible costs. Because of this restricted use, it’s not like we’re simply giving money to the CID, they argue.

    This type of doublespeak actually makes sense to some people. But as long as the CID proceeds pay for something that developers must pay for anyway, these restrictions have no meaningful economic effect.

    It’s as if I gave someone $100 with the stipulation that it can be spent only on Mondays. Who could deny that I have not enriched that person by $100, even considering the restriction? As long as the person was going to spend at least $100 on any Monday, the restriction is without meaning.

    Some on the Wichita city council, like council member and Vice Mayor Jeff Longwell contend that since some taxes — like the extra sales tax on hotel rooms in a CID — are paid mostly by visitors to Wichita, they’re a wise economic development strategy.

    We ought to consider, however, that once visitors to Wichita examine their hotel bills and realize how much sales tax they’ve paid, they’re not going to feel happy about Wichita. The high sales tax rate expressed on the hotel bill may give visitors the impression that is the sales tax that applies to the entire city. Is that the impression we want to leave with our visitors?

    Or, if visitors realize they paid extra tax by staying in a hotel located in a certain geographical district, they may regret their decision. They may also wonder why a city allows certain merchants to collect tax at such a high rate.

    I have one question: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices?

    Is the answer as simple as this: that it’s preferable for merchants to blame the state for high prices?

  • Wichita downtown boom could be over before it starts

    As Wichita moves towards the release of the plan for the revitalization of its downtown, urban planners — both local and out-of-town — tell us that there’s a big demand for downtown living. People are tired of suburban living, they say. The recent draft presentation by the city’s planning firm Goody Clancy contained bullet points like “who favor living and working in vibrant downtowns” and “and they are part of broad demographic trends that are much more ‘downtown friendly’ …e.g., almost two-thirds of Wichita’s households include just one or two people.”

    Or, as “uber-geographer” Joel Kotkin wrote in the Wall Street Journal this week: “Pundits, planners and urban visionaries — citing everything from changing demographics, soaring energy prices, the rise of the so-called ‘creative class,’ and the need to battle global warming — have been predicting for years that America’s love affair with the suburbs will soon be over.”

    But as Kotkin later writes: “But the great migration back to the city hasn’t occurred.”

    Kotkin cites some figures showing the decline in the market for downtown condos in a few cities, and concludes “Behind the condo bust is a simple error: people’s stated preferences.” He shows some figures that support his contention that “Demographic trends, including an oft-predicted tsunami of Baby Boom ’empty nesters’ to urban cores, have been misread.”

    These demographic trends are behind the analysis that Goody Clancy uses to promote its vision for downtown Wichita. Kotkin’s research ought to give us concern that downtown visionaries are leading Wichita down a path that really isn’t there.

    Kotkin issues a note of caution for urban planners: “The condo bust should provide a cautionary tale for developers, planners and the urban political class, particularly those political ‘progressives’ who favor using regulatory and fiscal tools to promote urban densification. It is simply delusional to try forcing a market beyond proven demand.”

    What does this mean for Wichita? Wichita’s planners and leaders are promoting a light-handed approach to downtown development, saying, for example, that public financing will be only for public purposes. But Wichita has a history of heavy-handed interventionism in markets, using economic development tools of all types. And as the mayor recently said at a council meeting, he’s recently learned of new types of incentive programs that other cities are using.

    So I think Wichita’s leaders definitely will use the “regulatory and fiscal tools” that Kotkin warns of. It’s only without government intervention that we’ll know whether Wichitans really prefer suburban, downtown, or other forms of living. Urban planners and city hall bureaucrats can’t tell us that.

    The Myth of the Back-to-the-City Migration

    The condo bust should lay to rest the notion that the American love affair with suburbia is over.

    Pundits, planners and urban visionaries—citing everything from changing demographics, soaring energy prices, the rise of the so-called “creative class,” and the need to battle global warming—have been predicting for years that America’s love affair with the suburbs will soon be over. Their voices have grown louder since the onset of the housing crisis. Suburban neighborhoods, as the Atlantic magazine put it in March 2008, would morph into “the new slums” as people trek back to dense urban spaces.

    But the great migration back to the city hasn’t occurred. Over the past decade the percentage of Americans living in suburbs and single-family homes has increased. Meanwhile, demographer Wendell Cox’s analysis of census figures show that a much-celebrated rise in the percentage of multifamily housing peaked at 40% of all new housing permits in 2008, and it has since fallen to below 20% of the total, slightly lower than in 2000.

    Continue reading at the Wall Street Journal (subscription required) or at Kotkin’s website.

  • Wichita downtown master plan meetings scheduled

    Recently planning firm Goody Clancy presented the master plan for the revitalization of downtown Wichita. This plan is in “draft” form, meaning that input is being solicited, with revisions appearing in the final version expected to be ready in September.

    In order that citizens may become familiar with the draft plan, the Wichita Downtown Development Corporation, the City of Wichita, and Visioneering Wichita will present the plan at a series of community meetings. The schedule is:

    July 7: Atwater Neighborhood City Hall (2755 E. 19th St. N.)
    July 8: Evergreen Library (2601 N. Arkansas)
    July 12: Haysville Public Library (210 S. Hays)
    July 13: Bel Aire City Hall (7651 E. Central Park Ave.)
    July 14: Derby City Hall (611 Mulberry)
    July 19: 1st United Methodist Church (330 N. Broadway) Meredith Room
    July 20: WSU Metroplex (5015 E. 29th St. N.) Entrance C
    July 21: Sedgwick County Extension (7001 W. 21st St.)

    All meetings begin at 7:00 pm.

  • Wichita should follow Lawrence’s lead in tax warnings

    Is there a point where sales taxes become so high that consumers need to be warned?

    Sales tax is already high in the northeast Kansas college town of Lawrence, home to the University of Kansas Jayhawks. After July 1, the combined sales tax rate — state, county, and city — will be 8.85 percent.

    Lawrence has two districts where an extra one cent per dollar is added to that. Like Wichita, Lawrence is considering creating Community Improvement Districts, where merchants add up to another two cents per dollar in sales tax. The proceeds of that extra sales tax go to the exclusive benefit of the district.

    In Lawrence, therefore, the sales tax in some parts of town could reach 10.85 percent. On in round numbers, eleven cents per dollar spent.

    That has the mayor and some city council members concerned, according to reporting in the Lawrence Journal-World. According to the article: “Commissioners said they have heard multiple concerns from residents who fear they may buy products at locations without knowing they are paying the extra tax.”

    That’s a problem. Most people are generally aware of their state’s sales tax rate, and of that in the city where they live. But shoppers are just starting to realize that different stores in a city may charge different sales tax rates. A Kansas Reporter story has more on this.

    So the issue is this: should high-tax zones be required to post signage warning shoppers that they’ll pay more sales tax by shopping there?

    Some in Lawrence are worried that the signs are bad for business, both within the high-tax districts, but also for the city as a whole. I think they’re right: taxes — and the realization thereof — are bad for business and consumers.

    In Wichita, the only community improvement district approved so far is for a hotel. According to Wichita City Council Member and Vice Mayor Jeff Longwell, the fact that the extra sales tax will be paid almost exclusively by visitors to our city is a wise economic development strategy.

    With or without signs warning of high sales tax districts, local shoppers will eventually learn where these districts exist. Our out-of-town visitors, however, probably won’t learn of the high tax rates until they receive their bill. Then, one of two realizations will set in: They’ll either curse themselves for staying at a hotel in a special high-tax district, or they they may form an impression that sales tax is very high in the entire City of Wichita or State of Kansas.

    Either way, Longwell’s soak-the-visitors tax strategy isn’t likely to make Wichita many friends.